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FIN5FSA - Financial Statement Analysis Assignment - La Trobe University, Australia

Objectives -

1. Define financial flexibility and decompose return on common equity to assess financial flexibility.

2. Assess working capital management and short term liquidity risk.

3. Assess long term solvency risk.

4. Assess credit risk.

5. Apply predictive statistical models to assess bankruptcy risk.

6. Distinguish between firm-specific risks and systematic risks.

Task - Submit a succinct operating and financial health check of your firm.

Answer - Growth Risk Analysis

The company on account of the Growth Risk analysis can be understood with the perspective of is the Bankruptcy risk, Systematic risk as well as business risk.

Bankruptcy Risk

Understanding the perspective of bankruptcy risk the best way to understand the how the company is doing on account of insolvency and in terms with the aspect of that the risk may be computed on the basis of the Altman Z score

The same can be computed as follows: -

Z-Score = 1.2 A + 1.4 B + 3.3 C + 0.6 D + 1.0 E

Where, A = Working Capital / Total Net Assets

B = Retained Earnings / Total Net Assets

C = EBIT / Total Net Assets

D = Market Value of Equity / Total Net Liabilities

E = Revenue /Total Net Assets

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Considering the financial figures of the company for the year 2018 can explain the bankruptcy on account with the figures can be expressed as follows

Millions


Net Assets

Net Liabilities





Working Capital

$ -2,015.00

$23,558.00

$12,709.00

A

-0.0855

1.2

-0.1026

Retained Earnings

$ 4,073.00

$23,558.00

$12,709.00

B

0.17289

1.4

0.24205

EBIT

$ 2,548.00

$23,558.00

$12,709.00

C

0.10816

3.3

0.35692

Market Value of Equity

$43,856.93

$23,558.00

$12,709.00

D

3.45086

0.6

2.07051

Revenue

$57,187.00

$23,558.00

$12,709.00

E

2.4275

1

2.4275








4.99434

The value being more than 3 the company is definitely out of danger and bankruptcy.

Business Risk on the other hand, can be explained on the perspective where the variability on account with the EBIT and the ROA the standard deviation is computed on account with five-year analysis to understand the business risk and its comparison on account with the industry analysis as well as the obligations.

The business risk which can be computed from the above figures is that the as follows: -

Business Risk

2014

2015

2016

2017

2018

Financial Year






EBIT

$3,783.10

$3,748.00

$2,563.80

$2,326.00

$2,548.00

Assets

$24,205.20

$25,336.08

$23,502.02

$22,915.80

$23,558.00


0.1563

0.1479

0.1091

0.1015

0.1082

Standard Deviation

0.110515743

0.104603246

0.077137215

0.071772767

0.076479671

Standard Deviation = 0.441 ( 0.11051 +0.104 +0.77+0.071+0.0764)

(MS , 2019)

The analysis clearly provides that the level of standard deviation is much under control and the same can be reflected that the five year analysis is around 0.41 which is very less than the margin level as a matter of fact the degree contained does not qualify a pointer of 0.5 on standard deviation proving that the company is much stable on account with the business risk and risk analysis.

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Systematic Risk

This is a segment which can be explained and understood through the analysis of the beta and the beta coefficient. It defines coverability of the organisation return in connection with the desired return value of the diversified portfolio undertaken by the organisation to analyized the return value.

Understanding the beta of the company and the industry it is evident that the company beta is 0.72 and the industry is 0.76 (MS , 2019). This shows two main thing one being the fact that the organisation beta is less than the industry beta stating that even a difference 0.04 which being a small difference but in beta analysis it is a huge difference can lead to a defining a huge difference in terms with the such a small difference. On the more, the second aspect which it Cleary states is that the company is well settled on account with the systematic risk as the beta being less than 1 and as a matter of fact less than the industry standard it is efficient and it can be considered that the systematic risk is well stable and the company is on a much stable position as considered.

Thus, on the overall basis the company is dealing with a stable position on account with the growth risk analysis and the level they can take risk.

Prospective Analysis

This segment of analysis ensures that as to how the company deals and reflect in its future which being the on the basis of it is financial information and the year analysis on a later date, the other is the analysis of the share prices which has been study that the company and accordingly deal with the aspect of the ensuring how will the company will be progressive in

The analysis can be done as follows: -

Item

Jun-19

Jun-20

Jun-21

Jun-22

Jun-23

Operating Revenue

62,39,86,00,000

63,64,65,72,000

66,82,89,00,600

70,17,03,45,630

71,57,37,52,543

Other Revenue

50,71,00,000

51,72,42,000

54,31,04,100

57,02,59,305

58,16,64,491

Total Revenue Excluding Interest

62,90,57,00,000

64,16,38,14,000

67,37,20,04,700

70,74,06,04,935

72,15,54,17,034

Operating Expenses

-58,88,96,00,000

-60,06,73,92,000

-63,07,07,61,600

-66,22,42,99,680

-67,54,87,85,674

EBITDA

4,01,61,00,000

4,09,64,22,000

4,30,12,43,100

4,51,63,05,255

4,60,66,31,360

Depreciation

-1,19,35,00,000

-1,21,73,70,000

-1,27,82,38,500

-1,34,21,50,425

-1,36,89,93,434

Amortisation

-1,98,00,000

-2,01,96,000

-2,12,05,800

-2,22,66,090

-2,27,11,412

Depreciation and Amortisation

-1,21,33,00,000

-1,23,75,66,000

-1,29,94,44,300

-1,36,44,16,515

-1,39,17,04,845

EBIT

2,80,28,00,000

2,85,88,56,000

3,00,17,98,800

3,15,18,88,740

3,21,49,26,515

Interest Expense

-16,94,00,000

-17,27,88,000

-18,14,27,400

-19,04,98,770

-19,43,08,745

Net Interest Expense

-16,94,00,000

-17,27,88,000

-18,14,27,400

-19,04,98,770

-19,43,08,745

Pre-tax Profit

2,63,34,00,000

2,68,60,68,000

2,82,03,71,400

2,96,13,89,970

3,02,06,17,769

Tax Expense

-78,98,00,000

-80,55,96,000

-84,58,75,800

-88,81,69,590

-90,59,32,982

Net Profit after Tax Before Abnormal

1,84,36,00,000

1,88,04,72,000

1,97,44,95,600

2,07,32,20,380

2,11,46,84,788

Reported NPAT After Abnormal

1,97,45,00,000

2,01,39,90,000

2,11,46,89,500

2,22,04,23,975

2,26,48,32,455

Outside Equity Interests

-7,81,00,000

-7,96,62,000

-8,36,45,100

-8,78,27,355

-8,95,83,902

Shares Outstanding at Period End

1,43,92,40,000

1,46,80,24,800

1,54,14,26,040

1,61,84,97,342

1,65,08,67,289

Weighted Average Number of Shares

1,43,05,50,000

1,45,91,61,000

1,53,21,19,050

1,60,87,25,003

1,64,08,99,503

EPS Adjusted (cents/share)

135

138

145

152

155

EPS After Abnormal (cents/share)

146

148

156

164

167

Risk Analysis Assignment.png

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(Investing, 2019)

The figures clearly show the that the analysis is based on 5 year analysis which clearly show that the company is being on a progressive mode as a matter of fact the organisation is more larger five years done to be more on a profit motive and a much balanced revenue analysis it deals with a prospective where the company ensured that company not increased the revenue but at the same time provided a well-balanced option where the organisation ensured that the cost is also gradually reducing and the company is making an profit on two terms one being the revenue increment and the other being on account with cost reduction. The progressive years show that the interest and the debt as well as the equity analysis. It deals with an aspect which explains that the aspect will lead to provide a better stability and a better analysis.

In terms with the share analysis the company is showing a stable perspective on account with the share price and the company chart of share price deals with a perspective which ensures that the company will lead to a price per share which will definitely ensure that the company has provides that the company will lead to a position where the investors to justify the fact that the company has led to a condition where the shares must be at a stand still position as the organisation is on a profit mode and will lead to a condition where the shares of the organisation must be considered on a hold and a position , and where the investors get the option it must ensure that they buy the shares as it is a great investment and a portfolio.

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