Analysis of Financials

The financial analysis of a company is important in understanding its long term viability and any problems which can arise in future. This report analyzes the financial position of Breville Group Limited using ratio analysis, trend analysis, and common size balance sheet analysis. Recommendations are provided based on the findings.

Running head: ANALYSIS OF FINANCIALS
Analysis of Financials
Name of the Student:
Name of the University:
Author Note:

1ANALYSIS OF FINANCIALS
Executive Summary:
The financial analysis of a company is important in understanding its long term viability and
any problems which can arise in future. The financial analysis of the company helps it to
understand certain situation which the company is probably going to face in the future and it
can create some contingency plan to avoid the same. The ratio analysis of a company is
helpful to understand the level of operation of the company and the company has a weaker
performance in which aspect. These ratio can then be compared to an industry average or a
competing peer company in the same industry and compare the result of our target company.
The trend analysis also helps to understand the trend which the company had been following
for years and a forecast on the future trend can be made by analysing the past. The common
size balance sheet helps to understand changes in items in the balance sheet over years which
have an effect on the overall profitability of the company. The company Breville Group
Limited, a company which manufactures kitchen supplies is taken for the purpose of financial
analysis. All the three analysis techniques are used to determine the financial position and a
conclusion is made at the end of the report along with recommendation. Whirlpool limited is
taken as a competing peer firm for the purpose of the analysis.

2ANALYSIS OF FINANCIALS
Table of Contents
Introduction:...............................................................................................................................3
Discussion:.................................................................................................................................3
Financial Ratio and Trend Analysis:......................................................................................3
Liquidity Ratio:..................................................................................................................4
Profitability Ratio:..............................................................................................................7
Efficiency Ratio:..............................................................................................................12
Solvency Ratio:................................................................................................................14
Common Size Balance Sheet Analysis:...............................................................................15
Conclusion:..............................................................................................................................15
Recommendation:....................................................................................................................16
References and Bibliographies:................................................................................................17

3ANALYSIS OF FINANCIALS
Introduction:
The following assessment is based upon the study of the financial statements of
Breville Group Limited, a home appliance manufacturer based in Australia. The financial
statements of the company like the balance sheet, statement of income and the statement of
cash flow of the company are used for the purpose of the analysis. The financial ratio of the
company like liquidity, solvency, profitability and efficiency ratio are analysed for the
purpose of this report. The trend analysis is conducted of the financial statements along with
the preparation of a common size financial statements is prepared to understand the effects of
the economy on the company. The financial ratio are compared to the benchmark company
whirlpool limited to understand the current position of the company focused which is the
Breville Group limited.
This analysis is subjective and is based on a few financial ratio and the common size
financial statements. The scope of this analysis is limited to the relevant ratio calculated for
the purpose of this report.
Discussion:
Financial Ratio and Trend Analysis:
Financial ratio are a measure to understand the current financial health of the
company and the effect of certain factors which had an effect on the financial reports of the
company. The liquidity ratio shows and evaluates the current short term financial position of
the company and its ability to meet its liabilities in the near future. The solvency ratio is an
indicator of the leverage taken by the company for its business purpose and shows the risk
faced by the equity shareholders of the company who have a direct stake in the operations of
the company (Eckert, Hüsler, Liniger and Hodel 2015). The profitability ratio are an indicator

4ANALYSIS OF FINANCIALS
of the return which is earned by the company for its stakeholders after meeting all the
relevant expenses of the company. The efficiency ratio shows how the company utilizes its
assets in its business operation and generate return for the relevant stakeholders of the
company. It measure the level of efficiency at which the company is able to use the resources
which it has in its hand (Zainudin and Hashim 2016).
Ratio of Liquidity:
Current Ratio:
Current ratio is a measure of the current assets divided by the current liability and
shows the ability of the assets of the company to satisfy the liabilities of the company in the
short run.
Figure 1: Current Ratio of Breville Group Limited
Source: By the Author
The Breville Group Limited has current ratio as per the financial statements is at a
sustainable level and is above 2, which shows the sign of good liquidity position of the
company. This means that the company has twice the assets for the liability to be met.
Figure 2: Current Ratio of Whirlpool Group Limited

5ANALYSIS OF FINANCIALS
Source: By the Author
The above table shows the ratio of the whirlpool limited is at a very poor level as all
of its current ratio for all the years are below 1, this shows the liquidity position of the
company is at a very poor level.
2014 2015 2016 2017 2018
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2.526294824786282.482879582172162.38911685335108
2.57327313460914
2.90167369785204
0.96370343924788
8
3.23939679547597
3.88924218335983
0.93239271017048
8 0.81607770200454
6
Current Rati o
Breville Group Limited Whirlpool Limited
Figure 3: Trend Analysis of Current Ratio
Source: By the Author
The Breville Group limited has a stable trend of current ratio over the analysis period
while its benchmark competitor is exhibiting severe fluctuation in the current ratio of the
company. Thus Breville Group has a stable liquidity position while its competitor has a risky
and fluctuating liquidity position (Yao, Percy and Hu 2015)
Cash Flow Operation Ratio:
The cash flow statement shows the measure of cash generated from the business and
thus exacts the level of cash which is available with the company. This ratio measures the
amount of liability which can be satisfied by the company with the cash available with the
company.

6ANALYSIS OF FINANCIALS
Figure 4: Cash Flow Operation Ratio of Breville Group Limited
Source: By the Author
The Ratio of the company was very poor in the year 2014 but it has improved over
time and is increasing with coming close to 1. However overall this ratio is very poor in the
company, with now only about 80% of the liabilities being able to be met with the available
cash with the company.
Figure 5: Cash Flow Operation Ratio of Whirlpool Group Limited
Source: By the Author
The Whirlpool Company has a very poor ratio to meet its liabilities being good only
in the year 2015 and 2016 showing signs of improvement, but yet again it fell to very poor
level from the past two years.

7ANALYSIS OF FINANCIALS
2014 2015 2016 2017 2018
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
0.52244431053325
0.44503342232962
4
0.48324461202913
0.53590546063995
3
0.81480868742015
2
0.17600856836844
0.57728557964184
7
0.63751987281399
0.14861845972957
1 0.12698904732382
7
Cash Flow Operation Rati o
Breville Group Limited Whirlpool Limited
Figure 6: Trend Analysis
Source: By the Author
As it is seen that this ratio for the Breville Group Limited is on the increasing trend
which is the improving trend from the past four years. However Whirlpool Limited has a
poor ratio and is on the decreasing trend from the past three years with a severe fall from the
year 2016 to 2017 (Barua and Saha 2015).
Ratio of Profitability:
Gross Profit Margin:
This ratio measures the level of profit which a company charges over its cost of goods
sold. It shows the margin which a company has to cover all its expenses.
Figure 7: Gross Profit Ratio Breville Group Limited
Source: By the Author

8ANALYSIS OF FINANCIALS
The Gross Profit Ratio of the company is at a level of 32%-35% and it is relatively
stable and increasing in a decreasing rate over the analysis period from 2014-2018.
Figure 8: Gross Profit Ratio Whirlpool Group Limited
Source: By the Author
The margin of gross profit for the whirlpool limited is very poor at is at 16%-17% and
a slight hint of systemic and unsystematic risk can render its profitability to be negative. Thus
the scope of margin for business for the company is very low.
2014 2015 2016 2017 2018
0
5
10
15
20
25
30
35
40
32.531226055408432.838174242366733.13509304112432.4690911672304
35.6036961866979
17.084339774557217.519506007371617.82025292016616.948195548863716.8132338261159
Gross Profi t
Breville Group Limited Whirlpool Limited
Figure 9: Trend Analysis
Source: By the Author
The Gross Profit ratio of the Breville Group Limited was stable for four years and
there was a sudden rise in the level by 3% in the year 2018. The gross profit of whirlpool

9ANALYSIS OF FINANCIALS
limited is around 16%-18% and is stable at those levels. Thus the Breville Group Limited has
a higher margin for expenses while the whirlpool limited does not have such a big margin
(Pando, San-José and Sicilia 2019.)
Net Profit Margin:
The Net Profit margin indicates the level of profit which is available for the direct
stakeholders of the company like the equity shareholders and minority interest. The higher
the margin the more profitable is the company as it would have reduced expenses.
Figure 10: Net Profit of Breville Limited
Source: By the Author
The ratio of Breville Group limited has a stable net profit ratio over the analysis
period indicating a stable administrative and operational expense of the company. The net
profit being stable although even due to rise in sales revenue indicates the expenses of the
company are directly proportional to the sales revenue.
Figure 11: Net Profit of Whirlpool Limited
Source: By the Author

10ANALYSIS OF FINANCIALS
The net profit of the whirlpool limited is very poor and is falling from the year 2014
and turning out to be negative in 2018. This shows poor performance of the company over
the years and its failure to improve its business over the years, leading to fall in sales revenue
and increase in expense. The data above when analysed shows that the company has more
fixed expense rather than variable expense.
2014 2015 2016 2017 2018
-2
0
2
4
6
8
10
9.003628038366748.857079971766638.701760228106418.887414091687268.97051880284756
3.27093397745572
3.74802546551146
4.28612800463365
1.64682633040041 -
0.86989589770404
5
Net Profi t Ratio
Breville Group Limited Whirlpool Limited
Figure 12: Trend Analysis
Source: By the Author
As per the trend analysis above it is observed that the Breville Group Limited is
showing a stable trend of profit over the years, with little minor fluctuations in profit. The
whirlpool limited is having a fluctuating trend which is very volatile. A proper forecast for
the profit of the company looking at the graph cannot be made. However the company has
started incurring losses which is a signal that the company has lost its profitable position in
the economy. The level of net profit margin is also very low for the company (Nababan,
Nainggolan, Tobing and Sembiring 2019).
Return on Equity:

11ANALYSIS OF FINANCIALS
Return on Equity is the level of return which is generated by the company for the
equity shareholders and is a useful measure to analyse the return which the equity
shareholders get on their investment in the company.
Figure 13: ROE of Breville Group Limited
Source: By the Author
The Return on Equity generated by Breville limited for its shareholders is above the
average at around 20%-22%. The company has a stable return on equity at 20% which
reduces the risk of shareholders about their investment in the company.
Figure 14: ROE of Whirlpool Limited
Source: By the Author
The return on equity of the whirlpool limited was above 10% for three years which is
2014, 2015 and 2016. However, it started to fall down after 2016 and it became negative in
2018. Thus investors have lost their money by investing in the whirlpool limited as compared
to its competitor which has a higher return than whirlpool limited.

12ANALYSIS OF FINANCIALS
2014 2015 2016 2017 2018
-10
-5
0
5
10
15
20
25
22.8894229415244
20.172424969209820.394707424645820.73656922525820.6609352657687
11.2146307798482
13.7997885089884
15.5027932960894
6.82527301092044
-
5.70982839313573
ROE
Breville Group Limited Whirlpool Limited
Figure 15: Trend Analysis
Source: By the Author
The ROE of Breville Group Limited is stable from the period 2015-2018, indicating
stable business environment for the company. While Whirlpool limited had an increasing
ROE till 2016, after that the company started to generate less return and even became
negative in the year 2018. Thus indicating a certain business problem is affecting the
company even after two years of occurrence (Quayyoum and Szabó 2015).
Efficiency Ratio:
Accounts Receivable Turnover:
This ratio indicates the level of sales of the company is on credit and the amount of
credit risk the company is exposed to in case of default.
Figure 16: Accounts Receivable Turnover of Breville Limited

13ANALYSIS OF FINANCIALS
Source: By the Author
The turnover of receivables of Breville Group is at a stable level of 6.5 over the five
year period. Thus this indicates that the company sells goods on credit to selected number of
buyers on credit. Also the company is only able to collect dues 6.5 times in a year.
Figure 17: Accounts Receivable Turnover of Whirlpool Limited
Source: By the Author
This ratio of whirlpool limited is higher than Breville Limited, it indicates that the
company can collect 8 times the receivables in a year. Thus it reduces the cash cycle rotation
of the company and improves the liquidity position of the company.
2014 2015 2016 2017 2018
0
1
2
3
4
5
6
7
8
9
10
6.507175596364446.414673628607256.617539711688556.318109989830246.35018349248995
8.32683846637335
7.886372215930547.906124785346317.90662202380952
8.6305641025641
Accounts Receivable Turnover
Breville Group Limited Whirlpool Limited
Figure 18: Trend analysis
Source: By the Author

14ANALYSIS OF FINANCIALS
Both the company show a stable trend in the Accounts Receivable Turnover, with
Breville Group Limited showing a poor performance in comparison to whirlpool limited
(Aldivitto and Rahman 2016).
Solvency Ratio:
Debt to Equity Ratio:
Figure 19: Debt to Equity Ratio of Breville Limited
Source: By the Author
The debt to equity ratio is at an optimal level and the company is slowly increasing its
level of debt
Figure 20: Debt to Equity Ratio of Whirlpool Limited
Source: By the Author
The Debt to equity ratio is very high and the company is highly leveraged and
increasing its leverage which result in loss to the company as it would incur significant cost
on further raising debt (Lewis and Tan 2016).

15ANALYSIS OF FINANCIALS
Common Size Balance Sheet Analysis:
Figure 21: Common Size Balance Sheet
Source: By the Author
On analysing the common size balance sheet of the company Breville limited, all the
data from the year 2014 to 2018 have a stable rise and fall, which are miniscule in nature. The
company has been able to maintain its stability over the years and thus reducing its risk (Hess
2019).
Conclusion:
As per the analysis conducted in the above report it is established that the current
ratio, Net Profit , Return on Equity, Gross Profit, and the debt to equity ratio are at an optimal
and healthy financial level of the company. The ratio being at a good level also are stable thus
reducing volatility in its financial statements and having a very good positive trend. The cash
flow from operation ratio which was at a poor level is now improving. The trend exhibited is
an increasing trend which is good for the company as it is improving on its cash position.
Thus overall the company is better than its competitor whirlpool Limited which has a very
poor financial position. Also the company has a stable balance sheet values as it is shown by
the trend from 2014-2018, with only miniscule volatility.

16ANALYSIS OF FINANCIALS
Thus it is concluded that the company Breville Group Limited has a good financial
position and its financials are healthy and no such liquidity or solvency constraint is
observed.
Recommendation:
The company Breville Group Limited which has a nice current ratio which is at a
healthy level, the company can improve it more by making itself more liquid by acquiring
more cash balance. As it is observed it had a poor cash flow operation ratio, this indicates the
high current ratio was on account of other current assets which did not include cash and cash
equivalents. Thus the company should improve its cash position.
The company should improve upon its accounts receivables by collecting payments
more frequently and to decrease the cash cycle rotation and thus increase profitability of the
company. This can be done by reducing the credit period of debtors and to check the quality
of debtors before giving credit.
The company has a debt equity ratio which is less than 1, the company should find out
its optimal level of debt and use leverage as a measure to increase its business and fund
expansion projects. Since leverage acts as a catalyst for firms which are not properly
leveraged and increase their profitability.

17ANALYSIS OF FINANCIALS
References and Bibliographies:
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assets, return on equity, economic value added and the equity multiplier. Modern
Economy, 8(10).
Aldivitto, D. and Rahman, A.F., 2016. The Impact of Working Capital Components Turnover
Period Towards Market Value Ratio. Jurnal Ilmiah Mahasiswa FEB, 3(2).
Barua, S. and Saha, A.K., 2015. Traditional Ratios vs. Cash Flow based Ratios: Which One is
Better Performance Indicator?. Advances in Economics and Business, 3(6), pp.232-251.
Eckert, S., Hüsler, F., Liniger, H. and Hodel, E., 2015. Trend analysis of MODIS NDVI time
series for detecting land degradation and regeneration in Mongolia. Journal of Arid
Environments, 113, pp.16-28.
Hess, R., 2019. Government Assistance and Capital Structure: A Growing, Off-Balance Sheet
Financing Source. Off-Balance Sheet Financing Source (July 31, 2019).
Kariuki, P.M. and Awino, Z.B., 2018. ORGANIZATIONAL RESOURCES AND RETURN
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timing. Journal of financial economics, 119(3), pp.599-610.
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TOTAL ASSETS TURNOVER (TATO), NET PROFIT MARGIN (NPM). Jurnal Akrab
Juara, 4(2), pp.67-76.

18ANALYSIS OF FINANCIALS
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inventory model with stock-dependent demand rate and non-linear holding cost. Applied
Mathematical Modelling, 66, pp.643-661.
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