Business Analysis and Valuation

Executive Summary of Healius Limited Analysis

Following discussion shows the analysis of Healius Limited in terms of liquidity ratios, profitability ratios, capital structure ratios and leverage ratios. This analysis shows how the company is performing as compared to its competitors and as compared to previous years.

Contents

Executive Summary.

Healius Limited.

Profitability ratios.

Liquidity ratios.

Capital structure ratios.

Efficiency ratios.

Conclusion.

Bibliography.

Healius Limited

It is one of the leading companies in the Australia. The company Healius deal with the different health care available in Australia. With the help of the different network it deals with different centres such as pathology laboratories, diagnostic imaging centres and multi-disciplinary medical centres, these centres plays a very important role in Australia. This company give different health care professionals, radiologist and professionals their best services so that they give the patients their best services. The nurses and the other employees also took advantage from Healius. The services that Healius provides is one the best services in the world. Also these services are very easy to access.

There are many business Healius but the main businesses of Healius are imaging, pathology and day hospital. It also has some different fields that deal with the sale of their products. Healius has a completely different working system than others; also this company has more than 12,500 employees. Healius provides one of the best services in the other.

Profitability Ratios

It is the method use by the investors and the analysts to know the ability of the company that how much profit is made through the company, it is also use to calculate the revenue, operating cost, shareholders equity and other more things. Profitability ratios help us to produce the profit with the help of investors and the shareholders. The more the profitability ratio the higher the chance we are going to make through our business.

Gross margin ratio (12 months) – the operating margin ratio of the Healius Limited in 2019 is 87.17% while the industry average in 2019 is 78.13%. Gross margin ratio tells us how much the gross profit of the company is as a percentage of the net sales. If the company's gross margin ratio is less than the average of the sector, then it indicates that it has performed badly over the period and that the company has a gross margin ratio higher than the average in the sector then it means that the business has done well over the period. The Healius Limited's gross margin ratio is higher than the industry average which implies its performance in the period according to the gross margin ratio results.

Gross margin ratio (five years) – the average operating margin ratio of the Healius Limited for five years is 88.44% while the industry average in 2019 is 77.39%. Gross margin ratio tells us how much the gross profit of the company is as a percentage of the net sales. When the company's gross margin ratio is lower than the average industry, then it indicates that the company's activities were not successful in this period and that the company's gross margin ratio was higher than its average in the industry. As the Healius Limited's average brutal profit ratio is higher than the average industry, it is evident that the company achieved a strong result of the gross margin ratio over the last five years.(Healius Limited, 2018).

Operating margin ratio (12 months) – the operating margin ratio of the Healius Limited in 2019 was 4.8% while the industry average was 11.73. Operating margin ratio tells us how much the operating profit of the company is as a percentage of the net sales. If the company's operating margin proportion is smaller than the average industry, the company's output over the period is not good, but where the company's operating margin ratio is higher than the industry average, this indicates that the company has performed well over the period. According to the operating ratio, the Healius Limited's operating margin ratio is significantly lower than that of the industry, showing that it has not done its job well in this time(Healius Limited, 2019).

Operating margin ratio (five years) – the average operating margin ratio of the Healius Limited in the recent five years was -3.66% while the industry average was 8.13. Operating margin ratio tells us how much the operating profit of the company is as a percentage of the net sales If the company's operating margin proportion is smaller than the average industry, the company's output over the period is not good, but where the company's operating margin ratio is higher than the industry average, this indicates that the company has performed well over the period. The operating ratio shows that Healius Limited has not reached its average operating margin for the past five years, which is substantially lower than the market, in recent years.

Net profit margin ratio (12 months) –the net profit margin ratio of the Healius Limited in 2019 was 4.54% while the industry average in 2019 was 7.7%. If the company's operating margin proportion is smaller than the average industry, the company's output over the period is not good, but where the company's operating margin ratio is higher than the industry average, this indicates that the company has performed well over the period. The operating ratio shows that Healius Limited has not reached its average operating margin for the past five years, which is substantially lower than the market, in recent period.

Net profit margin ratio (five years) – the average net profit margin ratio of the Healius Limited for the recent five years was -4.24% while the industry average for the recent five years was 5.78%. The profit margin ratio indicates how much the company's net profit amounts to as part of the company's net profits. If the company's net profit margin ratio is higher than the industry average, the company demonstrates that it does well over the period, but if the company's net profit margin ratio is lower than the average industry, then it means that the company has not done well in future. Healius Limited has struggled to perform well in the last five years in line with the net profit margin ratio(Healius Limited, 2018).

Liquidity Ratios

It is one of the most important classes of the financial metric. We use this to pay-off all the debt of the debtors but we have to do this without raisingany other external capital, in that we liquidity ratio. It also helps us to known the ability of our company that how much our company is capable of paying its debts. We also use it in different calculations such as ratio of the operating cash flow, quick ratio and current ratio.

Quick ratio - The quick ratio of the Healius Limited in the 2019 was 1.33 while the industry average in 2019 was 0.84. Quick ratio informs us how quickly the company's assets have to repay its current liability. If the company's rapid ratio exceeds the industry average shows that, compared with the industry average, the company has quicker assets than the current liabilities to pay however, if the company's quick asset ratio is less than the average in the industry, then it means that the current liabilities are paying less quickly compared with industry standards. Healius Limited performed well in the time, depending on the rapid asset ratio (Yüksel et al., 2019).

Current ratio - The current ratio of the healius Limited in 2019 was 1.36 while the industry average in 2019 was 0.91. The current ratio demonstrates how much the firm needs to pay its existing liabilities for the current assets. If the company's current ratio is greater than the industry average it is shown that its existing assets are larger than the industry average but if its current asset ratio is smaller than the industry average then it is shown that, relative to industry averages, the company has less existing assets to fund its current liabilities. Healius Limited performed well in the time, according to the current asset ratio (AREAS, 2018).

Capital Structure Ratios

It is a combination of different things such as equity and the debts which we use to maintain the growth and the other operation of the company. The most of the debts of the company comes in the form of the loan which the banks gives them, the debts also come in other form such as retained earnings, common stock, preferred stocks etc. We also use the short term debts in our structure capital.

LT debt to equity ratio – the LT debt to equity ratio of the Healius Limited in 2019 was 81.5% while the industry average in 2019 was 100.19%. LT debt to equity ratio tells us how much debts the company has as a percentage of its equity. If the company has higher LT debt to equity ratio than the industry average then it shows that the company has taken more debts as compared to the industry but if the LT debt to equity ratio of the company is lower LT debt to equity ratio than the industry average then it shows that the company has les debt as compared to the industry average. According to the LT debt to equity ratio, Healius Limited is in much better condition as compared to the other companies working in the same industry(Healius Limited, 2015).

Total debt to equity ratio – the total debt to equity ratio of the Healius Limited in 2019 was 90.5% while the industry average in 2019 was 105.1%. Total debt to equity ratio tells us how much debts the company has as a percentage of its equity. If the company has higher total debt to equity ratio than the industry average then it shows that the company has taken more debts as compared to the industry but if the total debt to equity ratio of the company is lower than the industry average then it shows that the company has les debt as compared to the industry average. According to the total debt to equity ratio, Healius Limited is in much better condition as compared to the other companies working in the same industry(Healius Limited, 2017).

Efficiency Ratios

We use efficiency ratio to known that how much the company gets the profit from the liabilities and the assets of the company. We also use efficiency ratio to calculate different things such as equity of the usage and quantity, liabilities of the repayment, the receivables of the turnover and, the machines and inventory general use in the company. We use this ratio system to analyze the investment of the banks in our company and the commercial performance of the company.

Asset turnover ratio – the low asset turnover ratio of the Healius Limited as compared to the industry average shows that Healius Limited has not performed well in the period.

Inventory turnover – the low inventory turnover ratio of the Healius Limited as compared to the industry average shows that Healius Limited has not performed well in the period (Palepu et al., 2020).

Receivable turnover - Low receivable turnover ratio of the Healius Limited as compared to the industry average shows that Healius Limited has not performed well in the period(Healius Limited, 2019).

Conclusion on Healius Limited Analysis

Here are the some of the limitation of ratio analysis given below:

  1. Any change in policies of accounting - Any significant change that effecting the financial reports when the procedure and the accounting policies changed by the company or the organization. In this situation, the main financial metrics, which be, applied in changing ratio assessments and the financial results that have been achieved following the change cannot be reported comparing with those generated prior to the change (Healius Limited, 2020).
  2. Manipulation of financial statements - Ratio analyses based on the data reported in the financial statements by the corporation or organisation. The management of the business could manipulate this information to produce a better result than its actual results.
  3. Inflationary effects - In there every release, there must be a difference just of their periodic release of the financial statements. If the inflation that could also occurs in the centre of the periods, the financial reports can’t reflect the real prices of the goods.

According to the above discussion, it has concluded that Healius Limited has not performed well in the period of five years.

Bibliography for Healius Limited Analysis

Healius Limited. (2015). Annual Report , https://www.healius.com.au.

Healius Limited. (2016). Annual Report , https://www.healius.com.au.

Healius Limited. (2017). Annual Report , https://www.healius.com.au.

Healius Limited. (2018). Annual Report , https://www.healius.com.au.

Healius Limited. (2019). annual report , https://www.healius.com.au.

Healius Limited. (2020). About us , https://www.healius.com.au.

Palepu, K. G., Healy, P. M., Wright, S., Bradbury, M., & Coulton, J. (2020). Business analysis and valuation: Using financial statements. Cengage AU.

AREAS, B. (2018). Financial analysis. Growth, 30, 10.

Yüksel, S., Dinçer, H., & Meral, Y. (2019). Financial analysis of international energy trade: a strategic outlook for EU-15. Energies, 12(3), 431.

Grennan, J., & Michaely, R. (2019). Fintechs and the market for financial analysis. Michael J. Brennan Irish Finance Working Paper Series Research Paper, (18-11), 19-10.

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Accounting and Finance Assignment Help

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