Financial Analysis of Caltex Australia Limited

Caltex Australia Limited 0
FINANCIAL ANALYSIS
Caltex Australia Limited

Caltex Australia Limited 1
Abstract:
This report is prepared to analyse the financial performance of Caltex Australia Limited
which is an ASX listed company engaged in the business of manufacturing and selling the
petroleum products and running the convenience stores across the country. The financial
performance of the Caltex Limited is analysed using the ratio analysis technique. It has been
observed that liquidity position of the company in 2017 is satisfactory but it has weakened as
compared to 2016 due to limited availability of current assets especially the quick assets.
Also, there is a decline in the level of profitability of Caltex in 2017 because of increased
operating expenses and excessive investments in the total assets which could not be ideally
utilised in the business and hence remained idle throughout the year 2017. Further, the
corporate governance statement of Caltex was studied and it was found that company is
voluntarily disclosing the non-financial information related to it through the issuance of said
statement. The company is duly complying with the ASX principles and recommendations
for corporate governance along with the provisions of Australian Corporations Act, 2001.
Even though Caltex is maintaining corporate governance structure, there has been identified
some ethical issues on part of company’s management such as wage fraud where the Caltex
has been accused for underpaying to its employees.

Caltex Australia Limited 2
Introduction:
Ratio analysis is the important technique of financial management which is used to analyse
the financial information of the company. In the present report, the technique of ratio analysis
is applied to the financial statements of Caltex Ltd to assess its financial performance in
terms of profitability and liquidity.
Part a
Ratio calculation:
Ratio Formulas 2017 2016 Change Impact
Current
Ratio
Total current
assets / Total
current liabilities
2727623/23586
69
2143655/15024
56
Results 1.16 1.43 -18.95% Decrease
Quick
Ratio
(Total current
assets -
Inventory) / Total
current liabilities
(2727623-
1694915)/
2358669
(2143655-
1080920)/
1502456
Results 0.44 0.71 -38.10% Decrease
Cash Ratio
(Cash + Cash
Equivalents)/
Current
Liabilities 44521/2358669
244857/150245
6
Results 0.02 0.16 -88.42% Decrease
Return on
Assets
(EBIT / Average
total assets)
930497/
((6355220+5302
734)*0.5)
934953/
((5104741+5302
734)*0.5)
Results 10.65% 11.73% -9.25% Decrease
Return on
Equity
(PAT / Average
equity)
620752/
((3107901+2810
215)*0.5)
610480/
((2787805+2810
215)*0.5)

Caltex Australia Limited 3
Results 20.98% 21.81% -3.82% Decrease
Net Profit
Margin
EBIT / Sales or
revenue
930497/213982
51
934953/179332
01
Results 4.35% 5.21% -16.59% Decrease
Gross
Profit
Margin
Gross profit /
Sales or revenue
2160426/21398
251
1992969/17933
201
Results 10.10% 11.11% -9.15% Decrease
Earnings
per share
Profit for
shareholders /
Number of
ordinary shares
(6190850/26100
0)*100
(609940/263000
)*100
Results 237.2 231.9 2.28% Increase
Part b
Analysis of Ratios:
As a part of report, ratio analysis is undertaken in respect of Caltex Limited for the evaluation
of financial results of the company in 2017 and 2016. A comparative study is made to
understand the changes in the financial performance of the company in last two years.
However, only two aspects of financial performance have been taken into consideration for
the purpose of preparation of this report. They are: Caltex Limited’s profitability position and
its liquidity position in the market.
Liquidity position of a business is achieved when the firm is able to meet its current liabilities
using the current assets, whenever they fall due. If the company does not maintain sufficient
current assets, then it has to face liquidity crunch in the market at the time of paying-off the
short term liabilities of its business. To assess the liquidity position of Caltex Limited the use