Financial Statement Analysis: Bega Cheese Limited

Discuss about the Financial Statement Analysis.

Profile of Bega Cheese Limited–

Bega cheese is an Australia company which is managing its operations in dairy industry of Australia. This company is one of the largest Australian dairy companies. Current valuation of the company is Australian $ 775 million. Around 25% share of Australian dairy industry is held by Bega cheese. This company has diversified its market into various countries to grab more opportunity. Various dairy products such as cheese yogurt, retail cheese, processed cheese, chilled food etc are offered by the company in the Australian market (Bloomberg, 2018).

This company has been founded in 1899 and in 2011; it has become public limited company. Initially, it has been founded by an agriculture corporative firm. Currently, this company has been listed in Australian stock exchange. Earlier, this company used to offer its services and the products into limited area. But now, it has diversified its market.

Bega cheese is an Australia company which is managing its operations in dairy industry of Australia. This is one of the largest Australian dairy companies. Various companies are operating its business in Australian dairy industry, but around 25% share of Australian dairy industry is held by Bega cheese.  

For analysing the performance and the position of Bega cheese limited, profitability ratios have been calculated. Profitability ratios brief the investors and the financial analyst about the net profit, gross profit position of the company in terms of equity, share capital etc. Following is the calculation of profitability position of company:

Return on shareholder is a measurement which analysed the performance of the stock of a company. Following is the formula of calculating the return on shareholders’:   

The above ratio explains that the return on equity of 2014 was quite higher but in 2015, the ratio has been lower and in 2016, company has again tried to enhance it. Through the above graph, it has been found that return on equity position of 2016 of Bega cheese is quite improved and it explains that the stockholders would get a god return form the company (Annual report , 2016).

Return on total assets is a measurement which analysed the performance of the total assets of a company in context with the total net profit of the company. Following is the formula of calculating the return on total assets:  

The above ratio explains that the return on total assets of 2014 was quite higher but in 2015, the ratio has been lower and in 2016, company has again tried to enhance it. Through the above graph, it has been found that return on total assets position of 2016 of Bega cheese is quite improved and it explains that the good level of total assets have been managed by the company according to the total assets of the company. 

History

Net profit margin is a profitability ratio. It is a measurement which analysed the performance of a company in context with the total revenue of the company (Brigham and Houston, 2012). Following is the formula of calculating the net profit ratio:  

The net profit margin of 2014 of Bega Cheese was quite higher but in 2015, the ratio has been lower and in 2016, company has again tried to enhance it. Through the above graph, it has been found that net profit position of 2016 of Bega cheese is quite improved and it explains that the company has managed the expenses and the enhanced the revenue to manage the performance and the position of the company in 2016. Following is the calculations of the net profit of the company:  

Gross profit margin is a profitability ratio. It is a measurement which analysed the performance of a company and the gross profit of the company in context with the total revenue of the company. Following is the formula of calculating the gross profit ratio:

The above ratio explains that the gross profit margin of 2014 of Bega Cheese was quite better but in 2015, the ratio has been lower and in 2016, company has again managed to enhance the level of gross profit. Through the above graph, it has been found that gross profit position of 2016 of Bega cheese is quite improved and it explains that the company has managed the expenses and the enhanced the revenue to manage the performance and the position of the company in 2016. Following is the calculations of gross profit margin of the company:

For analysing the performance and the position of Bega cheese limited, efficiency ratios have been calculated. Efficiency ratios brief the financial analyst and the managers about the working capital management position of the company in terms of total inventory, debtors, creditors etc. Following is the calculation of efficiency position of company:

Inventory turnover ratio is an efficiency ratio. This ratio measures that how the inventory could be managed in an effective manner. This measures that how much time the inventory of the company would be turned in a period. Following is the formula of calculating the inventory turnover ratio: 

The above ratio explains that the inventory turnover days of 2014 of Bega Cheese was quite higher but in 2015, the ratio has been lower and in 2016, company has again enhanced the level of inventory turnover ratios. Through the above graph, it has been found that the more the inventory turnover of the company, the more the working capital of the company would be affected (Annual report, 2014). The current level of the company is quite good. Following is the calculations of gross profit margin of the company:

Industry

Account receivable turnover days ratio is an efficiency ratio. This ratio measures that how the accounting receivables collection process could be managed in an effective manner. This measures that how much time the accounting receivables of the company would be turned in cash a period. Following is the formula of calculating the accounting receivable ratio:

Accounts receivable turnover (days) =

The above ratio explains that the accounting receivable days of 2014 of Bega Cheese was quite lower in comparison of 2015 and 2016. In 2015, the ratio has been enhanced and in 2016, the debtor’s turnover days have been highest. Through the above graph, it has been found that the more the accounting receivable days of the company, the more the working capital of the company would be affected. The company is required to maintain a lower level. Following is the calculations of accounting receivable days of the company:

Accounts payable turnover days ratio is an efficiency ratio. This ratio measures that how the accounting payable payment process could be managed in an effective manner. This measures that how much time the accounting payables of the company would be turned in cash a period (Fulin, 2011). Following is the formula of calculating the accounting payable ratio:

Accounts payable turnover (days) = 

The above ratio explains that the accounting payable days of 2014 of Bega Cheese was quite higher in comparison of 2015 and 2016. In 2015, the ratio has been lower and in 2016, the debtor’s turnover days have been lowest. Through the above graph, it has been found that the less the accounting receivable days of the company, the more the working capital of the company would be affected. The company is required to maintain a higher level. Following is the calculations of accounting payable days of the company:

Asset turnover day’s ratio is an efficiency ratio. This ratio measures that how the total assets could be managed in an effective manner. This measures that how much time the asset of the company would be turned in a period. Following is the formula of calculating the asset turnover ratio:   

The above ratio explains that the asset turnover days of 2014 of Bega Cheese were quite higher in comparison of 2015 and 2016. In 2015, the ratio has been lower and in 2016, the debtor’s turnover days have been lowest. Through the above graph, it has been found that the less the asset turnover days of the company, the more the working capital of the company would be affected (Brigham and Ehrhardt, 2013). The company is required to maintain a lower level. Following is the calculations of asset turnover days of the company:

Profitability

For analysing the performance and the position of Bega cheese limited, liquidity ratios have been calculated. Liquidity ratios brief the financial analyst and the managers about the short term debt obligations of the company (Bromwich and Bhimani, 2005). Following is the calculation of liquidity position of company:

Current ratio is a liquidity ratio. This ratio measures that how the current assets and current liabilities of an organization could be managed in an effective manner. This measures that how much obligation could be paid by the company in a short period of time. Following is the formula of calculating the current ratio:  

The above ratio explains that the current ratio of 2014 of Bega Cheese were quite lower in comparison of 2015 and 2016. In 2015, the ratio has been enhanced and in 2016, the current ratio has been lowered by the company. Through the above graph, it has been found that the current ratio must be managed by the company according to the market position. Through the analysis, it is suggested to the company to lower the level. Following is the calculations of current ratio of the company:

Cash flow from operations is a liquidity ratio. This ratio measures that how the operating cash flows and current liabilities of an organization could be managed in an effective manner. This measures that how much obligation could be paid by the company in a short period of time. Following is the formula of calculating the operating cash flow ratio:  

The above ratio explains that the operating cash flow ratio of 2014 of Bega Cheese were quite lower in comparison of 2015 and 2016. In 2015, the ratio has been lowest and in 2016, the current ratio has been improved by the company. Through the above graph, it has been found that the operating cash flow ratio must be managed by the company according to the market position. Through the analysis, it is suggested to the company to enhance the level to manage better position. Following is the calculations:

For analysing the performance and the position of Bega cheese limited, financial gearing ratios have been calculated. Financial gearing ratios brief the financial analyst and the managers about the capital structure of the company (Higgins, 2012). Following is the calculation of financial gearing position of company:

Gearing ratio is a financial gearing ratio. This ratio measures that how the total debts, total equity and the total liabilities of an organization could be managed in an effective manner. This measures that how the capital structure of the company is. Following is the formula of calculating the gearing ratios: 

Efficiency

The above ratio explains that the gearing ratio of 2014 of Bega Cheese were quite lower in comparison of 2015 and 2016. In 2015, the ratio has been highest and in 2016, the gearing ratio has been lowered in the company. Through the above graph, it has been found that the gearing ratio must be managed by the company according to the market position (Annual report, 2015). Through the analysis, it is suggested to the company to enhance the level of capital employed. Following is the calculations:

Interest coverage ratio is a financial gearing ratio. This ratio measures that how the interest expenses could be paid by the company on its outstanding debt. This measures that what is the position of the company in terms of managing the funds through debt. Following is the formula of calculating the interest coverage ratios: 

The above ratio explains that the interest coverage ratio of 2014 of Bega Cheese were highest in comparison of 2015 and 2016. In 2015, the ratio has been lowest and in 2016, the interest coverage ratio of the company has been improved. Through the above graph, it has been found that the interest coverage ratio must be managed by the company according to the total funds and the ratio of outstanding debt (Gitman and Zutter, 2012). Through the analysis, it is suggested to the company to manage the same level in near future. Following is the calculations:

Conclusion/ recommendations 

Through the above study, it has been found that various alternations have been done by the management of the comapny in the financial position of the company in last 3 years. Through analysing the profitability position of the company, it has been evaluated that the position of the profits of the comapny has been lowered in 2016 and thus the management of the company must reduce the level of expenses to maintain a good position. Further, efficiency ratios have been measured and it has been evaluated that the organization should maintain the resources in such a manner that maximum utilization could be done.

In addition, the liquidity ratios of the company brief that the level of current assets is quite higher in context of the current liabilities of the comapny and due to it, the company is not able to do maximum utilization of the resources. Further, the gearing ratios brief that the current capital position of the company is bit better and company should maintain it further.

To conclude, investors are suggested to invest into the company to enhance the investment amount. The current position of the company is not that much good but the future prediction of the company would be better and thus the return of the company would also be higher.  

References 

Annual report. 2014. Bega Cheese limited. Available at https://www.annualreports.com/HostedData/AnnualReportArchive/b/ASX_BGA_2014.pdf [Accessed on 11th Jan 2018].

Annual report. 2015. Bega Cheese limited. Available at https://www.annualreports.com/HostedData/AnnualReportArchive/b/ASX_BGA_2015.pdf [Accessed on 11th Jan 2018].

Annual report. 2016. Bega Cheese limited. Available at https://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_BGA_2016.pdf [Accessed on 11th Jan 2018].

Bloomberg. 2018. Bega Cheese limited. Available at https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=5440962 [Accessed on 11th Jan 2018].

Borio, C., 2014. The financial cycle and macroeconomics: What have we learnt?. Journal of Banking & Finance, 45, pp.182-198.

Brigham, E.F. and Ehrhardt, M.C., 2013. Financial management: Theory & practice. Cengage Learning.

Brigham, F., and Houston.J. 2012. Fundamentals of financial management. Cengage Learning.

Bromwich, M. and Bhimani, A., 2005. Management accounting: Pathways to progress. Cima publishing.

Fulin, S. 2011. Preface by SHANG Fulin. Corporate Governance of Listed Companies in China, 9-10.

Gitman, L.J. and Zutter, C.J., 2012. Principles of managerial finance. Prentice Hall.

Higgins, R. C., 2012. Analysis for financial management. McGraw-Hill/Irwin.