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Analytical Procedures – An Understanding Of Entity’s Performance

Discuss about the Analysis of Ainsworth Game Technology.

Analytical review has been conducted by following the ratio analysis of the company financial statements for the last three years and then of the competitor – Ainsworth Game Technology. In order to facilitate the more comparability, the ratios of industry have also been identified. The ratios under the major four heads have been calculated and mentioned – Liquidity ratio, profitability ratio, long term solvency ratio and market strength ratio.

In order to start with the company’s ratio analysis, the debtor’s turnover ratio has been increasing on year on year basis from 2.54 in the year 2014 to 4.92 in the year of 2016. It indicates that the company has either started making the sales in cash to the customers or has increased the efficiency in collection of the revenue from the customers of the company. The competitor has earned 2.40 as debtor’s turnover ratio which means that the company is more efficient in doing the business and when the same is compared to the industry where 8.50 is the benchmark, the efficiency of the company is lower (Drake, 2010, Delen, 2013).

The second ratio is the net profit margin. The company has earned the net profit margin of negative 1.96 in the year of 2014, 11.78 in the year of 2015 and 16.47 in the year of 2016. It depicts that the company has increased its growth significantly. The competitor of the company has earned 19.51 as net profit margin which indicates that although the competitor is not efficiently managing its debtors but has been able to earn the high net profit margins at the end of the year. When the ratio of net profit margin of the company and competitor is compared with the industry then it is observed that both the companies have exceeded the level of the industry and is generating higher net profit margins (Delen, 2013, PCAOB, 2017).

The third measure that has been considered is the earnings per share. The company has disclosed and earned the 20.6 per share in the year of 2014, 24.8 in the year of 2015 and 55.10 in the year of 2016. The company has been able to perform very well in the three years and have been able to achieve the higher earnings per share almost more than double of previous year. The competitor has earned the 16 per share. When these figures are compared with the industry then it is shown that the company under consideration has performed very well in relation to the providing the maximum return to the shareholder of the company (Company Official Website, 2016; Company Official Website,2015; Company Official Website2014)          

STATEMENT SHOWING THE RATIO ANALYSIS

       

($ millions)

   

S. No.

PARTICULARS

2016

2015

2014

Competitor

Industry

         

( Ainsworth Game technology 2016)

(As per Investing .com)

1

Liquidity Ratios

         

a

Current Assets

875.1

898.5

701.5

208.1

 
 

Less Current Liabilities

549.2

442.4

371.7

47.8

 
 

Working Capital

325.9

456.1

329.8

160.3

 

b

Current Ratio

1.59

2.03

1.89

4.35

1.59

c

Debtors

432.9

441.9

328.4

118.8

 
 

Revenue

2128.7

1582.4

833.7

285.5

 
 

Debtors Turnover Ratio

4.92

3.58

2.54

2.40

8.5

d

Assets

2987.7

3218.7

1112.7

435.9

 
 

Revenue

2128.7

1582.4

833.7

285.5

 
 

Assets Turnover Ratio

0.71

0.49

0.75

0.65

0.53

e

Stock

124.3

102.2

75.8

55.7

 
 

Revenue

2128.7

1582.4

833.7

285.5

 
 

Stock Turnover Ratio

17.13

15.48

11.00

5.13

76.25

2

Profitability Ratios

         

a

Net Profit

350.5

186.4

-16.3

55.7

 
 

Revenue

2128.7

1582.4

833.7

285.5

 
 

Net Profit Margin

16.47

11.78

-1.96

19.51

11.07

b

Gross Profit

1256.0

903.3

457.8

171.7

 
 

Revenue

2128.7

1582.4

833.7

285.5

 
 

Gross Profit Margin

59.00

57.08

54.91

60.14

51.19

3

Long Term Solvency Ratios

         

a

Total Debt

1912.2

2301.3

406.6

120.1

 
 

Equity

1075.5

917.4

706.1

315.9

 
 

Total Debt to Equity

177.80

250.85

57.58

38.02

92.53

b

Long Term Debt

1363.0

1858.9

34.9

72.4

 
 

Equity

1075.5

917.4

706.1

315.9

 
 

Long Term Debt to Equity

126.73

202.63

4.94

22.92

91.5

c

Debt

1912.2

2301.3

406.6

120.1

 
 

Total Assets

2987.7

3218.7

1112.7

435.9

 
 

Debt Ratio

64.00

71.50

36.54

27.55

 

4

Market Strength Ratios

         

a

Earnings Per Share (cents)

 $      55.1

 $      24.8

 $        20.6

 $                  17

 $               35

The management plays the important role in the functioning of the company. Without proper management, the company will not be able to perform and achieve its objectives. Under this heading, the company’s working and the functions of the management of the company and those charged with governance will be discussed.

  • Integrity and Ethical Values – As per the report of the chairman of the company embedded in the annual report of the company, the company has established the objectives and the strategies which led company to have the effectiveness in the operations of the company along with the good administration across all level of the company. Secondly the management of the company wherever required has been able to make the estimates and judgments and the assumptions which further led to ensure that the company has designed the accounting framework lawfully and efficiently (Claessens and Fan, 2012).  
  • Competence- Under the part of the Operational and financial review of the annual report of the company, it is mentioned that the company is continuously facing the severe competition from the market and the industry and in order to be more competitive, company have planned to make investment in acquiring the key skills and the talent which is required to perform the particular type of task. To make it the strategy, the company has included the retention incentive for the managers who will retain in job for consecutive period of five years and is the part of remuneration.
  • Participation – As per the annual report for the year ending 2016, the company has nine directors and each of them has the requisite experience and skills. All the directors of the company are totally independent and is not related in any manner with each other. Each of the directors has requisite experience. For instance, ID Blackburn has been appointed in the year or 2010 and has been the managing director of Caltex Australia Limited, Teekay Corporation, Recall Holdings and Australian Nuclear Science and Technology Organization. Currently he is acting as the member of each board committee and is also non executive chairman.   
  • Management’s Style and Philosophy – DCP bank is the chairperson of audit and risk committee of the company and also is the director of the company. The company has mentioned in the annual report of the company the areas where the risks have been identified and for which the management of the company is required to identify the risks concerned and manage it accordingly. The approach that has been adopted by the company is to assess the risk on regular basis then monitoring the same and reporting it to the management of the company so as to increase the progress of the company and delivering the strategic opportunities.
  • Structure of the organization- The Company has established the well defined structure within the organization. There is no chance of having any irregularity in the functioning of the company. It is because the company has followed all the provisions of corporation’s act 2001 and the listing guidelines and has accordingly formulated the various committees like remuneration, audit and risk, shareholders grievance and etc. Secondly the company has mentioned all the accounting policies and procedures which h further states that the structure of accounting function is also very well defined (Shleifer and Vishny, 2011).
  • Authority and Responsibility – The authority and the responsibility of various works are made through the passing of the resolution at the meeting of the company. It may be monthly board meeting or the annual general meeting depending upon the facts and circumstances of the matter under discussion. Secondly, authority responsibility and reporting are well established through the employment contract entered into with the employee at the time of recruiting. It describes the roles and responsibilities and other activities required under the job.
  • Human Resource – The Company has the policy of recruiting the employees by way of posting the vacancy at the website of the company or by posting the vacancy in the daily newspaper of the company. The recruitment is done after having the screenings and the interviews and the verification checks.      

References

Company Official Website, (2015), “Annual Report 2015”, available at  https://www.aristocrat.com/au accessed on 18/09/2017.

Company Official Website, (2016), “Annual Report 2016”, available at https://www.aristocrat.com/au accessed on 14/09/2017.

Company Official Website, (2014), “Annual Report 2014”, available at https://www.aristocrat.com/au accessed on 14/09/2017.

Claessens, S. and Fan, J.P., (2012).”Corporate governance in Asia: A survey”. International Review of finance, 3(2), pp.71-103.

Delen, D., (2013), Measuring firm performance using financial ratios: A decision tree approach. Expert Systems with Applications, 40(10), pp.3970-3983.

PCAOB, (2017), “Analytical Procedures” available at  https://pcaobus.org/Standards/Archived/Pages/AU329A.aspx  accessed on 17/09/2017.

Shleifer, A. and Vishny, R.W., (2011), “A survey of corporate governance”. The journal of finance, 52(2), pp.737-783.

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My Assignment Help. (2018). Analyzing Ainsworth Game Technology: Liquidity, Profitability, Long-term Solvency, And Market Strength Ratios In An Essay.. Retrieved from https://myassignmenthelp.com/free-samples/analysis-of-ainsworth-game-technology.

"Analyzing Ainsworth Game Technology: Liquidity, Profitability, Long-term Solvency, And Market Strength Ratios In An Essay.." My Assignment Help, 2018, https://myassignmenthelp.com/free-samples/analysis-of-ainsworth-game-technology.

My Assignment Help (2018) Analyzing Ainsworth Game Technology: Liquidity, Profitability, Long-term Solvency, And Market Strength Ratios In An Essay. [Online]. Available from: https://myassignmenthelp.com/free-samples/analysis-of-ainsworth-game-technology
[Accessed 05 March 2024].

My Assignment Help. 'Analyzing Ainsworth Game Technology: Liquidity, Profitability, Long-term Solvency, And Market Strength Ratios In An Essay.' (My Assignment Help, 2018) <https://myassignmenthelp.com/free-samples/analysis-of-ainsworth-game-technology> accessed 05 March 2024.

My Assignment Help. Analyzing Ainsworth Game Technology: Liquidity, Profitability, Long-term Solvency, And Market Strength Ratios In An Essay. [Internet]. My Assignment Help. 2018 [cited 05 March 2024]. Available from: https://myassignmenthelp.com/free-samples/analysis-of-ainsworth-game-technology.

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