ACC306 Financial Statement Analysis
You are allocated to research an Australian listed company. Please write a well-structured professional report to advise a high net-worth individual who intends to invest in the company. You may consider the following questions in your report.
- Complete the table below and assess the company’s performance over the last three years.
- Evaluate long-term solvency of the company over the last three years.
- Assess the liquidity position of the company as at the latest financial year.
- Discuss the quality of the financial statements.
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FINANCIAL STATEMENT ANAYLYSIS -- YOUR COMPANY | |||
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Company name: | |||
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Company ticker: | |||
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Student name : | |||
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Ratios and Other Analysis Measures |
Year End (3 years) | ||
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ROE and DuPont Ratios | |||
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ROE (NI / OEavg) | |||
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Profitability (NI / Sales ) | |||
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Efficiency (Turnover = Sales / Assets avg) | |||
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Leverage (Leverage = Assets avg / OEavg) | |||
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Additional Profitability Ratios | |||
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Gross Profit Margin % [(net Rev - COGS) / net Revenue] | |||
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Selling General &Administration % (SG&A expense / net Revenue) | |||
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Important Expense Percentage* (Important Expense / net Revenue) | |||
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Additional Efficiency Ratios | |||
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AR Turnover (Sales / ARavg) | |||
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Days Receivables Outstanding (DRO) [ARavg / (Sales /365)] | |||
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Inventory Turnover (COGS / Inventoryavg) | |||
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Days Inventory (DI) [Inventoryavg / (COGS/365)] | |||
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AP Turnover (Purchases / APavg) | |||
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Days Payables Outstanding (DPO) [365 / (Purchases / Accts Payableavg)] | |||
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CASH CONVERSION CYCLE (DI - DPO + DRO) | |||
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PPE Turnover (Sales / Net PPEavg) | |||
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Additional Leverage Ratios | |||
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Debt-to-Equity (total Liabilities / total OE) | |||
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Times Interest Earned (Earnings before Interest Expense and Taxes / Interest Exp) | |||
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Return on Financial Leverage (ROE - ROA) | |||
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LT Debt-to-Assets (LT Debt, including current portion / total Assets ) | |||
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Cash Liquidity and Cash Sources & Uses | |||
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Working Capital (CA - CL) | |||
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Current Ratio (CA / CL) | |||
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Quick Ratio [(Ca s h + ST Securities + AR) / CL)] | |||
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OCFCL (Operating CF / CL) | |||
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OCFCX (Opera ting CF / Ca pi ta l Expenditures ) | |||
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Free Cash Flow (Ca s h from Ops – Net Ca p. Expend.) | |||
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Growth | |||
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Sales growth [(cy net Rev - py net Rev)/ py net Rev] | |||
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NI Growth [(cy NI - py NI )/ py NI ] | |||
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*Choose the most “important” non-SG&A expense. | |||
Assignment Answer:
Introduction
Every organization needs to use the effective financial management to raise and deploy the funds from the market. It is the process to raise the funds or capital from the market and deploy the same in the business functioning with an objective to create value on the investment. There are several financial tools which could be used to assess the financial performance of company such as ratio analysis, du pont analysis, capital budgeting tool and financial theories. In this report, three years of financial performance of company has been assessed to determine whether company has performed well or negative in market. In the first part of the report, ratio analysis have been used to assess the financial performance of company and after that capital structure of company has been assessed to determine whether company has equilibrium point in its financial leverage and cost of capital. After that, liquidity position of company in the latest financial year has been evaluated to determine whether company would be able to meet its current liabilities or not. In the end, quality of the financial statement has been analysed.
Description of company
Stockland Corporation is diversified Australian corporation property Development Company which has been running its business on international level. This company has business in shopping centres, housing estates, industrial estates and retirement vilages. This company has been running its business on international level and all the employees are accustomed to act as per the directions and instruction of its CEO named Mark Steinert. As per the ASX:SGP, the share price of company has gone down and reflected 4.14 AUD −0.035 (0.84%) (Stockland Company, 2017).
Task-1
Assess the company’s performance over the last three years
The ratio analysis is used to assess the financial performance of company and establish the relation between two financial factors. The below table reflects financial details of company.
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FINANCIAL STATEMENT ANAYLYSIS – Stockland Company | |||
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Company name: Stockland Company | |||
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Company ticker: STKAF | |||
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Student name : | |||
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Ratios and Other Analysis Measures |
Year End (3 years) | ||
