Blackmores Limited: Financial Analysis and Ratios

This report provides a detailed analysis of the financial position of Blackmores Limited, a healthcare supplement company. It includes ratio analysis, interpretation of results, and suggestions for improving business performance. The report also addresses questions about the company's sustainability and provides a conclusion based on the financial results.

Blackmores Limited
FIN600 TX YYYY
NAME: STUDENT ID:

Student name – ID FIN600 TX YYYY
Blackmores Limited
Executive Summary
For the purpose of review, we have taken the company “Blackmores Limited”. The company has
been engaged in healthcare supplement business. In this report, we will briefly discuss about the
financial position of the company taking under consideration the calculation of various ratio and
analysis of balance sheet & Income statement. The assignment includes the calculation of various
ratios, interpreting the results thereof, and then suggesting the ways in which the company could
improve its business performance. In the end, some of the main questions such as the sustainability
of the company in the near future etc. has been answered and the conclusion has been given which
depicts the financial results of the company.
1

Student name – ID FIN600 TX YYYY
Blackmores Limited
Contents
Page Number
1 Introduction 2
1.1 Background and Business
2 Company Analysis
2.1 Analysis of financial statements of the business
Current Financial performance, economic outlook
3 Ratio Analysis
3.1 Profitability ratios
3.2 Efficiency ratios
3.3 Liquidity ratios
3.4 Gearing ratios
4 Recommendations and overall assessment
5 References/Bibliography
Appendices – attached Excel Spreadsheet
2

Student name – ID FIN600 TX YYYY
Blackmores Limited
1 Introduction
1.1 Background and Business
The company “ Blackmores Limited” is Australian listed (ASX) company engaged in the
healthcare business. The company was founded in the year 1930 by Maurice Blackmores having
headquarter in Witney. Initially, the first shop of the company was opened in Brisbane Australia,
Queens land. Also n date, the company “Blackmores Limited” covers under top 200 ASX listed
company with market value capitalization $ 2 Billion. The company is working with 843 people for
the manufacturing of wide range healthcare products. Some of the range of product produced by the
company includes Mineral, Vitamin along with other health supplements. The “Blackmores
Limited“operates across Asia pacific region out of world with 17 markets and the same has been
inducted into the Queensland business Leader hall of Fame (Blackmores, 2019).
2 Company Analysis
2.1 Financial statements, Current Financial performance, economic outlook
Maurice Blackmores, Company’s founder belief in the herbs and other similar mineral for providing
health giving properties to the human which in result help him to develop this healthcare system all
over Asia pacific on the basis of naturopathic principles. He was of the view that belief only on
natural items to produce preventive medicines and also his views in regard to the environment as
well recycling were nothing short of radical during the year 1930s. resultant his belief and views in
regard to the same opened the doors for new ways to treat the illness as well as to maximize health.
His views on natural health, preventive medicine, the environment and recycling were nothing
short of radical in the 1930s, and his work opened the doors to new ways of treating illness and
maximizing health. As stated above, he has opened or starting up their belief for health food store
with his friends during the are also alive in today’s world the year 1938 so as to achieve his desire to
product or work on naturopathic facts. The belief of Maurice Blackmores is also alive today & the
same has been incorporated by many practitioner in the trading for health practitioner for
naturopathic measures.
3

Student name – ID FIN600 TX YYYY
Blackmores Limited
Later on in the year 1975, the son of Maurice Blackmores took over the business & widespread the
business by all mode. He was of the vision to establish his father business all over world to make
Blackmores limited one of the world leader with regard to natural health remedy. In today time it
has been proved that the company is appreciated all over world at one side by maintain or following
their core principles (natural remedy). Resultant the company has been enjoying their holistic
approach in terms of health issues to provide remedy as to prevent wellbeing of the human or
people. Also, the company performance is so sound or can say research & development is so sound
that they remained indulge to find new deliverable for the people by proving innovative products as
per requirements
If we talk about the financial performance of Blackmores limited. On the basis of deep analysis
made over the year, it has been found that the amount of sale ( quantitative terms) of Blackmores
limited decrease in the country China . the main reason behind such decrease was change in the
strategy adoption that has been used by then earlier. As a result it has targets or can say affected the
customer of china. In nutshell, the impact of the same led to increase in the sale revenue from the
Chinese customers or in terms of percentage there arise 8% growth when compared to the previous
accounting year.
On the announcement of the company that they have decided to burgeoning sales in the market of
china i.e. Chinese market many investors had sold their shares and also there arises decrease in the
Company’s sale by 11 %. Resultant it has weekend the earning of Blackmores limited in the 2nd
half of the accounting period. It has seen that the majority sale was made in china in respect of
health-conscious middle-class people that in result led Blackmores limited to get double sale in
respect of the country china.
3 Ratio Analysis
3.1 Profitability and Market ratios
The following table shows the calculated ratios:
2018 2017
Return on
Assets
(Profit / Average total assets) Profit / ((Year
1 Total A +
Profit /Year 2
Total A
4

Student name – ID FIN600 TX YYYY
Blackmores Limited
Year 2 Total
A)/2)
0.039464712 0.140785202
3.95% 14.08%
Return on
Equity (Profit / Average equity)
Profit / ((Year
1 OE + Year 2
OE)/2)
Profit /Year 2
OE
0.093004415 0.324506904
9.30% 32.45%
Net Profit
Margin Net profit / Sales or revenue NP/ Revenue NP/ Revenue
0.115153642 0.105092727
12% 11%
Gross Profit
Margin Gross profit / Sales or revenue GP/ Sales GP/ Sales
0.61390304 0.57086714
61% 57%
Net Interest
Income
Net Interest Income / Average Earning
Assets
NII / ((Year 1
earning A +
Year 2 earning
A)/2)
NII / Year 2
earning A
for banks only 0 0
0.00% 0.00%
Expense ratio Expenses (excluding tax) / Net sales Exp / Revenue Exp / Revenue
5

Student name – ID FIN600 TX YYYY
Blackmores Limited
(using operating expenses/operating
income) 0.838389377 0.85224125
84% 85%
Cash return on
sales
Net cash flow from operating activity /
Sales or Revenue
$ op activities /
REV
$ op activities /
REV
0.096418733 0.08256484
10% 0.08256484
Earnings per
share
Profit for shareholders / Number of
ordinary shares $xx per share $xx per share
EPS taken from annual report 4.064 3.426
Price earnings
ratio Share price 30 June / Earnings per share $XX / EPS $XX / EPS
share price 30 June taken from annual
report 34.1166 2.9912
XX times XX times
Earnings yield EPS / Share price 30 June EPS / $XX EPS / $XX
share price 30 June taken from annual
report 34.11663386 26.56450671
3411.66% 2656.45%
Dividends per
share
Dividends - Special dividends/ No of
shares $XX per share $XX per share
(determined) DPS taken from annual report 2.899988675 3.400014873
6

Student name – ID FIN600 TX YYYY
Blackmores Limited
R/A Ratio i.e. return on assets ratio – this ratio calculation taking under consideration the assets of
the company help to recognize the company’ s profitability in relation with the total assets held by
the company over the accounting period. It can be said that this R/A ration depicts the manner at
which any organization has performed when the same comes in terms of the profits as well as the
capital amount which a company has been able to generate out of the assets employed in the
business. Higher the R/A ratio depicts the more productivity and effective management in terms of
utilization of the resources. It is recommended that every company must have higher R/A ratio
however in the stated case of Blackmores limited there is decrease in the same . therefore it is
required for the management to take preventive measure so that resources can be utilized efficiently
using the assets (Corporate finance institute, 2019).
ROE i.e. return on Equity Ratio- this ratio depicts the company’s return in terms so equity from
their shareholders i.e. return from the amount invested by the shareholders in the company. It is
always recommended to have higher ration for every organization however in the stated case of
Blackmores limited there is decrease in the same . therefore it is required for the management to
take preventive measure (Economic times, 2019).
N/P ratio i.e. net profit ratio- this ratio as the name suggest calculated taking into consideration the
net profit that has been arisen after deducting all expenses from the revenue amount earned during
the accounting period. This ratio helps to measure the company’s profit extracted from the total sale
revenue. Here the net sale would be the sale revenue less discount or any other expense like sale
allowance etc. It is always recommended to have higher ration for every organization. In the stated
case of Blackmores limited there is increase in the same. Hence, the company performance is
sound in terms of net profit (Bragg, 2019).
G/P ratio i.e. Gross profit margin ratio- this is one of the profitability ratio that helps for calculation
of sales over the COGS i.e. after deduction of COGS from the sale revenue over the year. This ratio
depicts the company’s efficiency in terms of the labour & material as well as also sell their product
profit. It is always recommended to have higher ration for every organization. In the stated case of
Blackmores limited there is increase in the same .. hence the company performance is sound in
terms of net profit (Bragg, 2019).
7

Student name – ID FIN600 TX YYYY
Blackmores Limited
Now we will discuss the expense ratio means the ratio that has been charged by any organization for
the purpose of fund management for their investors.
Return on Sale ratio- this ratio depicts the company’s efficiency in terms to profit generation ability
of the company from their revenue. Resultant helps to measure the performance of the running
operation. It can be done by proper analysis of the percentage of revenue amount earning during the
accounting year by the company to the profits which have been generated by company. It is always
recommended to have higher ration for every organization however in the stated case of
Blackmores limited there is decrease in the same . therefore it is required for the management to
take preventive measure (My accounting course, 2019).
EPS means Earning per Share- it is a financial measure for the company that depicts the company’s
profitability. The same can be calculated by dividing the income so generated in the accounting
period by the number of shares outstanding. This has been considered as a tool by the inventors &
other stakeholders in the market to briefly assess the future prospects of any organization. . It is
always recommended to have higher ration for every organization. In the stated case of Blackmores
limited there is increase in the same .. hence the company performance is sound (Economic times,
2019).
P/E ratio- this is the earnings ratio that shows the connectivity between the earning on each share
invested by shareholder in the company as well as the stock price. Calculation or analysis of this
ratio helps the stakeholders or investors to assess the company in terms of ability of organization to
meet their future expectation. Whether the company is able to meet the future expectation or not. It
is always recommended to have higher ration for every organization. In the stated case of
Blackmores limited there is increase in the same .. hence the company performance is sound
(Corporate finance institute, 2019).
Earning Yield ratio- it is reverse for the P /E ratio i.e. price earnings ratio. However both the ration
indicates the same result. It helps the stakeholders or investors to assess the company in terms of
ability of organization to meet their future expectation. It is always recommended to have higher
ratio for every organization. In the stated case of Blackmores limited there is increase in the same.
Hence the company performance is sound or financially viable (Equity master, 2019).
Let’s discuss about the dividend per share- it means the amount of dividend declared and allocated
8

Student name – ID FIN600 TX YYYY
Blackmores Limited
by the company to their shareholder during the accounting period. The amount so arise help the
investor for decision making. This is so because the investor using the dividend per share can
understand the company’s income or financial position to redeem their shareholders as well the
amount that the company is earning for each share. These refers to the dividend which company
paid in cash to their shareholders. It is always recommended to have higher ratio for every
organization. In the stated case of Blackmores limited the ratio shows decrease over the year. Here
it does not mean the it would have negative impact on financial performance of the company this is
so because the company has set aside major earnings for future investments. (corporate finance
institute, 2019).
3.3 Efficiency ratios
The following table shows the calculated ratios:
2018 2017
Asset
turnover Sales / Average total assets
revenue /
((Year 1 Total
A + Year 2
Total A)/2)
revenue / Year
2 Total A
0.343122879 1.340950666
xx times xx times
Cashflow
return on
assets
Net cash from op activities / Average total
assets
$ op activities/
A
$ op activities/
A
0.033083473 0.110715377
result times result times
Fixed-
Asset
Sales / Total noncurrent assets revenue / Total
NCA
revenue / Total
NCA
9

Student name – ID FIN600 TX YYYY
Blackmores Limited
Turnover
Ratio
3.707298744 3.600402574
xx times xx times
Assets Turnover Ratio- - it refers to the ratio that depicts an ability of any organization to generate
revenue by way of comparison of the net revenue earned with the average total assets of the
company. This ratio calculation helps to assess the company’s efficiency in terms of sale generation
by employing or use of existing total assets. . It is always recommended to have higher ration for
every organization. In the stated case of Blackmores limited the same has been decrease which
shows negative impact financial performance because it states that company is less efficient to
manage their assets efficiently (My accounting course, 2019).
CF to SR ratio- this ratio calculating depicts the company’s ability in terms of cash generation in
relation with the volume of sale. The same can be calculated by diving the cash flow from
operating activities with the net sale . . It is always recommended to have higher ration for every
organization & Inca self-vice versa means there have been issue with efficiency. In the stated case
of Blackmores limited, this ratio has been increased over the year Hence shows good performance
in terms of cash flow & sale efficiency (Accounting tolls, 2019).
FA turnover ratio- this ratio calculation measures the company’s return on the investment made by
the company in Fixed assets like P & M. the same can be done by making comparison of fixed
assets with the net sale amount. This ratio resultant help to assess the company’s efficiency in terms
of production of sale by way of using or employing their equipment & machinery. . It is always
recommended to have higher ratio for every organization. In the stated case of Blackmores limited,
this ratio has been increased over the year hence shows good performance.
(Bragg, 2019).
10

Student name – ID FIN600 TX YYYY
Blackmores Limited
3.3 Liquidity ratios
The following table shows the calculated ratios:
2018 2017
Current
Ratio
Total current assets / Total current
liabilities CA / CL CA / CL
1.733892369 1.814458879
XX:1 XX:1
Quick Ratio
(Total current assets - Inventory) /
Total current liabilities (CA - INV) / CL (CA - INV) / CL
1.137991712 1.219647016
result:1 result:1
Receivables
turnover Credit sales rev / Ang receivables
(Credit sales rev/
((Year 1 Acc rec
+ Year 2 Acc
rec)/2)/100) *365
(Credit sales
rev/Acc
rec)/100*366
0.972622944 3.634449397
result days result days
Average
collection
period
Average receiveables x 365 / Net
credit sales rev
(Acc rec *365) /
Rev
(Acc rec *365) /
Rev
375.2738945 100.4278668
xx days xx days
11

Student name – ID FIN600 TX YYYY
Blackmores Limited
Current Ratio – it refers to the ratio that help to measure the company’s ability to pay their shoert
time liabilit with in the stipulated period of time. Here, the current assets are divided by current
liability to determine the company’s capability. Resultant this current ratio shows the financial
health of the company to pay their debt as well as the various ways in which the same could
maximize their liquidity position (Corporate finance institute, 2019). It is always recommended to
have higher ratio for every organization. In the stated case of Blackmores limited, this ratio has
been decreased over the year hence it shows company ‘inability to pay off the debt in near future.
Quick Ratio- – it refers to the ratio that measure the ability of a company to use their liquid assets
to meet their current liabilities. To calculate the quick ratio, the liquid assets is divided by current
liability to determine the company’s capability. Resultant this current ratio shows the financial
health of the company to pay their debt as well as the various ways in which the same could
maximize their liquidity position. It is always recommended to have higher ratio for every
organization. In the stated case of Blackmores limited, this ratio has been decreased over the year
that reflects inability on part of the Blackmores limited (Accounting coach, 2019).
A/R Ratio- Accounts receivable ratio is an efficiency ratio that helps to measure number of time a
company has been able to convert the amount receivable that has been arises out of the sale into ash
in the stated accounting period. This ratio helps to measure the number of time an organization has
been able for collecting the average receivables in the accounting period (My accounting course,
2019). It is always recommended to have higher ratio for every organization. In the stated case of
Blackmores limited, this ratio has been decreased over the year that reflects inability on part of the
Blackmores limited
In regard to the average collection period- it depicts the average time which a company has been
taking to collect their trade debts from the debtors. It has been calculated by dividing the accounts
receivable by the average credit sale during the year. ). It is always recommended to have lower
ratio for every organization. In the stated case of Blackmores limited, this ratio has been increased
over the year that reflects inability to collect the debt by the company in stipulated time.
12

Student name – ID FIN600 TX YYYY
Blackmores Limited
3.4 Gearing ratios
The following table shows the calculated ratios:
YYYY YYYY
Debt to
Equity
Total debt/Total equity or Total
liabilities/Total equity Debt / Equity Debt / Equity
(use debt figures only) - DEBT
or BORROWINGS 1.404438008 1.304978777
140.44 130.50
Debt ratio Total debt / Total assets Debt / Total Assets Debt / Total Assets
0.584102399 0.566156526
58% 57%
Equity Ratio Total equity / Total assets OE / A OE / A
0.415897601 0.433843474
42% 43%
Cash debt
coverage
$$ from op activities / Ang total
liabilities
$ operating
activities / ((Year 1
Total L + Year 2
Total L)/2)
$ operating
activities / Year 2
Total L
51832 22817
5183200% 2281700%
Interest
coverage
EBIT / Interest expense EBIT / Interest Exp EBIT / Interest Exp
13

Student name – ID FIN600 TX YYYY
Blackmores Limited
ratio
25.85547074 20.62942584
xx times xx times
D/E ratio i.e. debt to equity ratio - this ratio calculation shows the relative proportion of both debt
& equity that have been used for financing the company’s assets. As it close to leveraging this is
also called leverage ratio. It can also be said that this D/E ratio depicts the percentage of financing
through investors & creditors. It is always recommended to have lower ratio for every organization.
In the stated case of Blackmores limited, this ratio has been increased over the year it means the
company has been exposed to various risk such as the more bank loan has been used fir
investment purpose (My accounting course, 2019).
Cash debt coverage ratio- this ratio depicts proportion of coverage of company’s liabilities with the
net cash from operating activities (Wealthy education, 2019). It is always recommended to have
higher ratio for every organization. In the stated case of Blackmores limited, this ratio has been
increased over the year it means the company’s performance is good. (My accounting course,
2019).
Interest coverage ratio- this ratio calculation helps to determine how an organization would be able
to pay the interest expense on their outstanding debt during the year. This can be calculated by
dividing the EBIT by Interest expense so arises. In nutshell, it can be said that this ratio shows the
ability of an organization to meet the liability towards the interest payment ((My accounting course,
2019). It is always recommended to have higher ratio for every organization. In the stated case of
Blackmores limited, this ratio has been increased over the year it means the company’s is able to
meet their interest liability arises out of the outstanding debt during the accounting year.
14

Student name – ID FIN600 TX YYYY
Blackmores Limited
4 Recommendations and overall assessment
Discussion
ENSURE YOU COVER THE BELOW IN YOUR DISCUSSION
Has Year 1 been better than Year 2 for the company?
Based on analysis of annual report of the Blackmores limited, it has been depicted that year 1 i.e.
year 2017 was better for the company than year 2 i.e. year 2018.
Will the company succeed in the future?
Based on ratio calculation above, it shows the same has been decreasing over the year. Hence it
seems difficult for the Blackmores limited to succeed in future.
The likelihood of a merger or acquisition?
Based on analysis of ratio calculation as above, it is recommended to go for acquisition.
Suggest what should the company be doing help it succeeds?
\it has been suggested that management of Blackmores limited must take some preventive measures
on the efficiency. Also, they must take some steps to improve the profitability that can be done by
reducing the expenses through proper preventive measures.
Discuss relevant ethical considerations when an organisation becomes insolvent
In case of insolvency of any organization, stakeholders have major impact. Management of the
company are questioned as well as public and government loses interest. This is so because
insolvency depicts that business assets is less than the liabilities of the company that led to failure of
business.
The impact of the political competitive environment on the business
15

Student name – ID FIN600 TX YYYY
Blackmores Limited
In case of political competitive environment, it looks difficult for an organization to work smoothly
as rules & procedure handling become tough for the organization
External factors that need to be taken into consideration
Some of the external factors would include the completion with companies with same industry ,
benchmarking etc.
Would you invest in this company?
As an investor, it would be difficult to invest in the company “Blackmores limited” this is many due
to ratio analysis which have been reduced over the year.
16

Student name – ID FIN600 TX YYYY
Blackmores Limited
5 References/Bibliography
References
Dividend Per Share - Overview, Guide to Calculate Dividends Per Share. (2019). Retrieved from
https://corporatefinanceinstitute.com/resources/knowledge/finance/dividend-per-share/
Fixed Asset Turnover Ratio Formula | Example | Calculation Explanation. (2019). Retrieved from
https://www.myaccountingcourse.com/financial-ratios/fixed-asset-turnover
Interest Coverage Ratio | Formula | Example | Analysis. (2019). Retrieved from
https://www.myaccountingcourse.com/financial-ratios/interest-coverage-ratio
Investing Strategies That Work!. (2019). Retrieved from https://wealthyeducation.com/cash-debt-
coverage-ratio/
Accounts Receivable Turnover Ratio | Formula | Analysis | Example. (2019). Retrieved from
https://www.myaccountingcourse.com/financial-ratios/accounts-receivable-turnover-ratio
Asset Turnover Ratio | Analysis | Formula | Example. (2019). Retrieved from
https://www.myaccountingcourse.com/financial-ratios/asset-turnover-ratio
Bragg, S., & Bragg, S. (2019). Cash flow to sales ratio. Retrieved from
https://www.accountingtools.com/articles/2017/5/14/cash-flow-to-sales-ratio
Current Ratio Formula - Examples, How to Calculate Current Ratio. (2019). Retrieved from
https://corporatefinanceinstitute.com/resources/knowledge/finance/current-ratio-formula/
Debt to Equity Ratio | Formula | Analysis | Example. (2019). Retrieved from
https://www.myaccountingcourse.com/financial-ratios/debt-to-equity-ratio
Definition of Earnings Per Share (eps) | What is Earnings Per Share (eps) ? Earnings Per Share
(eps) Meaning - The Economic Times. (2019). Retrieved from
https://economictimes.indiatimes.com/definition/earnings-per-share-eps
Price Earnings Ratio - Formula, Examples and Guide to P/E Ratio. (2019). Retrieved from
https://corporatefinanceinstitute.com/resources/knowledge/valuation/price-earnings-ratio/
Return on Sales Ratio Formula | Analysis | Example. (2019). Retrieved from
https://www.myaccountingcourse.com/financial-ratios/return-on-sales
17

Student name – ID FIN600 TX YYYY
Blackmores Limited
What is the average collection period? | AccountingCoach. (2019). Retrieved from
https://www.accountingcoach.com/blog/average-collection-period
What is the quick ratio? | AccountingCoach. (2019). Retrieved from
https://www.accountingcoach.com/blog/quick-ratio-acid-test
Yield, E. (2019). Earnings Yield Formula, Definition & Example | Equitymaster.com. Retrieved
from https://www.equitymaster.com/glossary/earnings-yield/
Bonyhady, N. (2019). Blackmores shares tank after disappointing sales to China. Retrieved from
https://www.smh.com.au/business/companies/blackmores-reports-dip-in-china-sales-net-profit-
inches-higher-20190219-p50yop.html
Bragg, S., & Bragg, S. (2019). Net profit margin. Retrieved from
https://www.accountingtools.com/articles/what-is-net-profit-margin.html
Company information. (2019). Retrieved from https://www.blackmores.com.au/about-us/company-
information
Definition of Expense Ratio | What is Expense Ratio ? Expense Ratio Meaning - The Economic
Times. (2019). Retrieved from https://economictimes.indiatimes.com/definition/expense-ratio
Definition of Return On Equity | What is Return On Equity ? Return On Equity Meaning - The
Economic Times. (2019). Retrieved from
https://economictimes.indiatimes.com/definition/return-on-equity
Gross Profit Margin Ratio | Formula | Percentage | Example Calculation. (2019). Retrieved from
https://www.myaccountingcourse.com/financial-ratios/gross-profit-margin
Heritage & history. (2019). Retrieved from https://www.blackmores.com.au/about-us/company-
information/heritage-and-timeline
Return on Assets - ROA Formula, Calculation, and Examples. (2019). Retrieved from
https://corporatefinanceinstitute.com/resources/knowledge/finance/return-on-assets-roa-
formula/
18

Student name – ID FIN600 TX YYYY
Blackmores Limited
Appendices – attached Excel Spreadsheet
https://www.blackmores.com.au/about-us/company-information/heritage-and-timeline
19