Brief Overview of the Company
Discuss about the Ratio Analysis Of Seek Limited.
The process of ratio analysis help in understanding the financial position of the company. The investors can easily go through the records and make a move in the investment process (Vats & Patel, 2017). Various ratios that represents the company are discussed and analysed with the other two companies as well as compared with the last financial year. The study deals with the ratio analysis of the chosen company SEEK Ltd that is listed under the Australian Stock Exchange. . The study helps in the process of comparing the performance and the operations of a company to find out its liquidity profitability and efficiency.
Seek Limited is an employment business in Australia. That deals with the facilitation of the connection of the job seekers and the employment opportunities and also find candidates for hirers. The company is providing services with its headquarters in Melbourne Australia which is listed on the present ASX companies. The company focuses on differentiating and cost advantages for reaching the competitive advantage (Downs, 2017). The main strategy of the company is to retain the sustainability of the resources with smart technology and personified service.
Ratio analysis is the process analysing the company’s financial statements to evaluate the aspects of the operating and the financial performance of the company with the help of the efficiency, liquidity, profitability and solvency ratio (ALIFAH, 2017).In the given scenario the analysis is to be made of the SEEK Ltd. by comparing the ratios of the two years 2017 and 2016. The comparison has been made both year wise. The various ratios along with its descriptions are given below:
Current Ratio: The current ratio is the liquidity ratio that helps in measuring the company’s ability to pay off the short term and the long term obligations of the company. In order to find out the ratio the total current asset is divided by the total current liability of the company (Appelbaum, et al., 2017). This ratio is also known as the working capital ratio and is represented in the form of ratio.
Current ratio=Current Assets/Current Liabilities
Quick Ratio: The quick ratio is the mechanism of analysing the ability of a company to meet its short-term financial liabilities. In order to find out the quick ratio of the company the liquid asset is divided by the total current liabilities (Muritala, 2018). The liquid asset is the sum of all the current assets excluding the inventories. This ratio is also known as the acid test ratio.
Ratio analysis
Quick assets=Liquid assets/Current liabilities, Liquid asset=Current assets- inventories
Gross Profit Margin: The gross profit margin is the financial metric that is used to examine the company’s business model and financial health by revealing the proportion of the money left over from the revenues after accounting for cost of goods sold (DeFusco, et al., 2015). It is calculated by the gross profit by the total revenues. It is also known as the Gross margin.
Gross profit margin =Gross profit/ net sales
Return on Equity: The return on Equity is the amount of net income that is returned as a percentage of the shareholders equity (Baños-Caballero, García-Teruel & Martínez-Solano, 2014). It measures the profitability of the company by showing the profit of the company that is generated with the money that have been invested by the shareholders.
Return on Equity = Net Income/Shareholder’s Equity
Return on Assets: the return on asset which is also known as ROA is the financial ratio that represents the profit of the company that it earns in relation to its overall resources. The net profit is calculated by dividing the total income by the total assets (Altman, et al., 2017)).
Return on assets=Net profit after tax/Total assets
The ratio analysis of the chosen company of SEEK Ltd. which is a ASX listed company for the two financial years 2017 and 2016 is shown in the below table:
The other two company of the same industry as of SEEK Ltd is Career one Ltd. and Indeed Ltd. in Australia. Both the companies deal with the job searching business. For the analysis ratio of the two have been calculated and provided with the file.
The current ratio of the SEEK Ltd. has been increased from the year 2016 which was 1.34 to 1.46 in the year 2017. This shows that there has been increase in the current ratio indicating the enhancement in the company’s ability to pay off its obligations (Wolfson, 2017).
The current ratio of other company did not increase much as compared to SEEK Ltd., the Career one Ltd. remained from 0.03 in 2016 to 0.03 in 2017, which is much less if compared to SEEK. Indeed Ltd. also rose from 0.55 to 0.70 at a much lesser rate. If the current ratio of SEEK Ltd. is compared with the other two, the ratio is much greater in the present financial year.
Quick ratio Analysis
Current Ratio
Similarly the quick ratio that deals with the ability of the company to meets its short-term liabilities is much more in SEEK Ltd. that is 1.46 as compared to 2016 the ratio increased from 1.34 to 1.46 in 2017.
Similarly the quick ratio that deals with the ability of the company to meets its short-term liabilities is much more in SEEK Ltd. that is 1.46 as compared to the other two which are 0.030 for Career one Ltd. and 0.70 for Indeed ltd.
Gross profit margin Analysis
The Gross profit margin also is more in case of SEEK Ltd. that is 32.82% this represents that the profitability of the company is higher. Moreover there has been a drastic increase in the ratio in case of SEEK Ltd. from 12.10% in 2016 to 32.82% in 2017.
The gross profit margin also is more in case of SEEK Ltd. that is 32.82% whereas the other two companies has much less percentage. Career one Ltd. has 1.01% in 2017 and Indeed ltd had 2.32%. This represents that the profitability of the company is higher.
Return on Equity Analysis
The return on Equity is quite more in case of SEEK Ltd. is 22.96 % in 2017. The return on equity is the amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested(Chandra, 2017). However, as compared to 2016 the return on equity has been decreased from 26.35% in 2016 to 22.96% in 2017, repressing a fall in generating the profit.
The return on Equity is quite more in case of SEEK Ltd. is 22.96% in 2017 as compared to Career one Ltd. which is 10.8% and for Indeed Ltd which is 3.45%.
Return on Assets Analysis
Return on assets that represents the profit percentage a company earns in relation to its overall resources is 9.23% for SEEK Ltd. which is much less. There has been a fall in the return on assets from 2016 which was 10.89%. The rate of decrease is also more the last financial year.
Return on assets is 9.23% for SEEK Ltd. which is lesser as compared to Career one Ltd company which is 11.09% and for Indeed Ltd which is 9.99%. Therefore, SEEK earns less profit.
In the context of analysing the financial position without considering the financial statements of the company the factors that are to be taken in hand are (Vogel, 2014):
- Risk of the company
- Investment mix of the company
- Emergency fund of the company
- The overview of the Ratio analysis of the company
Conclusion
When it comes to the analysis of the current financial position of the SEEK limited the investors shall go through the balance sheet, income statement and the trend analysis of the company. This would help in assessing the actual position where the company stands. The investors may also go through the analysis of current financials with the previous year’s data as well as compare with other industries.
References
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Altman, E. I., Iwanicz?Drozdowska, M., Laitinen, E. K., & Suvas, A. (2017). Financial Distress Prediction in an International Context: A Review and Empirical Analysis of Altman’s Z?Score Model. Journal of International Financial Management & Accounting, 28(2), 131-171.
Appelbaum, D., Kogan, A., Vasarhelyi, M., & Yan, Z. (2017). Impact of business analytics and enterprise systems on managerial accounting. International Journal of Accounting Information Systems, 25, 29-44.
Baños-Caballero, S., García-Teruel, P. J., & Martínez-Solano, P. (2014). Working capital management, corporate performance, and financial constraints. Journal of Business Research, 67(3), 332-338.
Baños-Caballero, S., García-Teruel, P. J., & Martínez-Solano, P. (2014). Working capital management, corporate performance, and financial constraints. Journal of Business Research, 67(3), 332-338.
Chandra, P. (2017). Investment analysis and portfolio management. McGraw-Hill Education.
DeFusco, R. A., McLeavey, D. W., Pinto, J. E., Anson, M. J., & Runkle, D. E. (2015). Quantitative investment analysis. John Wiley & Sons.
Downs, L. C. (2017). Financial Accounting.
Muritala, T. A. (2018). An empirical analysis of capital structure on firms’ performance in Nigeria. IJAME.
Vats, S., & Patel, K. (2017). Ratio Analysis of a Private Limited Company with Relevance to Change in Type of Enterprise-A Case Study of Write Fine Products Pvt. Ltd. Umbragam, Gujarat. Journal of Applied Management-Jidnyasa, 9(2), 37-43.
Vogel, H. L. (2014). Entertainment industry economics: A guide for financial analysis. Cambridge University Press.
Wolfson, M. H. (2017). Financial crises: Understanding the postwar US experience. Routledge.
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