Proton

Perusahaan Otomobil Nasional Berhad, or also known as Proton, was incorporated in Malaysia on 7th May 1983. Proton involves in manufacture, assemble and sell motor vehicles and related product such as spare part, accessories and other components. Proton launched their first car, the Proton SAGA on 9th July 1985 by then Malaysia Prime Minister, Tun Dr. Mahathir Mohamad. Proton has produced about fourteen models of car up to year 2009.

In the case of PROTON- from SAGA to EXORA, Saiful Alawi a Chartered Accountant have been asked to review Proton and recommend on should Proton consider on collaboration with other multinational auto giant. The period under review was from the day the new Managing Director of Proton took office on 1st January 2006 till 31st October 2009.

First factor to be considered is in term of quantitative factors. First is liquidity ratio which is the ability of Proton to be able to pay the debt when it is due. The current ratio of Proton from year 2005 up to year 2009 shown that the current ratio of Proton is above one which means that Proton having enough money to repay its short term debt. A quick ratio analysis of proton show that there is decreasing in their quick ration. The overall trends show the decreasing of the liquidity of Proton.

Second is profitability ratio which is to measure the ability of Proton to generate profit relative to sales, asset and equity. The profitability ratio involved net profit margin, return on equity and return on assets of Proton. In year 2007 and 2009, Proton was unable to generate profit due to sales, asset and equity because its ratio shows negative percentage. In overall of profitability ratio, Proton has a fluctuating profit from year to year it could be due to that Proton does not cover the cost because being the small producer the cost are very high especially research and development. Fixed cost of Proton itself in per unit basis is higher compare to the other mega auto company.

Third is financial leverage ratio which is to evaluate the company debt level. The financial leverage ratio involved debt to equity ratio and leverage ratio. It measures the risk of Proton in term of ability to pay their debt and the dependence of Proton in outside finance. Proton show increasing ratio from year 2007 to 2009 which means that is being financed by creditors. However, the ratios are still below one which indicates that the investors will have lower risk in getting back their returns. Therefore, Proton could be considered as the less risky company for investors to invest in Proton due to their lower financial leverage ratio.

Second factor to be considered by Saiful Alawi in his review is in term of qualitative factors. Proton has faces several problems such as poor quality of product, poor technologies enhancement and limited funds to conduct research and development. First, a poor quality of product, after Proton discontinuation of Partnership with Mitsubishi