PURPOSE - Financial Statement Analysis - To calculate and analyse financial ratios using actual reported data.
REQUIRED - Given the financial statements and the additional information, analyse and discuss the financial performance and position of Billabong International Limited. You should refer to the notes to the financial statements and the Director's Report for further details and clarifications of changes in the financial statements. (You may find the Full Year Results CEO & CFO Presentation useful for this assignment).
Your analysis should be supported by profitability, liquidity, gearing and other appropriate ratios from Chapter 18 of the prescribed textbook.
Calculate and analyse financial ratios (percentage and ratio analysis)
Use the 2015 and 2014 published annual reports to obtain the financial statement figures needed to calculate the ratios (where there are consolidated accounts, use the consolidated amounts). In addition, students are strongly advised to:
-perform horizontal and vertical analyses of the Balance Sheets and Income Statements for the company
-read all parts of the Annual Reports
Instructions: Your report should calculate* and analyse the following ratios, in clearly identified separate sections:
Profitability:
Rate of return on net sales
Rate of return on total assets
Asset turnover
Rate of return on ordinary shareholders' equity
Earnings per share (given in the Annual Report)
Liquidity:
Working capital
Current ratio and Acid-test ratio
Inventory turnover and Days in inventory
Gross profit percentage
Accounts receivable turnover
Days' sales in receivables
Gearing:
Debt ratio
Debt to equity ratio
Times interest earned ratio
(* Tabulate and show the formula and detailed calculations in an Appendix.)
Your analysis should include:
-Year-to-year (2015 and 2014) comparisons (horizontal analysis). Use the Director's Report and the Notes to the Accounts to further justify your answer.
-The components of each ratio should be investigated to determine the significant or determining factors in any change to the ratio.
-These significant factors should then be investigated to determine (to the extent possible) the cause and sustainability of their change (refer to example below).
Example of a current ratio analysis: Company X current ratio increased from 1.2 to 4.3. The company increased its ability to pay its debts in the short-term. The main reasons for the increase were a 22% increase in cash and a 14% decrease in accounts payable. The increase in cash and the decrease in accounts payable were both a result of reductions in purchases of inventory. This is unlikely to continue as the company was depleting a previous overstock.
Each ratio analysis will be marked on the correctness of the comparisons and the identification of the determining factors. The depth and correctness of analysis of the factors will be the primary criteria for grade differentials in this assignment. The determining factors
need not be confined to the annual reports but they must be relevant to your analysis.
The following is the link to the Annual Reports of Billabong International Limited. This is also available on the course Blackboard site.
https://www.billabongbiz.com/phoenix.zhtml?c=154279&p=irol-reportsannual.
Attachment:- Ratio, Vertical and Horizontal Analysis.rar