Comparative Analysis of Financial Performance of Dulux and Lovis Holding Limited

Accounting for
decision making

ACCOUNTING 1
Introduction
Financial Analysis is the procedure of evaluating of financial position of the firm. The external
parties are required the financial information of the company in order to invest in the company.
The external parties have to compare the financial performance of the companies to take the
accurate decision for smooth operation of business. In this report, the comparison has been done
on the two companies such as Dulux and Lovis Holding Limited. In this report, the comparative
analysis has been done on the financial performance of these companies.
Dulux Group is a foremost marketer and manufacturers of premium brand-named products that
protect, and develop the spaces and places in which we live and work. It transformed the
household rooms by colors and texture (Duluxgroup, 2018).
Lovisa Holdings Limited is a locally owned business which works in fast-fashion jewellery and
accessories retail chain. It has the 320 stores which are located in nine countries and franchise
operations in the other six countries (IBIS World, 2018).
Comparative Analysis
The financial position of Dulux Group Limited states that the company is constant from the last
year. It has been evaluated that the profit margin of 2018 is 8.06% and in 2017 it is 7.83% which
shows that the changes of percentage is not major bur the company earns more profit from the
last year. It has been seen that the gross profit of the firm is decreasing in the year 2018 which
depict that the company has to more focuses on its cost of production as it affects the business.
The gross profit of Lovisa is also decreasing in the year 2018 due to increasing the cost of
production (Robinson, Henry, Pirie, & Broihahn, 2015).

ACCOUNTING 2
The efficiency Ratio of Dulux Group Limited is strong as it takes less time to receive the amount
from debtors. But it has been found that Lovisa Holdings Limited consumes less time to collects
the debtor’s amount as compare to Dulux Group Limited such as it takes 2.87 days to collect the
amount and Dulux Group Limited takes 4.41 days to receive the cash (Zainudin, & Hashim,
2016).
As per the liquidity position ratio of the companies, it has been evaluated that the current ratio of
Lovisa Holdings Limited is increasing in the year 2018 by 1.94 and the quick ratio is 1.25. It
depicts that the company more invests in current assets instead of fixed asset. The liquidity
position of Dulux Group Limited depict that the firm starts focusing on current assets rather than
fixed assets in order to earn the more revenue. The current ratio and quick ratio of Dulux Group
Limited is 0.88 and 0.99 in the year 2018 (Williams, & Dobelman, 2017).
According to the capital structure ratio, it is observed that the long term liability of Dulux Group
Limited is decreasing with the passage of time. In 2018, the total liabilities of the company is
less as compare to its total assets which indicates that the company is able to pay its all liabilities
by utilizing its assets. In the case of Lovisa Holdings, the debt ratio depict that the company is in
the position of improvement as it has more assets as compare to liabilities. But by comparing the
companies, it has been found that Dulux has more assets with the liabilities as compare to
Lovisa.

ACCOUNTING 3
Limitations
While analyzing the both companies, it has been found that there are some areas in which both
the companies perform well due to which it is difficult to take the decision of choosing one
company to invest in it.
Another challenge which was faced while comparing the financial performance of the companies
is the accurate results. It is very difficult to calculate the accurate result as the financial
performance of the firm is evaluated on the basis of ratio analysis. Ratio Analysis does not
evaluate the accurate result as it is calculated on market value which is fluctuating.
Another challenge is that it difficult to choose the one company for investment on the basis of
financial performance as both the companies are almost in the similar phase. Similar phase
means the financial position of the companies are equal but there are also some areas such as in
which it have huge different and need to be recover to improve the financial performance.
The huge confusion have been also arises while comparing the financial data of both the
companies such as similar amount under the same ratio headings (Accounting Tools, 2018).
Conclusion
As per the limitation, it is difficult to find out the correct choose as both the companies have
similar financial position. It is observed that the companies have more current assets as compare
to current liabilities. The gross profit and net profit of Lovisa is more as compare to Dulux Group
Limited in terms of percentage. It depicts that the cost of production of Dulux is high due to
which the gross profit is reduces.

ACCOUNTING 4
Recommendations
From the above analysis, it is recommending that the financial position of both the companies is
good. But by comparing the financial data, Lovisa is less applicable as compare to the Dulux
Group Limited. It has been founded that the Dulux have more assets due to which it is highly
able to cover its all liabilities. But as compare to the profit margin, Lovisa has more profit as
compare to Dulux. It is suggesting that the investors has to invest in Lovisa Limited to gets the
good return.

ACCOUNTING 5
References
Accounting Tools. (2018). Comparability. Retrieved From:
https://www.accountingtools.com/articles/2017/5/5/comparability
Duluxgroup. (2018). About Us. Retrieved From: http://www.duluxgroup.com.au/about-us
IBIS World. (2018). Lovisa Holdings Limited - Profile Company Report Australia. Retrieved
From: https://www.ibisworld.com.au/australian-company-research-reports/retail-trade/lovisa-
holdings-limited-company.html
Robinson, T. R., Henry, E., Pirie, W. L., & Broihahn, M. A. (2015). International financial
statement analysis. John Wiley & Sons.
Williams, E. E., & Dobelman, J. A. (2017). Financial statement analysis. World Scientific Book
Chapters, 109-169.
Zainudin, E. F., & Hashim, H. A. (2016). Detecting fraudulent financial reporting using financial
ratio. Journal of Financial Reporting and Accounting, 14(2), 266-278.
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