Financial Analysis of Dominos Pizza Enterprises Limited

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HI5002
Finance for Business
Group Assignment
Company Performance Analysis

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Abstract
The report is being developed for providing an understating of the financial analysis
carried out for a company to provide recommendation to an institutional investor aiming to
invest within a company. The overall financial analysis is based on an ASX listed entity, that is,
Dominos Pizza Enterprises Limited. It has been suggested to invest within the company on the
basis of iota good profitability and efficiency position, sound cash management, regular dividend
paid to shareholders and effective management of systematic and unsystematic risks.

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Contents
Abstract............................................................................................................................................2
I: Introduction..................................................................................................................................4
II: Detailed discussion on financial analysis of Dominos Pizza Enterprise Limited.......................4
2.1: Brief information of the selected company...........................................................................4
2.2: Use of performance ratios to depict the performance of the company.................................5
Profitability Ratios of Domino’s Pizza........................................................................................5
2.3: Use of marketable securities for cash management............................................................10
2.4: Application of sensitivity analysis in capital budgeting problem.......................................12
2.5: Systematic and Unsystematic Risks Associated with Dominos Pizza................................17
Systematic Risks........................................................................................................................18
Unsystematic Risks....................................................................................................................18
2.6: Calculation of dividend payout ratio and interpretation of dividend policy implemented by
the company...............................................................................................................................19
III: Recommendation Letter to client (As a potential investor).....................................................20
IV: Conclusion...............................................................................................................................21
References......................................................................................................................................22

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I: Introduction
The business entities tend to prepare and disclose their financial information through the
financial statements to facilitate the economic decision-making of its investors. The financial
statement assists the investors of an entity from across the world to take investment decisions by
analysis of its past, present and future financial performance. This report has been developed to
undertake an analysis of the financial performance of a selected listed company on the ASX for
the purpose for providing guidance to an institutional investor. The business entity selected for
the purpose is Domino’s Pizza Enterprise Limited, an ASX listed pizza chain in Australia.
The report undertakes an evaluation of the financial performance of the selected entity
through the use of ratio analysis, cash management, conducting sensitivity analysis and
discussing the systematic and unsystematic risks associated with the company operations. It also
calculates the dividend payout ratio for providing an assessment regarding the dividend policy of
the company. Lastly, the overall findings generated are presented within the recommendation
section to provide guidance to an institutional investor regarding investment within the company.
II: Detailed discussion on financial analysis of Dominos Pizza Enterprise Limited
2.1: Brief information of the selected company
Domino’s Pizza Enterprises Limited is regarded as largest pizza chain in Australia in
reference to the number of stores and its wide network. The company realizes high sales within
the Australian market as it is the largest franchise for Domino’s Pizza brand across the world. Its
pizza chain has extended to several countries across the world having about 2,500 stores and thus
largely contributing to the growth and expansion of Domino’s franchise on an international level.
The major markets of the company include Australia, New Zealand, Germany, Denmark,
Luxemburg, Japan, France and the Netherlands. It has been established in the year 1983 and is
presently regarded as one of the biggest pizza franchised business across Australia. It is
headquartered within Queensland in Australia and is regarded as major player within the food
retail sector of the country. The distinctive advantage is acquired by the company in retail sector
of Australia owing to its capabilities of proving faster and fresh quality food to the people and
also has achieved a leadership in the use of innovative technologies in food sector. It is being

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recognized as first company to introduce drone-delivery pizza and also providing innovative
features such as ordering through app and using artificial intelligence in managing its operational
activities (About Dominos, 2019).
2.2: Use of performance ratios to depict the performance of the company
Profitability Ratios of Domino’s Pizza
Financial Data of Domino's Pizza for calculation of Profitability Ratio
Financial Items 2015 2016 2017 2018
Amount in $ Thousands
Earnings before
Interest and tax
$
93,085.00
$
130,603.00
$
164,202.00
$
182,407.00
Net profit after tax
$
68,421.00
$
86,592.00
$
105,804.00
$
121,693.00
Net Sales
$
539,138.00
$
705,702.00
$
790,861.00
$
794,072.00
Shareholder's equity
$
305,056.00
$
394,546.00
$
415,064.00
$
307,664.00
Average shareholder's
equity
$
349,801.00
$
404,805.00
$
361,364.00
Total Assets
$
630,600.00
$
1,125,728.0
0
$
1,132,793.0
0
$
1,302,411.0
0
Average total assets
$
878,164.00
$
1,129,260.5
0
$
1,217,602.0
0
Profitability Ratio of Domino's Pizza

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Ratios Formula 2016 2017 2018
Return on Total
Assets
Earnings before
Interest and
tax/Average
Total Assets
14.87% 14.54% 14.98%
Net profit ratio Net profit/Sales 12.27% 13.38% 15.33%
Return on equity
Net profit after
tax/Average
shareholder's
equity
24.75% 26.14% 33.68%
2016 2017 2018
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
14.87% 14.54% 14.98%
12.27% 13.38%
15.33%
24.75% 26.14%
33.68%
Profitability Ratio of Domino's Pizza
Percentage