Ratio Analysis of Transurban

Running Head: Accounting for Managers
TRANSURBAN
Accounting for Managers

Accounting for Managers
Question 1.
Solution 1.
Ratio Analysis of Transurban
Ratios/Year 2017 2018
1) Profitability Ratios
a) Gross Profit Margin
Total Revenue-Cost of goods sold/ Total
Revenue 56% 50%
Interpretation: This ratio shows how much revenue the company has
generated after meeting its cost of goods sold. The gross profit margin has
decreased by 6% which reflects the inefficiency of the company in managing
its resources like raw material and labor.
b) Return on Assets
Net Profit/Average Total Assets 1% 2%
where, Average total assets 23181.5 24870.5
Interpretation: This ratio reflects the efficiency of the company in utilising
its assets for maximising the profit of the company. In case of Transurban the
ratio is not that much impressive even though it increased by one per cent in
the year 2018. Such a low ratio of the company tells about its inefficiency in
using the assets and putting it to a beneficial use (Banerjee, 2015).
2) Liquidity Ratios
a) Current Ratio
Current Assets/Current Liabilities 0.60 0.82
Interpretation: This ratio is calculated in order to check the company's
efficiency in meeting its short term obligations. The company's current assets
had increased in 2018 as a result its current ratio had shown improvement in
2018(Atrill and McLaney, 2019).
a) Accounts Receivables Turnover
1

Accounting for Managers
Total Revenue/Average Accounts Receivables
*365days 77 days 42 days
where, Average Accounts Receivables 129.5 287
Interpretation: This ratio indicates the efficiency of the company in
recovering the money from its debtors. In this case the Turnover days had
come down reflecting the company's proficiency in recovering the debt
amount (Bragg, 2012).
3)Efficiency Ratios
a) Asset Turnover Ratio
Sales/ Average Total Assets 0.12 times
0.13
times
where, Average total assets 23181.5 24870.5
Interpretation: This ratio informs the readers of financial statements
regarding generation of sales with the use of its assets (Double Bookkeeping,
2019). The ratio had not shown much improvement which could be because
of the poor sales or because the assets of the company were not being utilized
properly by the company.
b) Return on Equity
Net Profit/Average Equity 3% 7%
where, Average equity 6,133 6282.5
Interpretation: This ratio is calculated to know how well the shareholders'
equity are being utilised for generating profit. Transurban had witnessed a
rise of 4% in this ratio which shows the company is using the shareholders'
equity for earning profit.
4)Gearing Ratios
a)Equity Ratio
Total Equity/ Total Assets 25% 26%
2