Question 1

Determine the economic earnings of MarineCorp Sdn Bhd, Green Port Sdn Bhd and Sungai Emas Port Sdn Bhd.

Economic earnings is used to calculate the profit earned by the company in excess of investors’ expected returns. Positive economic earnings represent that the value was created for the company. Unlike, negative economic earnings represent that the company’s value was destroyed. The calculation for economic earnings is as follow;

ECONOMIC EARNINGS = *NOPAT – (ᵝWACC X Average Invested Capital) or NOPAT – Capital Charge

ECONOMIC EARNINGS = *NOPAT – (ᵝWACC X Average Invested Capital) or NOPAT – Capital Charge

*Net Operating Profit after Tax
ᵝ Weighted Average Cost of Capital

| Green Port S/B (RM) | Sungai Emas Port S/B (RM) | MarineCorp S/B (RM) | NOPAT | 31,381,168 | 5,218,664 | 15,128,917 | Capital Charge | 45,969,400 | 187,801 | 854,306 | Economic Earnings | 31,381,168 – 45,969,400= (14,588,232) | 5,218,664 - 187,801= 5,030,563 | 15,128,917 – 854,306= 14,274,611 |

Table 1

Table 1 showed that, Sungai Emas Port and MarineCorp had positive economic earnings which indicate that the value was created for the both companies. However, Green Port’s value was destroyed because of its negative economic earnings as shown in table 1.

Question 2

Rank the companies in terms of their financial performance.

All the companies are ranked based on three main areas in relation to their financial performance. The areas include their liquidity ratio, profitability ratio, and economic earnings. Firstly, the companies’ liquidity would be measured by current ratio. The liquidity ratio is used in order to know if the particular company has enough cash on an ongoing basis to meet its operational obligations or liabilities. A ratio less that 1 may indicate liquidity issues. A very high current ratio may mean there is excess