Comparative Financial Analysis of Vita Group Limited and Redflow Limited

The financial performance and position of Vita Group Limited and Redflow Limited are analyzed to examine their profitability, liquidity, assets efficiency, and debt equity ratios. The analysis shows that Vita Group is more profitable, has better assets efficiency, and is less dependent on borrowed funds compared to Redflow. On the other hand, Redflow has high liquidity. Based on the analysis, it is recommended that investors should make investments in Vita Group.

Finance
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Table of Contents
Part 1................................................................................................................................................6
Answer to Question 1......................................................................................................................6
Background summary of Vita Group..........................................................................................6
Answer to Question 2......................................................................................................................7
Answer to Question 3......................................................................................................................7
Answer to Question 4......................................................................................................................7
Redflow Limited..........................................................................................................................7
Vita Group Limited......................................................................................................................8
Answer to Question 5......................................................................................................................9
Vita Group Limited......................................................................................................................9
Redflow Limited..........................................................................................................................9
Part 2..............................................................................................................................................10
ANSWER TO QUESTION 1:.......................................................................................................10
ANSWER TO QUESTION 2:.......................................................................................................11
ANSWER TO QUESTION 3:.......................................................................................................11
ANSWER TO QUESTION 4:.......................................................................................................12
ANSWER TO QUESTION 5:.......................................................................................................13
ANSWER TO QUESTION 6:.......................................................................................................13
ANSWER TO QUESTION 7:.......................................................................................................13

ANSWER TO QUESTION 8:.......................................................................................................14
ANSWER TO QUESTION 9:.......................................................................................................14
Part 3..............................................................................................................................................15
Answer to Question 1....................................................................................................................15
Redflow limited.........................................................................................................................15
Vita Group Limited....................................................................................................................15
Answer to Question 2....................................................................................................................15
Redflow limited.........................................................................................................................15
Vita Group Limited........................................................................................................................15
Answer to Question 3....................................................................................................................16
Redflow limited.........................................................................................................................16
Vita Group Limited....................................................................................................................16
Answer to Question 4....................................................................................................................16
Redflow limited.........................................................................................................................16
Vita Group Limited....................................................................................................................16
Answer to Question 5....................................................................................................................16
Redflow limited.........................................................................................................................16
Vita Group Limited....................................................................................................................17
Answer to Question 6....................................................................................................................17
Redflow limited.........................................................................................................................17

Vita Group Limited....................................................................................................................17
Answer to Question 7....................................................................................................................17
Redflow limited.........................................................................................................................17
Vita Group Limited....................................................................................................................17
Answer to Question 8....................................................................................................................18
Redflow limited.........................................................................................................................18
Vita Group Limited....................................................................................................................18
Answer to Question 9....................................................................................................................18
Redflow limited.........................................................................................................................18
Vita Group Limited....................................................................................................................18
Answer to Question 10..................................................................................................................18
Redflow limited.........................................................................................................................18
Vita Group Limited....................................................................................................................19
Answer to Question 11..................................................................................................................19
Redflow limited.........................................................................................................................19
Vita Group Limited....................................................................................................................19
Answer to Question 12..................................................................................................................19
Vita Group Limited....................................................................................................................19
Answer to Question 13..................................................................................................................19
Redflow limited.........................................................................................................................19

Vita Group Limited....................................................................................................................20
Answer to Question 14..................................................................................................................20
Part 4..............................................................................................................................................21
Introduction....................................................................................................................................21
Comparative performance.............................................................................................................21
Limitation of analysis....................................................................................................................21
Conclusion and recommendation..................................................................................................21
Reference.......................................................................................................................................23

Part 1
Answer to Question 1
Background summary of Vita Group
The Vita Group Company was founded by the Maxine Horne and David McMahon. The
main reason for forming the business was to provide retail outlets to Australians from where they
can buy mobile phones and telecommunication products. The company first started its operation
in 1995. The core business of the company is that it is a retailer that operated under the name
Telstra. The company operated in more than one industry they are telecommunication,
information communication, technology accessories and Athleisure. The company only operates
within Australia and it is one of the truly national organization as it has presence all across
Australia.
Background summary of Red flow limited
The Redflow limited was incorporated in the year 2008. The main reason for
commencing the operation of the company was to provide sustainable solution for storing energy
for various application that includes telecommunication, renewable energy etc. The core business
of the company was to develop, manufacture, and selling of Zinc bromine flowing electrolyte
battery module (ZBM). The company is not diversified and it is only engaged in the Electrical
Components & Equipment industry. The company currently only operates in Australia. The
company operates in USA and Germany through subsidiary (Vogel, 2014).
Answer to Question 2
The corporate governance report of both the companies provided discussion of
fulfillment in the application of the various principles of corporate governance under the heading

of the principles. The eight principles of corporate governance under which heading the report
have been discussed are:
 Principle 1: Lay solid foundations for management and oversight;
 Principle 2: Structure the Board to Add Value;
 Principle 3: Ethical and Responsible Decision Making;
 Principle 4: Safeguard Integrity in Corporate Reporting;
 Principle 5: Timely and Balanced Disclosure;
 Principle 6: Respect the Rights of Security Holders;
 Principle 7: Recognize and Manage Risk;
 Principle 8: Remunerate Fairly and Responsibly;
Answer to Question 3
The corporate governance report is in page 19 of the annual report of the company Red
flow limited. In case of Vita group the company has issued a separate corporate governance
statement. In both the cases the report contains the information related to the corporate
governance effort of the company and compares that with the principles of corporate governance
of the company (Kallala et al., 2015).
Answer to Question 4
Redflow Limited
In case of Redflow limited there are four members in the board of directors. The highest
position was held by Mr. Simson Hackett as the Executive chairman of the company. The deputy
chairman of the company was Mr. Howard Stack. The total remuneration of Mr. Simson Hackett
is $92447 and that of Mr. Howard Stack was $58342.

Vita Group Limited
The two most important directors of the company are Dick Simpson and Maxine Horne.
The Dick Simpson is the chairman and his remuneration is $205883 in 2016 and it was $185229
in 2015. On the other hand, Maxine Horne is the Chief Executive Officer and the remuneration is
$615371.
Answer to Question 5
Vita Group Limited
The consolidated financial statement of the company includes the financial statements of
the Vita group limited and its subsidiaries provided below:

Redflow Limited
The company has subsidiary that are provided below:

Part 2
ANSWER TO QUESTION 1:
REDFLOW:
In the current year the amount invested by the company in net assets is $14,266,636. The
amount of net asset is reduced by $203,134 from the year 2015 and the amount increased by
$3,981,065 from the year 2014. This is because in 2016 inventories was reduced compared to
2015 and from 2014 plant and equipment was increased.
VITA GROUP LTD.:
Amount invested in net asset in 2016 is $67,986,000. The net assets have increased over
the years. It was $30,740,000, $48,992,00 and $67,986,000 in the year 2014, 2015 and 2016
respectively. Current and non-current assets have increased.

ANSWER TO QUESTION 2:
REDFLOW:
The total equity in 2016 was 14,266,636. In 2016 decreased slightly from 2015 and
increased significantly from 2014. The reasons behind this is in 2016 reserves increased
significantly compared to 2015 and accumulated losses increased in 2016.
VITA GROUP LTD.:
Total equity in 2016 was $67,96,000. The total equity have also increased over the years
and the reason being retained earnings have increased substantially.
ANSWER TO QUESTION 3:
REDFLOW:
The current assets for 2016 is $15,001,858.
The components of current asset are:
Yes there are changes. Cash and cash equivalents have decreased in 2016 and trade
receivables also decreased.
VITA GROUP LTD.:

Current Asset for 2016 is $72,844,000.
Yes there are significant change. Cash and cash equivalents have increased and term
deposits have been raised in 2016.
ANSWER TO QUESTION 4:
REDFLOW:
The items under non-current liabilities are:
Yes, non-current Warranty claim was absent in 2014 but present in 2015 & 2016.
VITA GROUP LTD.:
The items are:
No. there are no such activity.

ANSWER TO QUESTION 5:
REDFLOW:
The net loss (not profit) is $14,121,539. The loss have increase over the year. There is an
introduction of Manufacturing transition costs in 2016, which is not present in 2015 and 2014.
VITA GROUP LTD.:
Net profit for the year 2016 is $35,371,000. In 2016 and 2015 there was net profit but in
2014 there was net loss.
ANSWER TO QUESTION 6:
REDFLOW:
Total revenue recorded in 2016 is less than that of 2015 and 2014.
VITA GROUP LTD.:
Total Revenue in 2016 is greater than that of 2015 and 2014.
ANSWER TO QUESTION 7:
REDFLOW:
Cash flow from operating activities for 2016 was ($12,445,288). The largest inflow and
largest outflow are
VITA GROUP LTD.:

Cash flow from operating activities in 2016 is $49,097,000. The largest cash inflow and
largest cash outflow are
ANSWER TO QUESTION 8:
REDFLOW:
Cash Flow from investing activities in 2016 was ($925,912). No there is no such
activities.
VITA GROUP LTD.:
Cash flow from investing activities in 2016 was ($31,308,000). Yes the company has new
investing activity which are store sale and funds invested in 2016 but not present in 2015
ANSWER TO QUESTION 9:
REDFLOW:
Net change in cash flow in 2016 is
VITA GROUP LTD.:
Net change in cash flow in 2016 is

Part 3
Answer to Question 1
Redflow limited
Yes the profitability margin has changed over the years. The result shows that the
company is making huge losses so it is not good result for the company.
Vita Group Limited
The profit margin of the company has changed. In the past three years the profit margin
of the company has improved.
Answer to Question 2
Redflow limited
The trend shows that the return on equity is declining or it can be said that the loss is
increasing. The main reason is the increased loss for the company.
Vita Group Limited
The return on equity of the organization has rapidly improved in the 3 year period. It is a
optimistic sign for the company as it indicates that the income from investment in the equity
shares are increasing.

Answer to Question 3
Redflow limited
The assets turnover ratio has increased over the period however it declined in 2015. The
increase in assets turnover ratio specifies that the company is able to generate revenue from the
existing assets.
Vita Group Limited
The calculation shows that the assets turnover ratio of the company has increased rapidly.
It is a positive sign for the company as it indicates that the company is able to generate higher
revenue using the assets (Abu-Bakar et al., 2014).
Answer to Question 4
Redflow limited
The receivable turnover of the company has increased over the past three years. It is a
positive sign as it indicates that the collection department of the company has increased.
Vita Group Limited
The overall receivable turnover ratio of the business has decreased. It is an undesirable
sign for the company as it indicates that the company is not able to improve its collection.
Answer to Question 5
Redflow limited
The inventory turnover ratio of the company has declined over the past three years. It is a
negative sign for the company as it means that the company is having inventory that is not
moving quickly.

Vita Group Limited
The inventory turnover ratio of the corporation has increased. It is not a positive sign for
the company as it indicates that the company is not able sell the inventory quickly.
Answer to Question 6
Redflow limited
The current ratio of the company has not seen much fluctuation. It has only slightly
decreased. The average current ratio of the company is 6 times. It is very high so a little decline
will not affect the company.
Vita Group Limited
The current ratio of the company is increasing. This is a positive sign for the company as
the company has current ratio less than one. That means it has more current liabilities than
current assets.
Answer to Question 7
Redflow limited
The overall quick ratio of the company has declined. It indicates that the quick assets
available to the company is declining.
Vita Group Limited
The quick ratio of the company is in increasing trend. It is a positive sign for the
company as it specifies that the establishment has enough liquid assets to pay of the current
liability.

Answer to Question 8
Redflow limited
The ratio has shown a decline and it is a negative sign for the company. The main reason
for the decline is the negative cash generation from operation.
Vita Group Limited
The net cash flow to current liability of the company has increased. It is a positive that
indicates the company has sufficient cash to pay off the current liability.
Answer to Question 9
Redflow limited
The debt to assets ratio of the company first increased then declined. This means the
dependence on external fund for financing the assets of the company has declined. It is a positive
sign for the company.
Vita Group Limited
The calculation shows that the debt to assets ratio of the company has declined. This
indicates that company’s reliance outsider fund has declined and the owner fund has increased.
Answer to Question 10
Redflow limited
The debt to equity ratio of the company first increased then declined it is a positive sign
for the company. This means the portion of debt fund is decreasing as compared to own fund.

Vita Group Limited
The debt equity ratio of the company is declining. It is a positive sign for the company as
it indicates that the company is relining on own fund and less on owners fund.
Answer to Question 11
Redflow limited
The horizontal analysis if the profit or loss account indicates that the revenue and the
expenses both are in increasing trend.
Vita Group Limited
The analysis shows that the profit of the company declined and then it increased. The
sales of the company is in declining trend.
Answer to Question 12
Redflow limited
The Horizontal analysis of the company indicates that assets and liability of the company
is declining.
Vita Group Limited
The analysis shows that the assets of the company is declining. On the other it can be
seen that the total liability of the company is increasing.
Answer to Question 13
Redflow limited
The vertical analysis if the company indicates that the loss of the company is declining.

Vita Group Limited
The vertical analysis of the company indicates that the profit of the company has
increased. It is a positive sign for the company.
Answer to Question 14
Redflow limited
The vertical analysis shows that the total current assets of the company is increasing. The
current liability of the company is declining as a part of the total liability.
Vita Group Limited
The vertical analysis indicates that the current assets of the company as a part of total
assets in an increasing trend. The current liability of the company is main part of the total
liability of the company.
Answer to Question 15
Redflow limited
The trend analysis shows that the sales of the company has declined. The profit after tax
of the company has improved.
Vita Group Limited
The trend analysis shows that the sales of the company has declined. The company has
seen rapid decline in the profit in the first two month then it increased.

Part 4
Introduction
The central aim of the report is to examine the financial performance and position of two
companies Vita Group limited and Redflow. The report shows the comparative performance of
the company.
Comparative performance
In case of analyzing the profitability ratio it can be seen that Redflow limited has incurred
loss so all the ratios are negative. On the other hand the Vita group has made profit so the
profitability ratios are positive. On analyzing the assets efficiency ratio it can be seen that the
position of Vita Group is much better than Redflow. In terms of liquidity ratio the Redflow
Company has high liquidity than the Vita Group. On analyzing the debt equity ratio it can be
seen that the Vita group is more dependent on borrowed fund than the Redflow Company
(Yarbro & Mehlenbeck, 2015).
Limitation of analysis
The analysis is based on the historic figures so the inherent limitation is that it does not
consider the current situation.
Conclusion and recommendation
Based on the above discussion it can be said that from both the company the investor
should make investment in Vita Group as it is profitable.

Reference
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