Accounting Analysis of Gff - Relevant Company Background

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(b) According to the ratios analysis, the company B shows a better financial performance. Company A has lower ratio on return on equity, return on assets, profit margins, which means company A has lower ability to return to shareholders’ investment. While the competition environment is growing, the income of Company A is reducing from the previous years, they get lost by 398 million in year 2014. And company B has a better opportunity to grow, since they just take over the largest competitive company in Australia. The financial performance is getting better and better. In conclusion, company B has less risk for investment than company A, by looking at the dividend report and earning per share, an investment on company B can expected a good return. So, my decision is to invest 1 million dollar in company B.

(c)(Earning per shar, 1995)EPS is defined as the portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability. It measures how much income is received of each share. The higher EPS ratio means higher earning each share and higher dividend paid to the shareholders. (Jordan, D.J, 2011) Market price to book ratio is compare the company’s market value to its book value. If the ratio is lower, it means the stock is being undervalued. By looking at company A last three years ratios, the earning per share ratio is decreasing to -20.7cents, and the ratio is not stable over the 3 years. It means the company has lower ability to get income and pay the shareholder. And the market price to book ratio over 3 years is increasing up to 2.71. it means the company is overvalued in the share markets. It may be caused by the decreasing of company’s asset.

GFF

BGA

2012

2013

2014

2012

2013

2014

Current Ratio

718.8/434.1=1.6558

720.4/382.8=1.8819

492.6/336.3=1.4648

264807/165310=1.6019

289201/174771=1.6547

321541/212170=1.5155

Quick Ratio

(718.8-177.1-128)/434.1=0.9530

(720.4-1.7-128.9)/382.8=1.5408

(492.6-1.7-122.9)/336.3=1.0943

(264807-162668)/165310=0.6179

(289201-163207)/174771=0.7209

(321541-184167)/212170=0.6475

Interest Coverage

-107.8)/90.1=-1.1964

123.5/67.2=

1.8378

-399.1/56.8=

-7.0264

27079/9204=2.9421

35349/8447=

4.1848

93580/6392=14.6402

Return on Equity

-116.8/1375.1=-0.0849

90.8/1552.3=0.0585

-398.0/1141.0=-0.3488

20429/246440=0.0829

25445/261952=0.0971

66055/314388=0.2101

Return on assets

-116.8/2693.8=-0.0433

90.8/2776.8=0.0327

-398/2213.2=-0.1798

20429/165310=0.0219

25445/549221=0.0463

66055/548637=0.1203

Profit Margin

-116.8/(2212.5+9)=-0.0526

90.8/(2127.6+34)=0.0420

-398/(2199.9+11.4)=0.1780

20429/932911=0.0258

25445/1004386=0.0253

66055/1069392=0.0618

Gross margin precentage

(2212.5-1412.1)/2212.5=0.3618

(2127.6-1342.3)/2127.6=0.3691

(2199.9-1427.5)/2199.9=0.3511

115336/932911=0.1237

130043/1004387=0.1295

118275/1069392=0.1106

Cash Flows from Operating Activities to Net profit After Tax

129/-116.8=

-1.104

178.7/90.8=

1.9681

118.9/-398=

-0.2972

10539/20429=0.5159

59385/25445=

2.3339

40474/66055=0.6127

Days in Inventory

128*365/1412.1=

33.0855

128.9*365/1342.3=

35.0507

112.9*365/1412.1=

31.7672

162669*365/817545=

72.6250

163027*365/874344=

68.0566

184167*365/951117=

70.6758