Business Finance - Assignment
Added on 2021-05-30
18 Pages4703 Words84 Views
Running head: BUSINESS FINANCE Business Finance Name of the StudentName of the UniversityAuthor Note
BUSINESS FINANCE Table of ContentsExecutive summary:...................................................................................................................1Introduction:...............................................................................................................................3Discussion:.................................................................................................................................3Analysis of solvency position:...................................................................................................3Analysis of long term solvency:.................................................................................................3Analysis of efficiency psoition:.................................................................................................3Analysis of profitability position:..............................................................................................3Analysis of market value:...........................................................................................................3Recommendation:......................................................................................................................3Conclusion:................................................................................................................................3References list:...........................................................................................................................4
BUSINESS FINANCE Introduction:The report is prepared for evaluating and comparing the performance and operationsof two companies listed on Australian stock exchange. Financial performance of companiesis done by using the technique of fundamental analysis. For the evaluation of performance,two companies operating under the biotechnology, pharmaceutical and life science industryare chosen. Adalta limited and Acrux limited are the two companies for which the analysis isdone by extracting the information from latest year financial statements.Adalta limited is a public biotechnology company of Australia that is primarilyinvolved in commercialization and development of i body technology platform and having aninitial focus on treating of fibrotic diseases. It is a highly innovative development companyengaged in development of drugs having the potential to treat the challenging medicalconditions. Acrux limited is a pharmaceutical company that helps in development andcommercialization of generic and specialty topical pharmaceuticals. Some of the marketedproducts of company involve Evamist, Axiron and Lenzetto. A range of generic products iscurrently being developed by company for US market by leveraging manufacturing sites, onsite laboratories and commercial and clinical experience that helps in bringing affordableproducts to the market. Comparison of performance of these two companies is done in termsof five aspects by determining the liquidity ratios, financial leverage ratios, efficiencyturnover ratios, market value ratios and profitability ratios.
BUSINESS FINANCE Discussion:Analysis of short term solvency position:Short term solvency ratios intend to measure the ability of organization to meet theirshort term financial obligations. Solvency position of Adalta and Acrux limited is analyzedby computing current ratio, quick ratio and cash ratio. Current ratio is obtained by dividingcurrent assets by current liabilities. Current ratio of Adalta limited stood at 6.426 in year 2016as against 23.475 in year 2017 indicating a considerable increase in figure. Acrux limited onother hand, has its current ratio computed at 5.95 in year 2016 compared to 11.778 in year2017. This increase in current ratio of Adalta is attributable to increase in amount of currentassets as well as current liabilities. It can be inferred from figures that the ability of companyto finance the short term obligations using current liabilities has increased (Burns 2016). Quick ratio of Adalta stood at 6.426 in year 2016 as against 23.475 in year 2017 andthat of Acrux limited stood at 5.95 in year 2016 compared to 11.778 in year 2017respectively. It is suggested from the figures that for both the organization, there are enoughliquid assets available for making the payment of short term obligations. For every one dollar,company has $ 23.47 and $ 11.77 of quick assets for making payment of short term liabilities.It can be seen that the value of current ratio is same as value of quick ratio as Acrux limitedand Adalta limited does not have any amount of inventories. However, the ideal ratio isdependent upon the industry in which company is operating. It is required to makecomparison of the ratio with the industry standard. Organizations operating in life cycle andpharmaceuticals industry have a shorter operating cycle depicting that they do not requiredhigher quick ratio. Cash ratio on other hand increased from 2.256 in year 2016 to 18.068 in year 2017 forAdalta. This increase in figure is indicative of the fact that ability of firm to make payment of
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