Financial Analysis of Apollo Tourism and Leisure Ltd

The assignment focuses on a comprehensive financial analysis of Apollo Tourism and Leisure Ltd. It delves into the company's capital structure, highlighting the proportion of debt and equity financing. The analysis also assesses the company's market performance, referencing profitability trends and cash flow position. Key financial indicators are examined to evaluate the overall financial health and stability of Apollo Tourism and Leisure Ltd.

RUNNING HEAD: ACCOUNTS ASSIGNMENT
ACCOUNTS ASSIGNMENT

ACCOUNTS ASSIGNMENT 1
Contents
INTRODUCTION.....................................................................................................................................2
DEBT VALUATION..............................................................................................................................2
SHARE VALUATION............................................................................................................................4
COST OF CAPITAL...............................................................................................................................7
MARKET ANALYSIS...........................................................................................................................10
REFERENCES........................................................................................................................................12

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INTRODUCTION
Apollo Tourism and Leisure Ltd is used for this question. Apollo is the Australian
based company and since 1985, the company has come into operations but in November 2016
the company has become listed in ASX (ASX: ATL). The main business activities of the
company are to do producing, wholesaling, leasing, retailing and issuing the wide varieties of
leisure activities such as motorhomes, campervans and caravans. The other business locations
of Apollo around the world are US, Canada, North America and New Zealand. The central
agenda of Apollo is to fulfil the potentials of the clients (Prospectus, 2017).
DEBT VALUATION
1. Short-Term Debt and Long-Term Debt of Apollo Tourism and Leisure Ltd
Debts are the outstanding’s in order to fulfil the financial necessities. Debts have 2
types of nature: Short-term and Long-term. Short-term Debt are the money owed and the
duration of repayment is < 1 year and it is shown under the “Current Liabilities” in the
balance sheet. For this case, Trade payables and borrowings - current are taken as Short-term
Debt. Long-term Debt are the money owed and the duration of repayment is > 1 year and it
is shown under the “Non-Current Liabilities” in the balance sheet. For this case, borrowings –
non-current are taken as Long-term Debt (MorningStar, 2017).
Particulars 2017 2016 Change in %
SHORT-TERM DEBT
Trade Payables $ 110,64,000.00 $ 72,03,000.00 53.60%
Borrowings -
Current $ 1118,94,000.00 $ 422,81,000.00 164.64%
TOTAL $ 1229,58,000.00 $ 494,84,000.00 148.48%
LONG-TERM DEBT
Borrowings - Non-
Current $ 567,87,000.00 $ 606,99,000.00 -6.44%
TOTAL $ 567,87,000.00 $ 606,99,000.00 -6.44%
(Source: Annual Report, 2017).

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2. Debt structure consistency of Apollo Tourism and Leisure Ltd
Particulars 2017 2016
Equity $ 1014,16,000.00 $ 315,50,000.00
Total debt $ 1797,45,000.00 $ 1101,83,000.00
Debt/Equity 1.77 3.49
Industry Average 1.66 1.66
(Source: Annual Report, 2017).
Consider the above slab, it has been observed that Apollo Tourism and Leisure Ltd
performance is regular with the industry ratio in 2017. Industry average is 1.66 in both years
whereas the Apollo’s figure is 1.77 in 2017 and 3.49 in 2016 (Investing. com, 2017).
3. Company’s influences on the long-term and short-term proportions
Particulars 2017 2016 Change in % Industry %
Short-term Debt $ 1229,58,000.00 $ 494,84,000.00 148.48% 166.33%
Long-term Debt $ 567,87,000.00 $ 606,99,000.00 -6.44% 55.99%
Total Debt $ 1797,45,000.00 $ 1101,83,000.00
Consider the above slab, it has been observed that long-term and short-term debt of
the Apollo Tourism and Leisure Ltd is not aligned with the industry figure. Therefore, the
short-term debt shown is 148.48% while the average of industry is 166.33% which indicates
the negative influence for the company. For long-term debt, there is also the negative
influence because the Apollo average is -6.44% while the average of industry is 55.99%
(Investing. com, 2017).
4. Cost of Debt
Particulars 2017 2016
Interest Expenses $ 77,53,000.00 $ 72,92,000.00
Total Debt $ 1797,45,000.00 $ 1101,83,000.00

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Cost of Debt
[Interest
expenses/Total
Debt] 4.31% 6.62%
(Source: Annual Report, 2017).
SHARE VALUATION
1. Cost of Equity
Particulars 2017 2016
Retained Earnings $ 388,38,000.00 $ 309,18,000.00
Net income $ 86,46,000.00 $ 48,34,000.00
Dividend Payout ratio [100-
retained earnings/Net
income] 95.5 93.6
Total Equity $ 1014,16,000.00 $ 315,50,000.00
ROE [Net income/Total
Equity] 8.53% 15.32%
Growth Rate [(1-payout
ratio)*Return on Equity 0.38% 0.98%
Dividend per share 2 0
Current share price 1.62 0
Cost of Equity 1.61% 0.98%
(Source: Annual Report, 2017).
2. Apollo’s revenue, earnings, EPS, dividends and growth
Particulars 2017 2016
Revenue
$
1770,01,000.00
$
979,29,000.00
(Source: Annual Report, 2017).

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2017 2016
$-
$20,000,000.00
$40,000,000.00
$60,000,000.00
$80,000,000.00
$100,000,000.00
$120,000,000.00
$140,000,000.00
$160,000,000.00
$180,000,000.00
$200,000,000.00
Revenue
Revenue
Particulars 2017 2016
Net income
$
86,46,000.00
$
48,34,000.00
(Source: Annual Report, 2017).
2017 2016
$-
$1,000,000.00
$2,000,000.00
$3,000,000.00
$4,000,000.00
$5,000,000.00
$6,000,000.00
$7,000,000.00
$8,000,000.00
$9,000,000.00
$10,000,000.00
Net income
Net income
Particulars 2017 2016
Earnings per share
$
8.89
$
5.09
(Source: Annual Report, 2017).

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2017 2016
$-
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
Earning per share
Earning per share
3. Firm’s stock using comparable approach
Particulars 2017 2016
Comparable Approaches
Price to free cash flow
Share price $ 1.62 $ -
Free cash flow
Operating cash flow $ 661,57,000.00 $ 372,81,000.00
Capital expenditures $ 110,16,000.00 $ 21,21,000.00
Free cash flow $ 551,41,000.00 $ 351,60,000.00
Price to free cash flow 2.93792E-08 0
Enterprise value to sales
Enterprise value
Market capitalization $ 1014,16,000.00 $ 315,50,000.00
Debt $ 1797,45,000.00 $ 1101,83,000.00
cash and cash equivalent $ 485,99,000.00 $ 55,35,000.00
Enterprise value $ 2325,62,000.00 $ 1361,98,000.00
Annual sales $ 1770,01,000.00 $ 979,29,000.00
Enterprise value to sales 1.31 1.39
Enterprise Multiple
Enterprise Value $ 2325,62,000.00 $ 1361,98,000.00
EBITDA $ 157,58,000.00 $ 135,56,000.00
Enterprise Multiple 14.76 10.05
(Source: Annual Report, 2017).
4. Reasonableness of the company’s stock as compare to the market

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Stock of Apollo Tourism and Leisure Ltd is given AUD $ 1.62 in 2017 which says
that the performance of the company is sound because the net income of the Apollo has
increased tremendously in 2017 from 2016 by 78.86% which signifies that the graph is
upward sloping which is a positive sign for the company.
5. Additional information for valuing company’s stock
In this case, the company is listed in November 2016, thus the share price of the
company in 2017 is AUD $ 1.62 and there is no share price in 2016. The share price of the
company might get rise in future because the company has issued share capital of $ 75679000
in 2017 after it get listed in ASX and also the company has earned good amount of profits in
2017 in comparison to year 2016.
Rate of interest also helps in assessing the performance of the entity by taken into
consideration all the factors which helps in improving the enactment of the company. An
organisation needs to control the interest rates which directly exaggerated the consumer base
of the industry in the wide environment.
COST OF CAPITAL
1. WACC
Formula for WACC:
WACC = Ke*We + Kd*Wd
where
Ke = Cost of equity
We = Weight of Equity
Kd = Cost of debt
Wd = Weight of debt

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Particulars 2017
Weights
(We/Wd)
Cost
(Ke/Kd) WACC
Equity $ 1014,16,000.00 0.360704365 1.61% 0.005807
Debt $ 1797,45,000.00 0.639295635 4.31% 0.027575
TOTAL $ 2811,61,000.00 3.34%
Particulars 2016
Weights
(We/Wd)
Cost
(Ke/Kd) WACC
Equity $ 315,50,000.00 0.222601652 0.98% 0.002181
Debt $ 1101,83,000.00 0.777398348 6.62% 0.051449
TOTAL $ 1417,33,000.00 5.36%
(Source: Annual Report, 2017).
2. Role of Tax rate in calculation of WACC
In computation of weighted average cost of capital, tax rate plays the key role of Apollo
Tourism and Leisure Ltd. The effect of tax rate is shown in the preparation of statement of
income and the statutory rate of tax is 30% which ultimately reduces the net income which
are distributed to the shareholders of the entity. Due to tax rate, WACC ultimately gets
reduces.
3. Difference between cost of Equity and Cost of Debt
Cost of Equity Cost of Debt
1. Interest are not paid in Cost of
Equity.
1. Cost of debt simply means the
interest paid by the company on its
borrowings.
2. Cost of Equity is calculated as:
Rf + Beta(Rm-Rf).
2. It is calculated as:
Interest/total debt * (1 – tax rate)
3. It is the return for the shareholders. 3. It is the return for the bondholders.
4. Inclusion of Current liabilities in capital calculation and its pros and cons.

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Short-term debts are included in current liabilities and its exclusion will make the
overall debt structure incomplete because the total debts of the entity is the
combination of both Short-term debt and long-term debt and thus the current
liabilities automatically included in the capital formation.
Benefits
1. The overall capacity of the firm is ascertained by the inclusion of the actual debt
incurred.
Limitations
1. Interest commitments gets increased charged on total debt.
5. WACC importance in the decision making
After the completion of overall evaluation of both the costs of capital that is cost of
equity and cost of debt, an organisation can take significant judgements about the
investments. Net present value is computed and it helps in decision making processes by
seeking the project or business which has generated higher or positive returns. The project
or the business is considered to be the best same as the projects which are assessed on the
basis of costs incurred by the business units.
6. Examples
WACC indicates the capacity of an entity in paying off all of its debts in a particular
time. An investor will determine the entity capability for the purpose of generating
maximum profits to validate the investments by the owners of the entity.
7. Capital Structure of the entity.
The basic thing after the incorporation of an entity is to form the capital structure that
indicates the business operations of an entity. There are vast sources of finance that are

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included in the firm having different weights of equity and debt. There is need to form the
adequate capital structure by the entity after the external opportunities and the expectations
have been analysed.
Particulars 2017 % 2016 %
Short-term Debt $ 1229,58,000.00 43.73% $ 494,84,000.00 34.91%
Long-term Debt $ 567,87,000.00 20.20% $ 606,99,000.00 42.83%
Total Debt $ 1797,45,000.00 63.93% $ 1101,83,000.00 77.74%
Total Equity $ 1014,16,000.00 36.07% $ 315,50,000.00 22.26%
TOTAL $ 2811,61,000.00 100.00% $ 1417,33,000.00 100.00%
(Source: Annual Report, 2017).
From the above table it is seen that Debt proportion of the company has increased in 2016 in
comparison to 2015 whereas the Equity proportion has decreased in 2016 in 2015.
8. Optimal capital structure
The meaning of optimal capital structure is that the equity component has more that the
debt component in order to overcome the costs of finance charged on the debts. In this case,
the debt proportion is higher than the equity proportion because the company has listed its
shares in 2016.
MARKET ANALYSIS
1. Comment on the financial performance
After the computation of WACC, it has been observed that financial position of the
Apollo Tourism and leisure Ltd is sound because the company has earned profits in the year
ended June 2017 and in 2016. The hike in the profit from 2016 to 2017 was 78.86% which is
tremendous and thus the financial stability of the entity is satisfactory (Annual Report, 2017).
2. Financial analysis of the company
The financial analysis of the Apollo tourism and leisure ltd is conducted and it has been
said that in both the year’s company has generated profits and the owners got the maximum

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returns of the earnings in the form of dividend. Thus the investors must invest in the Apollo
tourism and leisure ltd (Apollo, 2017).
3. Important element of the Apollo Tourism and Leisure Ltd
The other important element which needs to be highlighted is that the cash flow positon
of the company has increased from year 2016 which was AUD $ 66157000 to AUD $
37281000 in the year 2017 that is 77.45% increment has taken place in the company (Annual
Report, 2017).

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REFERENCES
Prospectus, 2017, Apollo Tourism and Leisure Ltd, viewed on 20 October 2017 from
https://www.morgans.com.au/morgans-assets/PDFs/Apollo-prospectus.pdf.
Apollo, 2017, About Us, viewed on 20 October 2017 from https://apollotourism.com/about-
us/.
Annual Report, 2017, Apollo Tourism and Leisure Ltd, 2017, viewed on 20 October 2017
from
https://atl.irmau.com/site/PDF/1100_0/AnnualReporttoshareholders.
Investing.com, 2017, Apollo Tourism and Leisure Ltd (ATL), viewed on 20 October 2017
from https://ca.investing.com/equities/apollo-tourism-leisure-ltd-ratios.
Financial Times, 2017, Apollo Tourism and Leisure Ltd, viewed on 20 October 2017 from
https://markets.ft.com/data/equities/tearsheet/charts?s=ATL:ASX.
MorningStar, 2017, Apollo Tourism and Leisure Ltd (ATL), viewed on 20 October 2017 from
http://performance.morningstar.com/stock/performancereturn.action?
t=ATL&region=aus&culture=en-US.