FINANCIAL STATEMENT ANALYSIS a. For the years ending June 30

FINANCIAL STATEMENT ANALYSIS a. For the years ending June 30, 2013, and June 30, 2011, compute and discuss the return on equity (ROE), return on assets (ROA), profit margin ratio, asset turnover ratio, current ratio, cash flow ratio, debt-to-equity ratio, interest coverage ratio, debt coverage ratio, NTAB, EPS, DPS and the PER. b. Discuss the major differences between your analysis of the June 30, 2013, report and the June 30, 2011, report (prior to the takeover of CTEC). Appraise the problems faced by FGL management in light of your analysis. c. Using the January 31, 2014, unaudited financial information, compute the ROE, ROA, profit margin ratio, asset turnover ratio, current ratio, cash flow ratio, debt-to- equity ratio, interest coverage ratio, debt coverage ratio, NTAB, EPS, DPS and the PER. Comment on the ratio analyses performed. 4. COMPANY GROWTH a. Outline and compare two types of company growth strategies. b. Hypothesize why it is important to compute financial metrics that link the income statement and the balance sheet to help understand the growing business. Use the FGL example to test your hypothesis. Table 2. Comprehensive Income Statement (in thousands of Australian dollars) June 30, 2010 Revenue $246,169 Cost of sales Changes in inventories of finished goods and WIP 9,696 Materials, plant, and contractor costs (125,171) Employee benefits expense (79,194) Depreciation and amortization (3,218) Consulting fees Provision for impairment losses (1,628) Other expenses (7,132) Other gains and losses 537 Expenses Results from Operating Activities $40,059 Finance income 1,023 Finance costs (716) Net finance income $307 Share of profit/(loss) of associates and jointly controlled entities Net Profit Before Tax $40,366 Income tax expense (10,915) Net Profit After Tax $29,451 Foreign exchange differences (net of tax) (346) June 30, 2011 $421,595 15,000 (211,000) (157,191) (5,159) (304) (8,043) $54,898 3,079 (711) $2,368 (513) $56,753 (17,920) $38,833 (1,946) $36,887 June 30, 2012 $774,879 (516,867) (164,502) (16,292) (582) (12,711) 257 $64,182 5,698 (2,850) $2,848 3,052 $70,082 (20,780) $49,302 (310) $48,992 June 30, 2013 $1,054,100 (656,334) (256,515) (21,361) (5,380) (21,033) 188 $93,665 6,939 (4,816) $2,123 (5,679) $90,109 (27,190) $62,919 1,826 $64,745 Unaudited January 31, 2014 $520,041 (711,430) Total Comprehensive Income $29,105 $(324,162) (2,301) $(326,463) IMA EDUCATIONAL CASE JOURNAL 5 VOL. 8, NO. 1, ART. 2, MARCH 2015 Table 3. Balance Sheet (in thousands of Australian dollars) June 30, 2010 Current Assets Cash and cash equivalents $51,921 Short-term deposits Trade and other receivables 42,162 Inventories and WIP 14,621 Current tax assets Other assets 2,246 Noncurrent assets classified as held for sale 6,900 Total Current Assets $117,850 Noncurrent Assets Trade and other receivables Term deposits Property, plant, and equipment 26,789 Deferred tax assets 1,827 Investments accounted for using equity method Intangibles 15,621 Other assets Total Noncurrent Assets 44,237 Total Assets $162,087 Current Liabilities Trade and other payables 52,968 Borrowings 2,789 Current tax liabilities 8,644 Provisions 525 Other liabilities Total Current Liabilities $64,926 Noncurrent Liabilities Trade and other payables Borrowings Deferred tax liabilities Investments accounted for using the equity method Provisions 164 Other liabilities Total Noncurrent Liabilities $3,785 Total Liabilities 68,711 Net Assets 93,376 Equity Issued capital 42,839 Profit reserve Reserves 1,034 Retained earnings 49,505 Total Equity 93,376 Number of shares 70,699,487 Share price $2.66 June 30, 2011 $78,285 49,542 29,622 1,574 $159,023 36,577 2,043 15,637 54,257 $213,280 72,845 3,272 6,387 755 $83,259 4,901 51 308 299 $5,559 88,818 124,426 44,294 (912) 81,080 124,462 81,541,569 $5.46 June 30, 2012 $51,091 72,500 196,884 11,331 2,487 $334,293 7,051 14,260 67,736 4,273 2,545 48,243 144,108 $478,401 267,169 8,734 8,367 825 $285,095 9,246 17,453 2,793 489 489 $29,981 315,076 163,325 45,430 (1,221) 119,116 163,325 86,169,014 $4.37 June 30, 2013 $90,728 2,748 83,254 150,491 2,535 1,560 $331,316 1,424 10,468 71,546 9,124 40,332 132,894 $464,210 219,568 11,139 3,970 $234,677 14,547 1,067 493 493 $16,107 250,784 213,426 45,430 62,919 1,471 103,606 213,426 86,169,014 $4.20 Unaudited January 31, 2014 $15,316 103,279 40,616 (23,415) $135,796 73,293 90,467 163,760 $299,556 299,909 63,731 $363,640 1,517 50,667 $52,184 415,824 (116,268) 42,768 (159,036) (116,268) 86,169,014 IMA EDUCATIONAL CASE JOURNAL 6 VOL. 8, NO. 1, ART. 2, MARCH 2015 Table 4. Statement of Cash Flows (in thousands of Australian dollars) Cash Flows from Operating Activities Receipts from customers Payments to suppliers and employees Other revenue Income taxes paid Net cash flows provided by operating activities Cash Flows from Investing Activities Payments for property, plant, and equipment Proceeds from disposal of property, plan, and equipment Interest received Term deposits matured/expired Amount received from joint ventures Acquisition of investments or associates Payment of deferred consideration Net cash flows provided by/used in financing activities Cash Flows from Financing Activities Proceeds from issue of share capital Proceeds from borrowings Repayment of borrowings Interest paid Dividends paid Net cash provided by/used in financing activities Net increase/decrease in cash and equivalents Cash and equivalents at beginning of year Effect of exchange rate changes Cash and equivalents at end of year Table 5. Reconciliation (in thousands of Australian dollars) Profit for the year after tax Depreciation and amortization Other noncash differences Decrease/Increase in trade debtors and receivables Decrease/Increase in inventories and WIP Decrease/Increase in other current assets Increase in deferred tax assets Decrease/Increase in trade and payables Decrease/Increase in current tax liabilities Decrease/Increase in deferred tax liabilities Increase in other provisions Net cash inflow from operating activities 2010 245,418 (215,240) 943 (670) $30,451 (8,371) 224 1,023 (7,124) 18,907 (4,131) (271) (3,419) $11,086 34,413 17,440 67 $57,920 2010 $29,450 3,217 907 (25,202) (9,696) (104) (779) 21,881 10,649 64 64 $30,451 2011 431,399 (373,464) 638 (20,390) $38,183 (11,257) 6,485 3,079 (205) (1,898) 1,458 (3,464) (658) (7,257) $(9,921) 26,364 51,921 $78,285 2011 $38,832 5,159 (1,815) (7,380) (15,000) 671 (215) 19,877 (2,311) 365 $38,183 2012 744,720 (631,924) (21,537) $91,259 (39,737) 500 5,649 (86,760) (3,439) (123,787) 1,136 23,011 (4,698) (2,850) (11,265) $5,334 (27,194) 78,285 $51,091 2012 $49,302 16,292 (43,488) (154,393) 18,291 (913) (2,231) 203,417 1,980 2,742 260 $91,259 2013 1,176,226 (1,113,073) (45,231) $17,922 (19,521) 869 7,379 73,545 130 (19,798) $42,604 9,152 (9,654) (4,877) (15,510) $(20,889) 39,637 51,091 $90,728 2013 $62,919 21,361 28,409 119,258 (139,160) 927 (4,851) (37,123) (10,903) (1,727) 86 $17,922