Sales Analysis Of Medibank Private Limited: Liquidity And Profitability Ratios

Advantages and Disadvantages of the New POS System

The analysis of sales related data is very much important for each and every company to track their sales report and for improving their sales percentage. This also help the organization to determine the sales pattern of the organization (Ott and Longnecker 2015). The sales pattern is able to assist the organization to set the budget of the sales for the future case. Sales analysis also helps to strengthen the products or the service range of the organization (Woodward 2013). The data gathered form the sales analysis can be used for comparing the sales performance of the organization with the market of similar industries.

In this case the sales analysis will be done for the Medibank Private Limited which is a health insurance company based in Australia. The Medibank Private Limited is the second largest public health company in the Australia.

For doing the sales analysis of the Medibank Private Limited firstly the liquidity ratio of the company will be calculated and this calculation will be based on the last two years business of the company. With the liquidity ratio, the profitability ratio of the company will be also calculated for the last two years of the business conducted by the company. Based on the outcome of the ratio values a trend analysis will be performed which will include a quantitative analysis. Therefore, the basic profile of the company will prepared and the chief competitors of the Medibank Private Limited will be identified. Further, a critical review will be given on the company’s statement on the corporate governance and the challenges faced by the Medibank Private Limited in the case of relation to ethical behaviour will elaborated. Finally, a conclusion will be drawn on the learning of the case study.

In this ratio value calculation the Liquidity Ratio and Profitability Ratio of the Medibank Private Limited will be calculated. For this calculation financial year of 2016 and the 2017 is selected for the company.

To calculate the liquidity ratio of the Medibank Private Limited current ratio, quick ratio and the cash flow will be calculated. From the website of the company following data is retrieved for the financial year of 2016 and 2017:

The above table shows that the total current assets for the financial year of the 2016 was 2812.5 million of dollars and for the year of 2017 it was 3000.4 million dollars (Medibank 2018). The following table will show the data about the current liabilities from the website of the company.

 The total liabilities calculated from the table is 1518.5 million dollars and 1564.7 million of dollar for the financial year of 2016 and 2017 respectively (Medibank 2018). In the next table cash flow of the company will be determined.

Form the above tables current ratio, quick ratio and the cash flow can be calculated.

Current ratio for financial year of 2016 = (Current Assets/Current Liability) = (2812.5/1518.5) = 1.85.

Current ratio for financial year of 2017 = (Current Assets/Current Liability) = (3000.4/1564.7) = 1.92.

Competitive Advantages of the POS System

Quick ratio for the financial year of 2016 = (Current assets – Financial assets – Other Assets)/Current Liabilities = (2812.5 – 2015.8 – 13.8)/1518.5 = 0.51

Quick ratio for the financial year of 2017 = (Current assets – Financial assets – Other Assets)/Current Liabilities = (3000.4 – 2038.1 – 14.1)/1564.7 = 0.60

Cash Flow for the financial year of 2016 = (Cash flow from operating activities – Cash flow from investing activities – Cash flow from financing activities) = (352.3 – 38.6 – 283.7) = 30.0

Cash Flow for the financial year of 2017 = (Cash flow from operating activities – Cash flow from investing activities – Cash flow from financing activities) = (393.4 – 75.9 – 313.4) = 4.1

• Net profit margin for 2016 of the company = (Net Profit/Revenue) = (417.6/6741.8) = 0.06

Net profit margin for 2017 of the company = (Net Profit/Revenue) = (449.5/6797.0) = 0.07

• Gross profit margin for 2016 of the company = (Gross Profit/Revenue) = (1065.9/6741.8) = 15.8%

Gross profit margin for 2017 of the company = (Gross Profit/Revenue) = (1026.7/6797.0) = 15.1%

• Rate of return on assets of the company for the financial year of 2016 = (Net income/Total Assets) = (417.0/3266.2) = 12.77%

Rate of return on assets of the company for the financial year of 2017 = (Net income/Total Assets) = (452.0/3462.5) = 13.05%

• Rate of return on shareholders’ equity for the financial year of 2016 = (Net income/Shareholder’s equity) = (417.0/1578.7) = 26.41%

Rate of return on shareholders’ equity for the financial year of 2017 = (Net income/Shareholder’s equity) = (452.0/1719.8) = 26.28%

• Earnings per share for the financial year of 2016 = (Net income/Number of equity share outstanding) = 74 (417000000/2754003240) = 0.15 dollars.

Earnings per share for the financial year of 2017 = (Net income/Number of equity share outstanding) = 74 (452000000/2754003240) = 0.16 dollars.

Trend analysis is used for identifying the changes occurred in a company over a certain period of time (Kossin, Olander and Knapp 2013). In this case the trend analysis will be done for the above founded ratio values.

From the above trend analysis table it is seen that there are some changes in the calculated ratio of the company if compared to the previous years. From the above table it is determined that current ratio has increased 3.9% in 2017 compared to the 2016. Quick ratio change percentage is huge which is 17.6% compared to its previous year. The main part of this trend analysis is that the cash flow has decreased by 86.3% in the year of 2017 compared to the year of 2016 which is not a good indication for the company. Other things which are the return of shareholders equity, gross profit margin, net profit margin and the earning per share are changed by the high rate.  The change in percentage is also seen in the terminology of the gross profit margin. The change is nearly 4.4%. The change in Return of shareholders’ equity is noticed to be nearly 2.2% and this also leads to the fact that the change in the terminology of the Earning per share has increased to 6.6%.

The Medibank is the one of the most successful company in the field of the health insurer. The Medibank private limited has total 40 years of experience in this health insurance field (Medibank 2018). This company holds a huge number of customers in the Australia which is nearly 3.7 million. Also with the health insurance the Medibank private limited provides health support, better integrated primary care and mental health support.

The main purpose of the Medibank private limited is “Better Health for Better Lives”. The main target of the Medibank private limited is to providing world class medical support to its customer. The main strategy of the Medibank private limited is helping the customers to provide them a better heath to them and by this improving the health of the total wellbeing (Medibank 2018).

Advantages of Having a Centralised Database

The main competitors for the Medibank private limited in the health insurance field are the Bupa, BizHealth, Amlin, Imagine Health and the BridgeHealth. The Bupa is similar with the Medibank private limited which is a healthcare group spread over internationally. This company has 32 million of customer over 190 country including the Australia (Turner and Shinnick 2013). BizHealth is also a health related company in the Australia which is one of the main competitor for the Medibank private limited. Amlin is totally same with the Medibank private lmited in which is also a health insurer company which can create huge market competition for the Medibank private. Other rest two company is also do the similar type of public health related operation which creates a vast competition for the Medibank private limited.

The corporate governance of the Medibank Private Limited is divided into some department on the behalf of the shareholders. The main divisions of the board of the Medibank private limited are including a risk management committee, audit committee, nomination committee, people and remuneration committee and an investment and capital committee (Medibank 2018). This all the departments are leaded by the CEO of the company which is a good strategy of running the company. In this architecture or the structure of the company the board of the Medibank private is able to provide enough strategic guidance for running and managing the business effectively. As a review of the corporate governance structure of the Medibank private it can be elaborated that the board of the Medibank private limited is able to monitor the performance of the company (Medibank 2018). This type of corporate governance statement can provide independence to the decisions of the board. The independence can increase the flow of the communications and the updates about the company. Also, this type of structure is useful for re-election of the directors. As per the governance statement of the Medibank private limited the board first checks character of a person, background and experience before appointing or including that person in the board which helps to maintain a clean interface of the board and also increase the efficiency of the board.

Conclusion:

Form the above discussion it can be concluded that Medibank Private Limited is a huge organization in the aspect of medical insurance field. In this case profitability ratio and the liquidity ratio of the company is determined and compared with two financial year. The liquidity ratio is required in this case of businesses to determine whether the company is able to pay the market liabilities which is required for running a business smoothly. The liquidity ratio is totally about the daily expense and incomes. The Medibank private limited will not able to sustain in the market if it fails to meet its market expenses. So, the calculation of the liquidity ratio is needed. In this case three type of liquidity ratio is calculated which are the current ratio, quick ratio and the cash flow and all of these are important for the Medibank private limited. On the other hand the profitability ratio is also important for the businesses. The profitability ratio is used for determining the overall performance and the efficiency of the organization. The profitability ratio can generate the efficiency in generating the shareholders return. Also in this case a trend analysis is done which shows the overall growth of the company. Though the growth of the company is overall good, still it needs to improve some of its area such as cash flow. Cash flow is quite low compared with the previous year. Also basic profile of the Medibank private limited is discussed in this document along with its market rivals. Following that the corporate governance statement of the company is reviewed critically which shows the functionality of the board of the company.

References:

Kossin, J.P., Olander, T.L. and Knapp, K.R., 2013. Trend analysis with a new global record of tropical cyclone intensity. Journal of Climate, 26(24), pp.9960-9976.

Medibank. (2018). Medibank Private Health Insurance | For Better Health | Medibank. [online] Available at: https://www.medibank.com.au/.

Ott, R.L. and Longnecker, M.T., 2015. An introduction to statistical methods and data analysis. Nelson Education.

Turner, B. and Shinnick, E., 2013. Community rating in the absence of risk equalisation: lessons from the irish private health insurance market. Health Economics, Policy and Law, 8(2), pp.209-224.

Woodward, M., 2013. Epidemiology: study design and data analysis. Chapman and Hall/CRC.

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