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Accounting and Finance of Organization | Assignment

   

Added on  2020-04-01

11 Pages2693 Words31 Views
Running head: ACCOUNTING AND FINANCEACCOUNTING AND FINANCE

ACCOUNTING AND FINANCE2Executive summaryIn this study, the researcher has made critical analysis on the financial performance of APNOutdoor Group. The researcher has also demonstrated the capital structure of APN outdoorgroup and its wealth maximization strategy, with the help of different financial instruments likefinancial ratios and comparative analysis. However, the study does not end here, further analysison the cost of capital of the company also been done with the help of examples.

ACCOUNTING AND FINANCE3Table of contentsIntroduction......................................................................................................................................4Discussing the capital structure of APN Outdoor Group................................................................4Critically analyzing the wealth maximization strategy of APN Outdoor Group.............................6Conclusion.....................................................................................................................................10References......................................................................................................................................12

ACCOUNTING AND FINANCE4IntroductionAPN Outdoor group Limited (APO) is one of the greatest outdoor advertising operator inAustralia and in New Zealand. It is an ASX listed company which offers many advertisingservices. These advertising includes digital billboards, static roadside billboards, advertisementof rails and advertisement of airport in Australia and New Zealand. This study aims todemonstrate the capital structure of APN outdoor group and its wealth maximization strategy,with the help of different financial instruments like financial ratios and comparative analysis.The researchers have also aimed to recommend the company for lowering its cost of capital.Discussing the capital structure of APN Outdoor GroupEvery business raises funds for financing its projects. It may raise funds either internally orexternally. If a firm raises funds internally it may use reserves and surpluses, retained earnings orit may have to sell its assets. However, if the company needs huge funds, it has to raise funds byissuing either equity shares or preference shares. Moreover, it may also borrow funds fromfinancial institutions or banks (Hope & Myllylahti, 2013). Thus, the capital structure is said to bethe mixture of short-term and long-term debt or equity.a) Comparing the bonds of the company with government bondsAccording to Wayne Castle, the CFO of APN Outdoor Group, the bonds of the companydistributed in the market proved to be the beneficial factor for the business. The rate of the bondswas low as compared to the government, but the return on such bonds were reasonable. Thus, inthe year 2014, the company sold bonds in large distribution. This not only helped the parentcompany to grow their business, but it's subsidiaries like iOM Pty Ltd, has largely gained benefitin promoting them in the international market. On the counterpart, government bonds tookdominating position since 2015, due to its low risk, regular income and easy to buy and sellfactor (www.quotes.wsj.com, 2017).b) Categorizing and calculating current capital structure and after tax weighted averagecost of capitalFrom the annual report of 2016, it has been found that the company APN outdoor group limitedhas taken more borrowings in the year 2016 for its current project. It has been found thatcompany has not raised its funds from internal sources but it has raised its funds from externalsources like borrowings of $ 102,677 from bank and issued equity shares to the public, which isfully paid up (Becker & Ivashina, 2015). The structure of equity debts is described below.

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