Question

Select a publicly listed Australian company, that is not banking or service orientated. Explain who they are and their main business activities. Using the library database “DatAnalysis Premium” (https://datanalysis-morningstar-comau.ez.library.latrobe.edu.au/af/dathome?xtm-licensee=datpremium) type your company code into the search bar and you will have access to a range of data. On the left-hand side of the screen select “financial data” (3rd from the bottom of the list). Select the “ratio” tab and download three years of data into excel. Required: review the following ratios of your business and draw a conclusion with respect to each ratio as to how your business is performing for the last 3 years. This is not to be written in financial investing language, rather you are to interpret the information similarly to the work we undertook in class. Profitability – Net Profit Margin and ROE (Return on Equity) Asset Management – Property Plant and Equipment turnover Debt and Safety – Current ratio, Net interest cover Cashflow – Days inventory, Days receivables and Days payables.

99

likes495 views

Darrell

4.5

61 Answers

Profitability Ratios:
Net Profit Margin: Measures how much of each dollar of revenues is translated into profits. A rising net profit margin indicates improving efficiency, while a declining trend might suggest increasing costs or declining revenues.
ROE (Return on Equity): Indicates how effectively the company uses equity from shareholders to generate profits. A steady or increasing ROE is generally positive, showing effective management.
Asset Management Ratio:
Property Plant and Equipment Turnover: This ratio indicates how effectively the company is using its fixed assets to generate sales. Higher values suggest better utilization of equipment and property.
Debt and Safety Ratios:
Current Ratio: Measures the company’s ability to pay off its short-term liabilities with its short-term assets. A ratio above 1.0 suggests financial robustness, whereas a lower ratio might indicate potential liquidity issues.
Net Interest Cover: This ratio assesses how easily a company can pay interest on outstanding debt from its earnings. Higher values signify greater comfort in managing debt costs.
Cash Flow Ratios:
Days Inventory: Reflects the number of days that a company holds its inventory before selling it. Shorter periods are generally better as they imply a quicker turnover.
Days Receivables: Indicates the average number of days the company takes to collect payment after a sale has been made. A shorter cycle improves cash flow.
Days Payables: Measures how long the company takes to pay its own invoices. A longer period helps with cash management but can strain relationships with suppliers if too extended.
Conclusion:
By reviewing these ratios for Fortescue Metals Group Ltd over the last three years, you can draw conclusions about the company's operational efficiency, profitability, asset utilization, debt management, and cash flow stability. This analysis will provide insights into how well the company is performing, its financial health, and operational efficiency.

Frequently asked questions (FAQs)

Question: If the sum of two numbers is 15 and their product is 36, find the values of the two numbers using the product and sum formulas.

+

Question: What is the x-coordinate of the vertex of the square root function y = √(x - 2) + 1?

+

What is the Pythagorean Theorem?

+

New questions in Mathematics