Discuss About Management of Wealth Is an Investment Approach That ?
The company names as enterprise Uranium limited was established as public company with only one share held by their previous parent company Enterprise Metals limited. The main objectives of the company is to generate various highly prospective projects with the potential uranium resources, application of best possible practice for the technology of mineral application and to get the assistance of an well experienced team with strong leadership, management and technical knowledge with a proven track record for discovery (Investogain.com.au, 2017).
Management of wealth is an investment approach that involves the investment portfolio, financial planning, asset valuation, return on the asset and financial services. Return on assets indicates how the company earns profit with regard to its assets. ROA gives the idea regarding the efficiency of management in using its assets for creating wealth. The return on assets is calculated by dividing the company’s net annual income by the average total assets (Net income/ average total assets).
The figures achieved from the ROA gives the investors an idea regarding how efficiently the organization is turning their fund into earning. Higher the figures for ROA, better the company will be regarded as per the shareholders (Delen, Kuzey & Uyar, 2013).
From the figures of ROA achieved through the financial statements of Enterprise Uranium Limited over the years 2014, 2015 and 2016, it can be seen that the profitability position of the company is not at all good as they were not able to generate any net earnings over all the three years under consideration. Further, as the company was not able to generate any positive income over all the three years, its return on asset is also negative and amounted to -36%, -64% and -27% respectively over 2014, 2015 and 2016. However, before relying on the figures of Return on assets, the following items are suggested to be monitored closely –
Exploration and evaluation is to be monitored closely as the there is high rate of fluctuation in the amount of this asset. As it can be seen from the annual reports of the company that the amount of this asset was 47,86,973 during 2014 and significantly fell during 2015 and amounted to 2074419 and further it goes up to 4816377 during 2016. This huge fluctuation must be checked properly (Heikal, Khaddafi & Ummah, 2014).
Available for sale financial assets includes the non-derivative financial assets and listed securities and are shown under the non-current assets category. The financial assets are measures through “fair value through profit or loss” method when these are held for trading, derivative or short-term profit taking purpose and not considered for hedging purposes. It can be seen from the annual reports of the company that the amount of the AFS was $ 914,047 in 2014, $ 77,500 in 2015 and $14,15,952 during 2015. The amount significantly fell during 2015, therefore the reason behind this fall must be find out.
Plant and equipment of the company are calculated at the historical cost method. The fixed asset cost that is constructed within the company includes material cost, borrowing cost, labour cost and the fixed and variable cost at appropriate proportion. The carrying amount of the asset is immediately written down to its recoverable value if the carrying amount of the asset is more than the projected recoverable amount. As it can be seen from the annual reports of the company that the figures for plant and equipment of the company are in decreasing trend as the amount was reducing from $93,817 in 2014 to $48,712 in 2015 and further to $22,034 in 2016. The reason of this reduction may be high rate of depreciation or the management is instead of making any new purchases, selling it year after year. Therefore, to find the actual reason, this asset must be monitored closely (Elsas, Flannery & Garfinkel, 2014).
Corporate and consulting expenses, as it can be seen from the annual report of Enterprise Uranium limited over the last three years that is 2014, 2015 and 2016 that the expense towards this head is significantly went up during 2015 and amounted to $ 414,927, which was $250,110 during 2014. Further, during 2016 the cost came down to 233,750. The significant increase of this expenditure during 2015 must be investigated to find out the reason behind this.
From the overall performance ratio of the company, that is the asset turnover ratio and net profit margin ratio, it can be seen that the net profit margin ratio of the company is significantly shocking. The reason for this is that over all the past three years the company could not earn any positive return and the ratio was -3763%, -1036% and -27% respectively over 2014,1015 and 2016. Further the asset turnover ratio of the company for last 3 years are also not impressive as it was just 1% during 2014 and 6% in both 2015 and 2016 as the net sales (other income) of the company is not so big (Ongore & Kusa, 2013).
Therefore, from the overall performance of the company it can be seen that the company is not using their resources efficiently to generate wealth. However, as compared to the performance of 2014 and 2015, the performance of 2016 is slightly better in all aspects. Thus it can be assumed that the company is trying their best to reviving its financial position (Saunders & Cornett, 2014).
Therefore, I can say from looking into the financial performance of the company that the company inefficiently managing its resources to create wealth and can be rated as 1 = very unsatisfactory as they were not able to earn even the minimum possible return and generate any positive earning.
Delen, D., Kuzey, C., & Uyar, A. (2013). Measuring firm performance using financial ratios: A decision tree approach. Expert Systems with Applications, 40(10), 3970-3983.
Elsas, R., Flannery, M. J., & Garfinkel, J. A. (2014). Financing major investments: information about capital structure decisions. Review of Finance, 18(4), 1341-1386.
Heikal, M., Khaddafi, M., & Ummah, A. (2014). Influence analysis of return on assets (ROA), return on equity (ROE), net profit margin (NPM), debt To equity ratio (DER), and current ratio (CR), against corporate profit growth in automotive In Indonesia stock exchange. International Journal of Academic Research in Business and Social Sciences, 4(12), 101.
Investogain.com.au. (2017). ENTERPRISE URANIUM LIMITED ENU - Profile and Status at InvestoGain. [online] Available at: https://www.investogain.com.au/company/enterprise-uranium-limited [Accessed 28 Apr. 2017].
Ongore, V. O., & Kusa, G. B. (2013). Determinants of financial performance of commercial banks in Kenya. International Journal of Economics and Financial Issues, 3(1), 237.
Saunders, A., & Cornett, M. M. (2014). Financial institutions management. McGraw-Hill Education,.
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