BUS502 Romeo Construction Co. Ltd Analysis Assignment Sample

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• Subject Code : BUS502
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Global Business Environment - Chapter 10

Q1. Ans. 1. The company has various liabilities but the major two liabilities include:

Liabilities	Amount ($million)
Trade and other payables	6676
Borrowing	2855

(Source: Woolworth Annual Report, 2019)

Trade and other payables of the company includes the following amounts

Particulars	Amount ($Million)
Trade Payables	5219
Accruals	1242
Contract liabilities	215

(Source: Woolworth Annual Report, 2019)

While borrowing includes:

Particulars	Amount ($)
Non-current Unsecured
Bank Loans	678
Securities	2178
Unamortized cost of borrowing	(4)
Finance leases	3

(Source: Woolworth Annual Report, 2019)

So, the maximum liabilities include Trade payable at $5219 million and Securities at $2178 million.

Ans. 2. The ratios for Woolworths are as follows:

Particulars	Formula	Ratio
Current Ratio	Current Assets/Current Liabilities	0.731
Quick ratio	(Current Assets-Inventories)/Current Liabilities	0.234
Gross profit margin	Gross profit/Sales*100	29.04%
Debt to Equity	Total liabilities/ Total Shareholder's equity	0.55

Global Business Environment - Chapter 9

Ans. 1. The profits of the company from the year 2014 to 2016 have declined. In the year 2014 the company’s profit were at $6000 while in the year 2015, the profits fell to $4500. In the year 2016, the company regained a bit of its profit and reached to $4687.

The major reason for decline in the profits for the year 2015 were decline in sales of the company and increase in finance expense of the company. These two reason lead to fall in profits by 25%. While in the year 2016, the profits of the company increased by 4.1% from the year 2015. The company’s sale increased significantly but with that material, labor and administrative expenses also increased significantly. Due to which the company was not able to increase its profits. The profitability of the company has declined. So, to improve the profitability of the company, management needs to reduce its cost as then the profits will increase. Sales has seen a jump but due to high cost, profit margins are low. Thus, overall company’s profitability has declined and company needs to reduce the expenses for improvement.

Ans2. The financial situation of the company is appropriate. The sales of the company have improved since 2014. Also, the position of assets in the company have increased. The company has brought in new assets that will help in the growth of the company. Other than that the liabilities or the company have reduced. Bank overdraft for the company has reduced from the year 2014 to 2016. In the year 2015, the company’s bank overdraft increased but in the year 2016, the company has paid back the loan and reduced its loans amount from the bank. But the other current liabilities have increased. This means that liabilities that are to be paid in the year has increased for the company. Shareholder’s funds have increased and also dividends were paid by the company. Company paying the dividends depicts that company has enough cash to pay off its shareholder’s. The sales of the company are growing that means the company’s products are being liked by the customer. This depicts a good position for the company. The only drawback that the company is facing is that all its expenses have increased due to which the profit margins of the company have reduced. Other than that, the company shows a stable financial position and is able to reduce its bank overdraft too. So, with certain controls on the cost the company will be able to have more returns and better financial position.

Ans3. For the upcoming year the company needs to focus on certain things to improve its profitability. The sales of company have improved but in the year 2015 there was a decline in the sales number. So in the future years, the company should focus on the increase in number of sales as it will generate cash flows for the company.

Another action that can be taken by the company is that it should focus on the reduction in cost. The company expenses on labor, material and administration have increased. The company should try to reduce its cost overall so as to increase the margins of profits.

Also, the current liabilities of the company have increased, this has in turn increased the cost of finance for the company. So, company should try to reduce its liabilities that will help in attaining a better position in the market.

The last action that company should take is on distribution of dividends. All the profits for the company has been distributed as dividends. Company should create a reserve for future stability. This will help the company in having cash in times of need. Thus, these are certain actions that the company can take in future years.

Global Business Environment - Chapter 11

1.

Ratio	Formula	Katrina	Catherine
Current Ratio	Current Assets/Current Liabilities	4.16	2.71
Quick Ratio	(Current Assets-Inventories)/Current Liabilities	1.04	1.74
Inventory Turnover	Cost of Goods Sold/ Avg. Inventory	2.22	3.06
Accounts receivable turnover	Net credit Sales/ Avg. Accounts receivable	9.57	12.5
Average day sales uncollected	Average accounts receivables/ Net credit sales	38.16	29.20

2. Catherine Ltd. has a better financial position than the Katrina Ltd. The company’s current ratio is lesser than Katriana but Katriana’s current ratio is very high which depicts it is not using its assets appropriately. Other than that the quick ratio of Catherine Ltd. is better than Katrina and also the inventory turnover is more than the other company. This shows that company is able to revolve its inventory more than Katrina and generate better returns. Accounts receivable ratio is also higher for Catherine Ltd. This depicts that Catherine ltd. has been able to collect the receivables 12.5 times from the customers while Katrina has been able to collect it only 9 times. This shows that cash flow for Catherine Ltd. is better than Katrina. The company Catherine Ltd. also collects its sales in less number of days than Katrina. This shows that company will have a better cash flow and liquidity in the company than Katrina. So, Catherine has better liquidity.

3. Ratios	Formula	Katrina	Catherine
Return on Total Assets	Net income/ Total assets	15.86%	18.87%
Asset Turnover	Net sales/ Total assets	1.00	0.90
Net Profit margin before tax	EBIT/sales*100	15.88%	21.05%
Profit margin after tax	PAT/Sales*100	12.81%	18.95%

Catherine Ltd. has higher ROA. This is because of better usage of assets by the company. The company is generating more returns on its assets and is putting them to good use. Katina Ltd has kept its assets ideal as it can be seen in the current ratio of the company where the current ratio of Catherine is better in the sense, the company has enough assets for safeguarding their liquidity and also it has not kept most of its assets in an ideal state. Thus ROA of Catherine is better than Katrina.

4. Ratio	Formula	Katrina	Catherine
Return on Equity	Net income/ Shareholder's equity	23.85%	30.77%
Financial leverage	Debt/equity	0.40	0.49

Catherine has higher ROE. ROE for the company depicts the efficiency of management in using the shareholder’s money in creating profits. The reason Catherine has higher ROE is because of more debt than equity is the company which leads to higher ROE for the company.

5. Catherine is using leverage on debt effectively for increasing the returns to shareholder’s equity. The company has taken more debts than the other and using its leverage appropriately so as to provide better returns to the shareholders.

References for Global Business Environment

Annual Report. 2019. Woolworths Group. Retrieved from:https://www.woolworthsgroup.com.au/icms_docs/195582_annual-report-2019.pdf

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