Company Performance Analysis

Running head: COMPANY PERFORMANCE ANALYSIS
Company Performance Analysis
Name of the Student
Name of the University
Author’s Note

2COMPANY PERFORMANCE ANALYSIS
Abstract
This report aims at the analysis of the financial performance of the A2 Milk Company for
the investment purpose. The findings of the report show the strong profitability and
efficiency position of the company. The cash management position of the company is
also good and effective. The findings of the sensitivity analysis states that the proposed
project should be accepted since it will be profitable. There are both systemic and un-
systemic risks in A2 Milk Company. Due to not paying dividend, the dividend payout
ratio of the company for the last three years is nil.

3COMPANY PERFORMANCE ANALYSIS
Table of Contents
I. Introduction..............................................................................................................................................4
II. Financial Analysis of A2 Milk....................................................................................................................4
2.1 Company Description........................................................................................................................4
2.2 Calculation and Analysis of Performance Ratios................................................................................4
2.3 Identification of Marketable Securities..............................................................................................8
2.4 Sensitivity Analysis.............................................................................................................................8
2.5 Systemic and Un-systemic Risks......................................................................................................11
2.6 Dividend Payout Ratio and Dividend Policy.....................................................................................12
III. Recommendation Letter.......................................................................................................................12
IV. Conclusion............................................................................................................................................13
References.................................................................................................................................................14

4COMPANY PERFORMANCE ANALYSIS
I. Introduction
Analysis of the financial performance of the companies is considered as a crucial
tool to measure the current financial performance and to get an idea about the
company’s future performance as well (Delen, Kuzey and Uyar 2013). For the same
reason, investment analysts consider analyzing financial performance of the firms as a
crucial part of the investment decision-making process. The use of certain tools and
techniques can be seen for this purpose such as ratio analysis of the selected company,
sensitivity analysis and others. Certain other aspects need to be considered are the
analysis of the risks of the companies, marketable securities and many others (Amit and
Villalonga 2014). The aim of this report is the analysis of the financial performance of an
ASX listed company for the purpose of investment decision-making. The considered
ASX listed company is A2 Milk Company. The whole report is divided into certain
sections. The first section involves the description of the selected company. The second
part involves in calculating as well as analyzing certain profitability as well as efficiency
ratios of A2 Milk for explaining the trend of these financial ratios. The next part
undertakes cash management analysis through the identification of marketable
securities. The next part involves in performing a sensitivity analysis for the
determination of the project. Identification of the systemic and unsystematic risk is the
aim of the next section. The next part identifies the dividend payout ratio along with the
dividend policy. The report ends with a recommendation letter and a conclusion.
II. Financial Analysis of A2 Milk
2.1 Company Description
A2 Milk is a public listed Australian company involves in the commercialization of
intellectual property relating to A1 protein-free milk that the company sells under A2 and
A2 milk brands along with other mil related products. The company was established in
the year 2000 and it is headquartered at Sydney, Australia. A2 Milk Company operates
in the Australian dairy industry which is considered as a strong and well-established
market for the companies under this industry (thea2milkcompany.com 2019). A2 Milk
Company is regarded as the successor of the A2 Corporation Limited. A2 Corporation
sold its interest to A2 Australia which is considered as the inception of the A2 Milk
Company. Since A2 Milk Company operates in the milk and dairy industry in Australia,
the company has to face major competition in some of its key competitors such as
Bellamy’s Australia, Bega Cheese, Freedom Foods Group and Inghams Group
(thea2milkcompany.com 2019).
2.2 Calculation and Analysis of Performance Ratios
Analysis of profitability and operating efficiency can be considered as two crucial
aspects for ascertaining the current financial standing and performance of A2 Milk
Company. The following discussion shows the analysis of certain ratios under
profitability and operating efficiency of A2 Milk Company.
Analysis of Profitability
The analysis of the profitability ratio is done with the aim to ascertain the ability of
the company to generate income against all the expenses that need to incur to conduct