Financial Analysis Of Blackmores Private Limited

Company Overview

Question:

Discuss about the Lean Practices on Inventory Turnover.

Blackmores Private Limited is a company which makes revenue by selling health care products for both human and for animals. These healthcare products include vitamins, herbal products and various mineral nutritional. The company is having more than 20% share of vitamin and supplement manufacturing industry. The company is working in consumer defensive sector. The company is performing its business in Asia and Australia. Company’s Asian head office is in Singapore. Company’s Chief executive officer is Mr. Richard Henfrey and chief financial officer is Mr. Aaron Canning. The company started in the 1930s and has been operated as the market leader for more than 80 years. Company’s head office is situated at 20 Jubilee Avenue, Warriewood, Australia. Company’s financial year end on 30 June every year. Latest financial year of the company starts on 1 July 2015 and ends on 30 June 2016. Company independent auditor for the latest financial year was Deloitte Touche Tohmatsu. As per the auditors of the company financial statements of the company is in accordance with the Corporations regulation act 2001. The closing price of company stock on the closing of the market for 29 August 2017 was AUD 97.99 and dividend per share is AUD 1.3 this is on the basis of dividend paid by the company in last quarter (Googal finance, 2017).

This report is presented for making analysis regarding the financial statements of Blackmores Private Limited company on the basis of financial statements of the company for the year ended on 30 June 2016. This report will also present company’s position in the industry in which company currently running. This report will use ratio analysis and trend analysis for making conclusions regarding the current financial position of the company.

Blackmores Private Limited is operating in the vitamin and supplement manufacturing industry. This industry needs a lot of capital investment for manufacturing and packing its produce. This industry needs a higher level of knowledge for using chemical components and machine operations. Companies performing in this industry also need to cope up with latest techniques and efficient workforce which can handle the latest technology. The company is having a vision of business stability. The company is having the objective to capture a major market share of the industry and is a company who provides support to workforce and commitment to the market. The industry in which company is working is growing and will always be in growth phase because the production of this industry is all time requirement for consumers (Blackmores, 2016).

Profitability Analysis

This statement shows the income and expenditure made by the company during the accounting period and net profit earned or loss suffered by the company due to the financial performance of the company during the year (Hoyle, Schaefer, & Doupnik, 2015). In the present case company’s profitability showing following results,

Gross profit shows profit earned by company from direct activities. It directly related to the revenue made by company and cost incurred for production. In the present case, such gross profit is having growing trend means the company is having good profitability position from a gross profit point of view. Net profit shows profit earned by company from all activities. In the present case, such net profit is having growing trend means the company is having good profitability position from a net profit point of view. Operating profit shows profit earned by company from operating activities. In the present case, such operating profit is having growing trend means the company is also having good profitability position from operating profit point of view.

Tread analysis presents that from the year 2014 to 2015 companies’ cost of revenue decline significantly and operating expenses increase significantly it means there may be any change for classification of expense from the cost of revenue to operating expense. Annual report of the company does not disclose regarding any significant change in the accounting policies of the company.

Statement of financial position represents the total assets, total liabilities and total equity of the company (Kieso, Weygandt, & Warfield, 2010). It satisfies the basic accounting equation i.e. total assets must be equal to total liabilities and total equity. In the present case, this equation is satisfied by company in this way,

It can be easily analysis by any accounting professional that company’s figures relating to the financial position of company satisfy the accounting equation i.e. total assets must be equal to total liabilities and total equity. Trend analysis of the company showing following results,

Trend analysis of the company’s balance sheet shows that there are no major changes made by a company in financing method i.e. debt financing and equity financing of the company over the three years remains approximately in same ratios. In addition to this company’s current and non-current assets are also not showing any major changes these remain with the approximately with the same ratio. ratios of current and non-current changed and current obligations increased means company will need more current assets for paying that current obligation. Annual report of the company does not disclose regarding any significant change in the accounting policies of the company.

Trend Analysis

Cash flow statement of a company is a statement which shows the flow of cash irrespective of accrual concept of accounting. It considers only cash related activities. Cash flow statement of a company divided into three parts i.e. operating, financing and investing (DRURY, 2013). In the present case company’s cash from operating activities and net income showing following amounts,

In 2014 and 2015 cash from operating activities is more than net income means that either company received advances from customers or received prior dues or creditors of the company become overdue and did not paid by company or company paid prior advances which are utilized in the year ending 2014. In 2016 cash from operating activities is less than net income means that either company paid advances to customers or did not received prior dues or creditors of company paid by company or company did not paid prior advances which are utilized in the year ending 2014. Cash from investing activities shows following result in the Blackmores Private Limited,

Negative cash from investing activities shows that company made cash outflow for making an investment in non-current assets more than the cash inflow realized due to the sale of non-current assets (Fraser, Ormiston, & Fraser, 2010). In the present case company’s cash from operating activities showing net flow means company made expansion of business by inserting new non-current assets in the pool of assets of the company in all three years. Company’s cash flow statement from financing activities showing following results,

Above data shows that company’s most relevant source of finance is debts. The company can make cash inflow either by issuing debts or by issuing equity. Overall cash increased and decreased over the past three years are,

Liquidity ratios show the short term position of the company these ratios always maintain by the company at a moderate level so that short-term obligation can be fulfilled by short term assets and excess of the fund will not remain for wrong utilization. In the present case liquidity ratios of the company showing following results,

A current ratio over the years decline means company started to maintain lower current assets it is not good for the company because it may create a problem in case of unexpected obligations. Average days’ sales uncollected shows credit period of the company which is declining, this is good for the company because lower credit period will help the company in earlier cash realization. Inventory turnover ratio shows a number of times company sale its inventory (Demeter & Matyusz, 2011). This ratio is declining it denotes that company’s stock become moving or obsolete hence company requires to take steps to check why the stock is slow moving.

Profitability ratios are the ratios which denote profitability condition of the company. Higher profitability denotes higher growth, hence these ratios must have increasing trend so that company could make growth with increasing rate. In the present case, company’s profitability ratios showing following results,

All profitability ratios of the company showing increasing trend, it means that the company is operating with efficiency and company should maintain this level of performance and make effors to enhance this performance.

Following are the long term solvency ratios of company,

Debt equity ratio shows debt financing by the company in comparison of equity financing of the company. In 2015 to 2016 increase in this ratio is due to new debt issuance. This ratio shows that company is believing more on debt financing which may create problem to the company in case of non-availability of funds on the repayment date. Interest coverage ratios show that how many times interest can pay by the company from the operating profits of the company. Increase in this ratio is good for the company.

Following results are presented by the market strength ratios of company,

Conclusion

Financial analysis of Blackmores Private Limited shows that company is doing good from the financial prospective except debt financing. Blackmores require decrease its debt financing and increase equity financing so that risk could be minimized.

• (2016). FINANCIALREPORT. Retrieved August 2017, 29, from https://www.google.co.in: https://www.google.co.in/url?sa=t&rct=j&q=&edata-src=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwiTytToyPzVAhVCLY8KHc5RC2kQFggtMAE&url=https%3A%2F%2Fwww.blackmores.com.au%2F~%2Fmedia%2Ffiles%2Finvestor-centre%2Fannual-and-half-yearly-reports%2Ffy17%2F1h-2017-f
• Demeter, K., & Matyusz, Z. (2011). The impact of lean practices on inventory turnover. International Journal of Production Economics , 133 (1), 154-163.
• DRURY, C. (2013). Management and cost accounting.
• Fraser, L., Ormiston, A., & Fraser, L. (2010). Understanding financial statements.
• Googal finance. (2017). Blackmores Limited. Retrieved August 29, 2017, from https://www.google.com: https://www.google.com/finance?q=ASX:BKL
• Hoyle, J., Schaefer, T., & Doupnik, T. (2015). Advanced accounting. McGraw Hill.
• Kieso, D., Weygandt, J., & Warfield, T. (2010). Intermediate accounting: IFRS edition. John Wiley & Sons.

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