Financial Analysis Of Australia Mines Limited And Australia Pacific Coal Limited

Company Overview

Discuss about the financial stamen of both the companies Australia mines limited and Australia pacific coal limited.

The report focuses on the fundamental analysis method. It measures that how the investment opportunity and the investment position of an organization could be evaluated. The report explains about the two companies Australia mines limited and Australia pacific coal limited. It measures the financial stamen of both the companies and identifies that which comapny is performing in an efficient way in the industry and how much returns could be got by the investors through investing into the company.

For evaluating the investment opportunity of both the company, fundamental ratios study has been performed on the companies. The short term solvency, liquidity, long term solvency, profitability, efficiency position etc has been evaluated and it has been measured that how well the companies are performing in the market and which company would offer more return to the investors of the company.

For the report, metals industry of Australia has been evaluated. The Australia mines limited and Australia pacific coal limited has been taken into the concern. The company overview of both the companies is as follows:

Australia mines limited is a metal company which supplies and manufactures the battery and technological metals in the international market. The Australia mines limited develops the cobalt-scandium-nickel projects in the Australian market. The projects of the company are among the largest project of Australian market (Bloomberg, 2018). The pre feasibility study of the company explains about the competitive position of the company. Financial performance of the comapny explains that the company has not generated any revenue from last few years. The company is facing huge loss from last 3 years.

Australia pacific coal limited is a coal mining company which supplies and manufactures the coals and the metals in the international market. The Australia pacific coal limited develops the coal treatments in the Australian market. The pre feasibility study of the company explains about the competitive position of the company (Reuters, 2018). The company is operated its business form the head office which is situated at Queensland. Financial performance of the comapny explains that the company has not generated any revenue from last few years. The company is facing huge loss from last 3 years.

Fundamental analysis is a process of evaluating the financial position and the investment position of an organization on the basis of the financial statement of the company of last few years. The fundamental analysis uses the related factor and the financial factors of an organization to identify the performance of the company and make a decision about the financial performance of the company.

Fundamental Analysis

It evaluates the stock of an organization on the basis of the intrinsic value and the financial factors of the company in the basis of the financial statement analysis methods to measure the performance of the company and the investment position of the company for long term (Du and Girma, 2009).

In the report, fundamental analysis study has been performed on two Australian companies to identify their performance and the investment opportunity of the company. The financial ratios have been calculated to measure the performance and the position of the company.

Financial ratios are the part of fundamental analysis which evaluates the financial statement and the financial transactions and market position of an organization on the basis of the various studies to measure the performance and the position of the company. Financial ratios evaluate the main items of the financial statement and the market value of the stock of the company to measure the profitability position, liquidity position etc of the company.

The financial ratios study of both the companies is as follows:

Short term solvency ratios explain about the skill and the ability of a business to meet entire short term financial debts and the obligations of the company. It measures the capability of a firm to neglect the financial distress in short term. The two main ratios of short term solvency are current ratio and the quick ratio which explains about the liquidity position of the company and the capability of the business.

Current ratio is a short term solvency ratio which measures the ability of an organization to pay the entire short term obligation of the company on the basis of the total current assets available (Shapiro, 2005).

The current ratio of Australia mines limited has been evaluated firstly and it has been recognized that the current ratio of the company is 7.2, 1.88 ad 3.18 in 2015, 2016 and 2017 respectively. It explains that the performance of the company has been improved as well as the current position also explains that the company could easily pay all the short term debts of the company.

Current Ratio		2015	2016	2017
Current Assets /		1727500	398611	1559609
Current liabilities		239940	211620	490340
Answer:		7.20	1.88	3.18

(Annual report, 2017)

The current ratio of Australia pacific coal limited has been evaluated further and it has been recognized that the current ratio of the company is 0.08, 1.39 and 0.26 in 2015, 2016 and 2017 respectively. It explains that the performance of the company has been lowered as well as the current position also explains that the company is not able to pay all the short term debts of the company in current year.

Current Ratio		2015	2016	2017
Current Assets /		146770	30097139	12905764
Current liabilities		1732936	21646941	48929152
Answer:		0.08	1.39	0.26

Financial Ratios

The current ratio of both the comapny explains that the performance of Australia mining limited is better than the Australia pacific coal limited due to the debt payment capability of the company.

Quick ratio is also a short term solvency ratio which measures the ability of an organization to pay the entire short term obligation of the company on the basis of the total quick assets which could be converted into cash at any time (Bierman and Smidt, 2012).

The quick ratio of Australia mines limited has been evaluated firstly and it has been recognized that the quick ratio of the company is 7.2, 1.88 ad 3.18 in 2015, 2016 and 2017 respectively (Investors, 2018). It explains that the performance of the company has been improved as well as the quick position also explains that the company could easily pay all the short term debts of the company from its quick assets.

Acid test ratio		2015	2016	2017
Current Assets - Inventory /		17,27,500	3,98,611	15,59,609
Current Liabilities		2,39,940	2,11,620	4,90,340
Answer:		7.20	1.88	3.18

(Morningstar, 2018)

The quick ratio of Australia pacific coal limited has been evaluated further and it has been recognized that the current ratio of the company is 0.08, 1.39 and 0.26 in 2015, 2016 and 2017 respectively. It explains that the performance of the company has been lowered as well as the current position also explains that the company is not able to pay all the short term debts of the company in current year.

Quick Ratio		2015	2016	2017
Current Assets - Inventory /		146770	30097139	12905764
Current liabilities		1732936	21646941	48929152
Answer:		0.08	1.39	0.26

The quick ratio of both the comapny explains that the performance of Australia mining limited is better than the Australia pacific coal limited due to the debt payment capability of the company.

Thus, it has been found that the liquidity position of Australia mining limited is better than the Australia pacific coal limited. It explains that the risk position of Australia mining is lower and explains that the investment into the Australia mining limited is better option.

Long term solvency:

Long term solvency ratios explain about the skill and the ability of a business to meet entire long term financial debts and the obligations of the company. It measures the capability of a firm to ignore the long term financial distress (Shapiro, 2005). The two main ratios of long term solvency are gearing ratio and interest coverage ratio which explains about the long term solvency position of the company and the capability of the business.

Gearing ratio is a long term solvency ratio which measures the ability of an organization to pay the entire long term obligation of the company on the basis of the total assets and the equity available to the business.

Short Term Solvency

The gearing ratio of Australia mines limited has been evaluated and it has been recognized that the gearing ratio of the company is 0, 0 and 0.03 in 2015, 2016 and 2017 respectively. The gearing amount has been 0 because of no long term debt of the company. It explains that the company has raised the debt amount in 2017 to maintain the capital structure position.

Gearing ratio		2015	2016	2017
Long term liabilities /		0	0	10965
Capital employed		3533521	2146188	3983111
Answer:	%	-	-	0.003

The gearing ratio of Australia pacific coal limited has been evaluated and it has been recognized that the gearing ratio of the company is 0, 0.034 and 0.174 in 2015, 2016 and 2017 respectively. It explains that the long term liabilities of the company have been improved as well as the capital structure position has also been enhanced which explains that the company is managing the long term debt as well but the capital structure of the company is not stable (Romney, Steinbart, Zhang and Xu, 2006).

Gearing ratio		2015	2016	2017
Long term liabilities /		0	93343	9259279
Capital employed		2715692	2758417	53271023
Answer:	%	-	0.034	0.174

(Morningstar, 2018)

The gearing ratio of both the comapny explains that the performance of Australia pacific coal limited is better than Australia mining limited due to the optimal capital structure of the company.

Interest coverage ratio is also a long term solvency ratio which measures the ability of an organization to pay the interest on the debt amount to the debt holders of the company on the basis of the total profit available to the company.

The interest coverage ratio of Australia mines limited has been evaluated to recognize that interest payment capability of the company. The interest coverage ratio of the company was nil in 2015, 2016 and 2017 respectively. It explains that the no interest amount has been paid by the company in last 3 years due to the fact that the company has not issued any debts in the market and thus the interest coverage ratio of the company is nil.

Interest Coverage Ratio		2015	2016	2017
EBIT /		-1087473	-1023221	-2413740
Net Finance Costs (used net interest expense)		0	0	0
Answer:	times p.a	#DIV/0!	#DIV/0!	#DIV/0!

(Bloomberg, 2018)

Further, the interest coverage ratio of Australia pacific coal limited has been evaluated further and it has been recognized that the interest coverage ratio of the company is 0, -7.07 and -3.39 in 2015, 2016 and 2017 respectively. It explains that the earnings before interest and tax of the company are negative and due to it, the company is not able to pay the interest expenses from the profits of the company.

Interest Coverage Ratio		2015	2016	2017
EBIT /		-1922562	-5991001	-8942416
Net Finance Costs (used net interest expense)		0	847340	2638203
Answer:	times p.a		-7.07	-3.39

The interest coverage ratio of both the comapny explains that the performance of Australia mining limited is better than the Australia pacific coal limited as the company is facing loss and thus no amount has been raised by the company through debt amount (Kaplan and Atkinson, 2015).

Current Ratio

Thus, it has been found that the long term solvency position of Australia mining limited is better than the Australia pacific coal limited. The company has managed the optimal capital structure in such a way that the company could bear the losses.

Asset utilization:

Asset utilization ratio explains about the efficiency position of the company and cash conversion cycle of the company. It measures that how effectively a business could run its business and the activities. The asset utilization ratios of the company are as follows:

Payment turnover ratio explains about the total average time in which the company pays the amount to the creditors.

The payment turnover ratio of Australia mines limited explains that the payment turnover ratio of the company is 0, 0 and 0 days in 2015, 2016 and 2017 respectively. The turnover ratio explains that the company has not generated any profit and thus the turnover days of the company could not be calculated in 2015, 2016 and 2017.

Trade payable payment period ratio		2015	2016	2017
Accounts payable/		190861	164080	328830
Cost of sales		0	0	0
Answer: (note the above needs to be x 365)		#DIV/0!	#DIV/0!	#DIV/0!

The payment turnover ratio of Australia pacific coal explains that the payment turnover ratio of the company is 0, 112481 days and 0 days in 2015, 2016 and 2017 respectively. The turnover ratio explains that the company has not generated any profit and thus the turnover days of the company could not be calculated in 2015 and 2017.

Trade payable payment period ratio		2015	2016	2017
Accounts payable/		291536	523579	2701937
Cost of sales		0	1699	0
Answer: (note the above needs to be x 365)		#DIV/0!	112481.66	#DIV/0!

These ratios are calculated to identify the efficiency and the cash conversion cycle of the company. The Inventory turnover and receivable turnover ratio of Australia mines limited explains that the company has not generated any revenue from last 3 years and due to it, the turnover days of the company could not be calculated in 2015, 2016 and 2017 (Annual report, 2017).

Inventory Turnover (days)		2015	2016	2017
Average Inventory /		0	0	0
Cost of Sales	# days	0	0	0
Answer:  (note the above needs to be x 365)		#DIV/0!	#DIV/0!	#DIV/0!
Receivables Turnover (days)		2015	2016	2017
Average trade debtors /		27013	1500	639
Sales revenue  (note used operating revenue)	# days	0	0	0
Answer:  (note the above needs to be x 365)		#DIV/0!	#DIV/0!	#DIV/0!

The Inventory turnover and receivable turnover ratio of Australia pacific coal explains that the ratio of the company is 128899.35 and 4592.26 days in 2016 respectively. The turnover ratio explains that the company has not generated any revenue in 2015 and 2017 and thus the turnover days of the company could not be calculated in 2015 and 2017 (Elliott and Elliott, 2007).

Inventory Turnover (days)		2015	2016	2017
Average Inventory /		0	600000	0
Cost of Sales	# days	0	1699	0
Answer:  (note the above needs to be x 365)		#DIV/0!	128899.35	#DIV/0!
Receivables Turnover (days)		2015	2016	2017
Average trade debtors /		17389	48615	241677
Sales revenue  (note used operating revenue)	# days	0	3864	0
Answer:  (note the above needs to be x 365)		#DIV/0!	4592.26	#DIV/0!

thus, it has been found that the efficiency position of Australia mining limited and the Australia pacific coal limited is quite similar. Both the companies have not generated any revenue and thus the efficiency position cannot be calculated.

Profitability ratios:

Profitability ratio explains about the profitability position of the company and the capability of the company to generate the profit. It measures that how well the company is using the sources and the assets to enhance the profitability level of the company. The profitability ratios of the company are as follows:

Quick Ratio

Return on capital employed, gross profit margin and net profit margin ratio explains about the profit generation capability of the company to measure the performance and the position of the company (Horngren et al, 2005).

The profitability ratio of Australia mines limited explains that the return on capital employed level explains about the negative performance of the company as well as the gross profit margin and the operating profit margin of the company cannot be calculated because of any sales generation in last 3 years.

		AUSTRALIAN MINES LTD
Profitability Ratios:		2015	2016	2017
Return on Capital employed		2015	2016	2017
Operating profit /		-1087473	-1023221	-2413740
Capital employed (total assets - current liabilities)		3533521	2146188	3983111
Answer:	%	-30.78%	-47.68%	-60.60%
Gross Profit Margin		2015	2016	2017
Gross profit /		462184	304571	1382984
Sales Revenue (note used operating revenue)		0	0	0
Answer:		#DIV/0!	#DIV/0!	#DIV/0!
Operating profit margin		2015	2016	2017
Operating profit /		-1087473	-1023221	-2413740
Sales Revenue	%	0	0	0
Answer:		#DIV/0!	#DIV/0!	#DIV/0!

The profitability ratio of Australia pacific coal limited explains that the return on capital employed level explains about the negative performance of the company as well as the gross profit margin and the operating profit margin of the company was 127.43% and 127.43% in 2016. The ratios of 2015 and 2017 cannot be calculated because of any sales generation.

		AUSTRALIAN PACIFIC COAL LTD
Profitability Ratios:		2015	2016	2017
Return on Capital employed		2015	2016	2017
Operating profit /		-1922562	-5991001	-8942416
Capital employed (total assets - current liabilities)		2715692	2758417	53271023
Answer:	%	-70.79%	-217.19%	-16.79%
Gross Profit Margin		2015	2016	2017
Gross profit /		0	2165	0
Sales Revenue (note used operating revenue)		0	1699	0
Answer:			127.43%
Operating profit margin		2015	2016	2017
Operating profit /		0	2165	0
Sales Revenue	%	0	1699	0
Answer:			127.43%

  (Morningstar, 2018)

On the basis of the above ratios, it has been found that the comparison study cannot be done because of no proper ratios and the values of sales.

Market value ratios explain about the market position of the company. On the basis of the market value ratios of Australia mines limited, it has been found that earnings per share of the company explain s about the negative position and the company has not paid any dividend amount to the shareholders of the company (Deegan, 2013).

		AUSTRALIAN MINES LTD
Market value Ratios		2015	2016	2017
Earnings per share		2015	2016	2017
Net income		-2573585	-1023221	-2413740
Weighted average shares outstanding		821163864	1072990676	1303750788
Answer:		-0.003	-0.001	-0.002
Dividend coverage ratio		2015	2016	2017
Net income /		-25,73,585	-10,23,221	-24,13,740
Dividend paid to shareholders		0	0	0
Answer:		#DIV/0!	#DIV/0!	#DIV/0!

Further, the market value ratios of AUSTRALIAN PACIFIC COAL LTD explain that the market value of the company is not at all competitive. Company has not paid any dividend to the shareholders in last 3 years.

		AUSTRALIAN PACIFIC COAL LTD
Market value Ratios		2015	2016	2017
Earnings per share		2015	2016	2017
Net income		-1922562	-5991001	-8942416
Weighted average shares outstanding		2948567	29990577	44875472
Answer:		-0.652	-0.200	-0.199
Dividend coverage ratio		2015	2016	2017
Net income /		-19,22,562	-59,91,001	-89,42,416
Dividend paid to shareholders		0	0	0
Answer:		-	-	-

(Annual report, 2017)

On the basis of the above evaluation and the study, market value of Australia mines limited is way better than Australia pacific coal limited. However, both the position is negative and does not explain about the better market position.

On the basis of the above evaluation and the study, it has been recognized that the liquidity position of Australia mining limited is better than the Australia pacific coal limited. Further it has been found that the risk position of Australia mining is lower and explains that the investment into the Australia mining limited is better option.

In addition, the efficiency position of Australia mining limited and the Australia pacific coal limited is quite similar. Both the companies have not generated any revenue and thus the efficiency position cannot be calculated.

The profitability position and the market value ratios of the company have also not been calculated because of any sales generation.

On the basis of this evaluation, it has been found that the of Australia mining limited is better than the Australia pacific coal limited for the purpose of investment. Though, no company would offer return to the investors. However, the risk of Australia mines limited is lower.

References:

Annual report. 2017. Australia pacific coal Limited. (Online). Available at: https://www.aqcltd.com/irm/content/annual-reports.aspx?RID=382 (Accessed 24/05/2018).

Bierman Jr, H. and Smidt, S., 2012. The capital budgeting decision: economic analysis of investment projects. Routledge.

Bloomberg. 2018. Australia Mines Limited. (Online). Available at: https://www.bloomberg.com/quote/AUZ:AU (Accessed 24/05/2018).

Bloomberg. 2018. Australia pacific coal limited. (Online). Available at: https://www.bloomberg.com/quote/AQC:AU (Accessed 24/05/2018).

Deegan, C. 2013. Financial accounting theory. McGraw-Hill Education Australia.

Du, J. and Girma, S., 2009. Source of finance, growth and firm size: evidence from China (No. 2009.03). Research paper/UNU-WIDER.

Elliott, B., and Elliott, J. 2007. Financial accounting and reporting. Pearson Education.

Horngren, C.T., Sundem, G.L., Stratton, W.O., Burgstahler, D. and Schatzberg, J., 2005. Introduction to management accounting. Upper Saddle River, New Jersey: Prentice Hall.

Investors. 2018. Australia Mines Limited. (Online). Available at: https://australianmines.com.au/investors (Accessed 24/05/2018).

Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.

Morningstar. 2018. Australia Mines Limited. (Online). Available at: https://financials.morningstar.com/income-statement/is.html?t=0P00006W9T&culture=en-US&platform=sal (Accessed 24/05/2018).

Morningstar. 2018. Australia pacific coal Limited. (Online). Available at: https://financials.morningstar.com/income-statement/is.html?t=AQC&region=AUS&culture=en_US (Accessed 24/05/2018).

Reuters. 2018. Australia Mines Limited. (Online). Available at: https://www.reuters.com/finance/stocks/company-profile/AUZ.AX (Accessed 24/05/2018).

Romney, M.B., Steinbart, P.J., Zhang, R. and Xu, G., 2006. Accounting information systems. Pearson Education.

Shapiro, A.C., 2005. Capital budgeting and investment analysis. Prentice Hall.