MAN605 Financial Analysis and Decision Making Report Sample

MAN605 Financial Analysis and Decision Making

Please select one (1) out of the following three (3) organisations to base your report on.

● Delaware North Companies Australia Pty Ltd

● Retail Zoo Holdings Pty Ltd

● Oaks Hotels & Resorts Limited

Your manager has been asked to prepare a report for the Board of Directors on the financial health of the business and needs your help.

Use IBISWorld to locate the company report and conduct research online to understand the company’s:

● Company information – background, vision

● Strategy and direction

● Financial performance based on their ratios

● Performance compared to industry average and competitor performance

You may not have all the information to complete a full analysis so you will need to include in your report any additional information you need and why – your manager is expecting this. Your manager hopes that your analysis will show that the business is healthy and therefore that she is performing well in her role.

Required

Prepare a report for your manager, in a short report format, that assesses the financial health of the organisation. Your report must include the following:

● your assessment of the financial health of the organisation for at least the past 3 years. This would include an explanation of the ratios or other data you are using to support your analysis.

● any additional information that you need to complete your analysis.

● an explanation of at least 3 (but not limited to) recommendations that your manager can take to the Board of Directors that are related to the strategic focus of the business.

You may refer to the lecture and tutorial notes and activities to help you organise your analysis.

Solution

1: Introduction

This report shall discuss the essential aspects relevant for the financial analysis and decision-making skills on a long-term prospect. As per the MBA Assignment Expert,  In order to evaluate the financial analysis and decision making, the company selected is Delaware North Companies Pty Ltd. (DNCPL), while a detailed discussion on company background, vision and information shall also be discussed. Analysis and calculation of financial ratios shall also be conducted in this report to outline the stability of the company’s performance as compared to industry benchmarks and competitors’ performance. 

2: Company Background, Vision and Information

DNCPL is considered to be a strong industry player who is engaged in the retail and hospitality sector over a span of three decades. The background is further energised by strong financial performances, where the company was able to generate revenues worth $281,986,000 (my-ibisworld-com, 2022). The vision and information statement of the company further suggests a steep inclination to keep progressing and growing in the field of hospitality services. 

3: Strategy and Direction

The major strategies and direction of the company are considered to be mostly based with meeting financial and nonfinancial objectives. Hence, a cohesive direction is being employed by the concerned loggerhead of the company to ensure through meeting of goals and objectives prescribed by the company. As per explanations and illustrations of Xu, Sheng & Tian (2020), a unified direction is needed to be emphasised where teamwork and proper management should be initiated for ensuring financial and nonfinancial growth of an organisation. 

4: Financial Performance

4.1: Calculation of Ratios

The calculation of ratios for DNCPL shall be substantiated by considering the relevant figures during 2020, 2019 and 2018 respectively. 

4.1.1: “Profitability Ratios”

Table 1: Profitability Ratios 
(Source: Created by Learner)

4.1.2: “Liquidity Ratios”

Table 2: Liquidity Ratios 
(Source: Created by Learner)

The above table of liquidity ratios further suggests marginal improvement in current and quick ratios in 2020 as compared to 2019. The overall growth in 2020 as compared to 2019 is considered to be 0.09. 

4.1.3: “Solvency Ratios”

Table 3: Solvency Ratios 
(Source: Created by Learner)

The above table of solvency ratios further reads to better performance in 2020 as compared to 2019 and 2018. 

4.1.4: Efficiency Ratios

Table 4: Efficiency Ratios 
(Source: Created by Learner)

As per the above table of efficiency ratios, it can be ascertained that the ratio metrics has decreased substantially in 2020 as compared to 2019 and 2018. 

5: Analysis of Performance

Profitability Analysis

The profitability ratios suggest that a marginal increase in performance is being witnessed in 2020 as compared to 2019. The business performance in 2020 is considered to be adversely positioned owing to net loss of $ -968.00.  

Yes, the business has generated a sufficient return for the years. Based on the estimation, it has shows a growth in 2020 return value. Hence, it can be determined that the company is failing to generate a satisfactory return [Refer Table 1].

Efficiency Analysis

The debtors and inventory turnover ratios are valued as 27.58 and 9.30, thereby depicting decent readings for debt collection and low reading for inventory holding. Thus, debt collection is facilitated after a span of nearly 13 days, while inventory is being held for approximately 40-41 days. 

The inventory turnover value is mainly suggested as 9.30 times for the firm. Inventory is turning over efficiently as it is matched the aggregate value. Furthermore, it has found turnover value was increased from 2018 to 2019. It has dropped 2020 that has indicated as 9.30 as per the value.   
Therefore, it can be ascertained that inventory holding is decreasing in 2020, while cash flow implications suggest adverse readings of 9.30 times in 2020 as compared to 11.41 times in 2019. 

It can be considered that assets are not working as per their achievable capacity. The asset turnover ratio is mainly suggested a value of 0.78 that has evaluated a lower utilisation of asset. It is required to increase the asset value based on the liability provided. [Refer Table 4]. 

Liquidity Analysis 

The liquidity analysis suggests that the company does not possess relevant financial credentials to pay bills, while debts are being collected in an inefficient manner. The identification of 0.34 is lower than ideal value that suggested a lower ability to pay its bills.  
The identification of debtors, it has found that DNCPL is collecting its debt random that has increased the liability value. It has effected on total value of liquidity. 

However, the creditor valuation is considerably lower in 2020 along with inventory holding valuations. Limited holding og creditor has been indentified in this case. 

As per illustrations and explanations of Plesca (2018), the stipulated industry benchmark of current and quick ratios is considered to be 2:1 and 1:1 respectively [Refer Table 2].

Solvency Analysis 

As per the solvency ratios, it can be ascertained that DNCPL has the ability to repay its long-term loans owing to lower proportion of debt as compared to equity, which determines a balance of 0.86:1 as the ratio. 
The interest coverage ratio, however is deemed to be negatively positioned owing to lesser operating profit and higher interest expenses in 2020
The calculations indicates that the balance of equity to debt 0.86 in 2020. Previous year, the balance has indicated as 1.27 in 2019 that was lower in 2018 (i.e. 0.32). [Refer Table 3]. 

6: Conclusion and Recommendations

6.1: Conclusion

This report has discussed the important aspects of the financial reporting and decision making with respect to the selected company DNCPL, where the ratio metrics are considered to be adversely positioned in comparison to industry benchmarks and its competitor. The vision and mission strategy of the company is considered to ensure harmonious progression of business across Australia and overseas countries including New Zealand. 

6.2: Recommendation

In order to excel with regards to financial credibility and stability following recommendations are being proposed. 

• It is recommended to ensure optimisation of financial and non-financial resources. 
• It is recommended to identify additional sources of revenue generation. 
• It is recommended to enable a streamlined organisational structure for ensuring higher profitability prospects.

References

my-ibisworld-com, 2022, Revenues [online], Retrieved from: https://my-ibisworld-com.ezproxy.angliss.edu.au/au/en/company-reports/5376/company-details [Retrieved on: 07th October, 2022]

Plesca, A., 2018. Temperature distribution of HBC fuses with asymmetric electric current ratios through fuselinks. Energies, 11(8), p.1990. https://doi.org/10.3390/en11081990

Xu, S., Sheng, C., & Tian, C. (2020). Changing soil carbon: influencing factors, sequestration strategy and research direction. Carbon balance and management, 15(1), 1-9. https://doi.org/10.1186/s13021-020-0137-5