BSB61015 Advanced Diploma of Leadership and Management

Assessment 1

Analysis of Financial statements and plan report

Business Context

Australian Hardware orginally opened up the store in the financil year 1921. The company is constantly engaged in providing the best quality hardware, homewares, garden supplies and building materials from Australia and the world. In 1982 Australian Hardware was recorded on the Australian Stock Exchange and was offered to general society in an share float. The business has kept on extending to now have 138 stores and roughly 10,000 staff the nation over. In this, the directorate and CEO are at the top most positions. In addition, the organization pulls in its client base through markup evaluating system and separation item methodology. Subsequently, the organization has embraced low estimating methodologies and has even taken different drives to guarantee local area commitment, ecological obligation, item quality and arrangement of master administrations. The vision of the organization is to lead the equipment and home-improvement market in Australia in the coming five years.

Financial Statements

Ratio Calculations

Business Financial Performance bases on Ratio Analysis

The liquidity ratios are the ratios which defines the ability of the company to pay back the current obligations on time. In case of Australian Hardware, the current ratio in 8.88 times, whereas the quick ratio is 8.15 times. The net working capital ratio is 7.88 times, which implies that the company like Australian Hardware is able to saturday current obligations on time and currency so much higher however the company hd understand the idea gas do not be kept as it would given him that to the earth it is that cash is going in the business and its not being used efficiently.

Under the capital structure ratio, it can be observed that debt to equity ratio is 0.14 times whereas debt ratio is 0.12 times. This implies that company is in a mood to take low financial burden on themselves.

Profit ability ratios at the ratios which i have been the the meaning the overall health of the business. The five financial measurement have been undertaken in case of profitability ratios which are net profit margins, gross margins, operating margin return on assets and return on equity. The net profit margin of Australian Hardware in 9.80 percent whereas the gross margins are 50%. The operating margins however have been 17.14% thereby determining the decrease in the overall expenses of the business. The higher the operating margins, better is the business of the enterprise.  

Return on assets and return on equity ratio are the ratios which are majorly in interest of investors and shareholders.

They return necessary she has been at 19.80 percent where is return on equity ratio is 24.82 percent. This really implies that the needs and preferences of the shareholders and investors are also taken into consideration and the companies performing really nice and satisfactorily.

Efficiency ratios at the ratio of his determine the ability of the company to collect the cash from the sale of inventory and accounts receivable. Inventory turnover ratio of 15.91 times whereas the accounts receivables ratio is 13.26 times. This implies that the overall efficiency of the company is sound smooth.

Business Financial Potential and Low Performance Areas

• The potential areas of the business are liquidty and profitability as the liabilities of the company are limited and the financial burden is quite low. The major reasons behind them becoming potential is due to enough cas to run the operations successfully and the shareholders and the investors’ needs are also given top priority.
• The low performnace areas are gearing ratios and the efficiency ratios. The company is using the equity funds entirely and this can be one of the toruble that the investors and the shareholders may take the ownership of the company and therefore a balanced capital sturcture is necessary. However, the efficiency ratios are also at back ends because the higher the ratio, the better and these ratios demands and upgradation to bring more efficienc in the business.

Business future funding requirement

• As such the business does not require to borrow funds, but to maintain the optimal capital structure it is advised that the company shall borrow funds through debentures, friend and relatives or loan from bank. The debt funding will be udeful for the company as the advantage of tax exemption can be availed and at the same time balanced and optimum capital structure can be created.
• If the funds are reuiqred it shall be less than 50% of the entire capital invested in the business. This is due to the fact that too much debt would also result in increasing the financial burden on the shoulders of the company.

Business’s legal and statutory obligations

• Preparation of the financial statements and all relevant reports
• Keeping with due diligence and compliance of all the standards
• Paying to employees and workers on time
• Register the company with ASIC
• Regulations stipulated in the Occupational Health and Safety Act provides guidelines on taking care of your workers in the workplace

Conclusion

From the overall analysis it can be understood that the performance of Australian Hardware is smooth and sound and the key potential areas have already mentioned. For the low-key areas, the company can work upon the cash conversion cycle of the business and proper infusion of funds thorugh right and appropriate channels. Infact in order to survive in the competitive world and grab greater margins and market share, the company shall diversify their business operations and focus on channelising proper resources.

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