Business Strategy and Entrepreneurship in Construction

Business management consultant of Hotel Properties group Ltd will examine the overall performance of these two corporations, itincludesCapital structure, leverage, liquidity, efficiency, performance and growth measures of the corporations. Mirvac and Stockland Groupcapital structures consist of long & short term borrowings, capital leases, payables and accrued expenses, other liabilities, stockholder's equity. Mirvac and Stockland Groupcapital structures consist of long & short term borrowings, capital leases, payables and accrued expenses,

Construction Business
Strategy and
Entrepreneurship

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
1. Examine and discuss the overall performance of each corporations......................................1
2 Comparison of the overall performance of the corporations..................................................8
3. Recommendations to Mr. Benson Evans regarding collaboration........................................11
4. Justification for recommendation..........................................................................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14
APPENDIX....................................................................................................................................15

INTRODUCTION
Business strategy defined as the long term plans and goals of the organisation and it is
implemented to lead the business towards growth. It takes the business to a powerful competitive
position and financial execution. Business strategies are formed by the management of the
organisation to attain the predetermined goals and objectives (Benavides-Velasco, Quintana-
García and Guzmán-Parra, 2013). Entrepreneurship is the function of leading, running and
launching a business that have long term goals to be achieved. It is the ability of an entrepreneur
to develop a running business or a new business start-up.
This report is based on a comparison of two different corporations, Mirvac group and
Stockland group. Hotel Properties Ltd is one of the leading resort development corporations in
Singapore. It is willing to collaborate with one the corporation from Mirvac and Stockland
group. Business management consultant of Hotel Properties Ltd will examine the overall
performance of these two corporations, it includes Capital structure, leverage, liquidity,
efficiency, performance and growth measures of the corporations. When the examinations is
done, then he will make recommendation according to the above mentioned factors. The
comparisons is based on the ratios and financial statements of the organisation.
TASK
1. Examine and discuss the overall performance of each corporations
Mirvac and Stockland Group are the two Australian corporations whose overall
performance will be evaluated by Business Management Consultant who is appointed by Mr.
Benson Evans ( the chief Operations Officer of Hotel Properties Limited ) so that he decide with
whom he wants to collaborate in future for strengthening its presence and market shares in South
East Asia and Australasia regions. For this evaluation business management consultant compares
both groups overall performance on the basis of last five years financial statement. Consultant
study companies capital structure and leverage. It also measures organisations liquidity,
efficiency, profitability position and their growth potentials.
a. Capital structure and leverage measures: Company's debt and equity combines to
form its capital structure. Organisation overall operations and development are finance by
several sources of funds which measure its leverage position (Brush, 2013). Mirvac and
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Stockland Group capital structures consist of long & short term borrowings, capital leases,
payables and accrued expenses, other liabilities, stockholder's equity.
Debt to Equity and Equity multiplier ratios are measured for calculating company's
capital structure. Higher leverage ratio refers to assertive capital structure which implies
company is using more debt than equity to finance its assets and lower leverage ratio means a
non-progressive capital structure where company finance assets with more equity than debt.
 Debt to Equity Ratio: This ratio covers company's Financial leverage that indicates
amount of debt it is using to finance its assets related to the amount of shareholder's
equity (Bucheli and Wadhwani, 2014).
Below calculations are done on the basis of companies financial statements which are
attached in Appendix.
Formula: Total Debt / Total Equity
Mirvac group
Years 2013 2014 2015 2016 2017
Total debts 3235.6 3746 3941 3989 4136
Total equity 6010.8 6176 6462 7180 7972
Ratio 0.54 0.61 0.61 0.56 0.52
Interpretation: Mirvac group debt to equity ratio is lower than last year i.e. 0.52 which
shows company's favourable capital structure.
Stockland Group
Years 2013 2014 2015 2016 2017
Total debts 5874.8 6602 6942 7688 7568
Total equity 8194.9 8298 8787 9254 9927
Ratio 0.72 0.80 0.79 0.83 0.76
Interpretation: Stockland group debt to equity ratio is also lower than last year i.e. 0.76
but it is more than Mirvac group which is not considered as good capital structure.
 Equity Multiplier: This ratio is also used to measure financial leverage of company
which is calculated by dividing total assets by total equity. It indicates the portion of
company's assets which are financed by equity (Burns, 2016).
Formula: Total Assets / Total Equity
Mirvac group
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Years 2013 2014 2015 2016 2017
Total Assets 9246.4 9922 10404 11169 12108
Total equity 6010.8 6176 6462 7180 7972
Ratio 1.54 1.61 1.61 1.56 1.52
Interpretation: Mirvac group equity multiplier ratio is frequently decreases from 2015 to
2017 i.e. 1.52 that is good for company.
Stockland Group
Years 2013 2014 2015 2016 2017
Total Assets 14069.7 14900 15729 16942 17495
Total equity 8194.9 8298 8787 9254 9927
Ratio 1.72 1.80 1.79 1.83 1.76
Interpretation: Stockland group equity multiplier ratio is often decreases from 2014 to
2017 i.e. 1.52 that is good for company but it is still higher than Mirvac group which is
unfavourable.
b. Liquidity measures: It identify organisation's ability to cover its short term debt.
Mirvac and Stockland Group liquidity position is measured with the help of comparing its liquid
assets i.e. easily converted into cash in order to meet short term liabilities. These ratios are used
to access short term financial position (Colpan and Jones, 2016). Current, Quick, cash ratios and
cash conversion cycle are key measurements of a identifying company's liquidity.
 Current Ratio: This ration assess the financial the company's ability to meet its short
term liabilities on time. According to accounting principles 2:1 is supposed to be an ideal
current ratio which means current assets of business should be at-least twice of its
current liabilities. Higher the ratio, the better it is because the organisation will be able to
pay its current liabilities more easily. Lesser than current ratio it indicates lack of
liquidity and storage of working capital.
Formula: Current Assets / Current liabilities
Mirvac group
Years 2013 2014 2015 2016 2017
Current Assets 891.4 198 133 464 203
Current Liabilities 911 875 854 1221 866
Ratio 0.98 0.23 0.16 0.38 0.23
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Interpretation: Mirvac group current ratio is good in 2013 i.e. 0.98 from last 5 years
analysis, then its decreases in 2014-15. It again increase in 2016 and then decrease in 2017 i.e.
0.23 which interpret bad short term financial position.
Stockland Group
Years 2013 2014 2015 2016 2017
Current Assets 1206.9 350 273 342 295
Current Liabilities 2801.8 963 881 1124 852
Ratio 0.12 0.36 0.31 0.30 0.35
Interpretation: Stockland group current ratio is good in 2017 as compare to Mirvac i.e.
0.35 that interpret good short term financial position.
c. Efficiency measures: It indicate how efficiently the working capital and stock is being
used to obtain sales. Business management consultant of hotel properties limited measures
Mirvac and Stockland Group efficiency by analysing how well they uses their assets and
liabilities internally. Higher the turnover ratio indicates the better use of capital or resources and
in turn leads to higher profitability (DaSilva and Trkman, 2014).
 Fixed assets turnover ratio: It measures the efficiency of an organisation's long term
capital investments. It interpret the level of sales created by investments in productive
capacity.
Formula: Sales / Fixed Assets
Mirvac Group
Years 2013 2014 2015 2016 2017
Sales 1469.7 1845 1663 2284 2245
Fixed Assets 8355 9726 10271 10705 11905
Ratio 0.22 0.19 0.16 0.21 0.19
Interpretation: Mirvac group Fixed asset turnover ratio is good in 2013 i.e. 0.22 in last 5
years, then its decreases in 2014-15. It again increase in 2016 and then decrease in 2017 i.e. 0.19
which explain worst utilisation of company's resources.
Stockland Group
Years 2013 2014 2015 2016 2017
Sales 1728.2 1862 2080 2300 2646
Fixed Assets 12862.8 14550 15456 16600 17118
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Ratio 0.14 0.13 0.13 0.14 0.15
Interpretation: Stockland group current ratio is good in 2017 i.e. 0.15 from last 5 years
records but it is lower than Mirvac Group which interpret bad use of company's resources.
 Total Asset Turnover: In this ratio business consultant measure overall investment
efficiency by total impact of both short and long term assets. Higher the total assets
turnover ratio, indicates how effectively company is using its entire funds (Drucker,
2014).
Formula: Sales / Total Assets
Mirvac Group
Years 2013 2014 2015 2016 2017
Sales 1469.7 1845 1663 2284 2245
Total Assets 9246.4 9922 10404 11169 12108
Ratio 0.16 0.19 0.16 0.20 0.19
Interpretation: Mirvac group total asset turnover ratio is good in 2016 i.e. 0.20 in past 5
years and in 2017 it decreases to 0.19 which is not consider good for company's short and long
term assets.
Stockland Group
Years 2013 2014 2015 2016 2017
Sales 1728.2 1862 2080 2300 2646
Total Assets 14069.7 14900 15729 16425 17495
Ratio 0.13 0.12 0.13 0.14 0.15
Interpretation: Stockland group total asset turnover ratio is continuously increasing from
last 5 years and reaches to 0.15 but it is less than Mirvac group which is unfavourable in terms of
company's short and long term assets.
d. Performance Measure: It is an indicator which is used to examine that the
organisation is able to achieve its predetermined goals or not. It is a process of collecting,
analysing, studying organisational data to measure the performance of individuals, groups, teams
and organisation. It is the measurement of effectiveness and efficiency of the ability of
performing a task by the employees (A Definition of What a Performance Measure Really Is,
2012). The performance of above mentioned two corporations can be measures by following
ratios:
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 Return on total asset ratio: This ratio measures relation of company's earnings before
interest and tax and total assets. This ratio shows that how effectively a company is using
its assets.
Formula: Earning before interest and tax/ total assets
Mirvac Group
Year 2013 2014 2015 2016 2017
EBIT 463 529 475 542 624
Total Assets 9247 9922 10404 11169 12108
Ratio 0.050 0.053 0.046 0.049 0.052
Interpretation: Mirvac group return on total asset ratio is higher in 2014 i.e. 0.053 in past
5 years then it is decreases till 2016 and again increase in 2017 i.e. 0.52 which is good for
company.
Stockland Group
Year 2013 2014 2015 2016 2017
EBIT 198 288 378 448 508
Total Assets 14070 14900 15729 16942 17495
Ratio 0.014 0.019 0.024 0.026 0.029
Interpretation: Stockland group return on total asset ratio is higher in 2017 i.e. 0.029 but
it is lower than Mirvac in all past 5 years which is not good for company.
 Net profit ratio: It is a profitability ratio that shows relation between net profit and net
sales. It is the best measure of the results of a company and also used to compare the
results with the competitors (George and Bock, 2011). It shows the percentage of the
profit that is earned by the company on net sales.
Formula: Net profit/ net sales*100
Net profit ratio of Mirvac Group:
Year 2013 2014 2015 2016 2017
Net Sales 1470 1845 1663 2284 2245
Net Profit 346 447 610 1033 1164
Ratio 23.537% 24.228% 36.681% 45.228% 51.849%
Interpretation: Mirvac group net profit ratio is higher in 2017 i.e. 51.849% from last 5
years income statement which is consider as its good financial position.
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Net profit ratio of Stockland Group:
Year 2013 2014 2015 2016 2017
Net Sales 1728 1862 2080 2300 2646
Net Profit 439 527 903 889 1195
Ratio 25.405% 28.303% 43.413% 38.652% 45.163%
Interpretation: Stockland group net profit ratio is higher in 2017 i.e. 45.163% from last 5
years income statement which is consider as its good financial position but it is less than Mirvac.
e. Growth Potentials: It shows the ability of the company to earn higher profit for the
future, expand the business and improve the production (Haley and Haley, 2013). It refers to the
amount of gross revenue that the company make. The growth potential of Mirvac and Stockland
group can be measured by following two ratios:
 Operating profit margin ratio: This ratio shows that how much profit a company can
earn on sales, after paying various cost of productions but before paying the income tax.
It shows the relation between company's sales and operating profit.
Formula: Operating profit/ net sales
Mirvac Group:
Year 2013 2014 2015 2016 2017
Operating profit 463 529 475 542 624
Net sales 1470 1845 1663 2284 2245
Ratio 0.315 0.287 0.286 0.237 0.278
Interpretation: Mirvac group operating profit ratio is higher in 2013 i.e. 0.315 from last 5
years income statement, then its continuously decreases till 2016. In 2017 operating profit
increase from 0.237 to 0.278 which is consider as good.
Stockland Group:
Year 2013 2014 2015 2016 2017
Operating profit 198 288 378 448 508
Net sales 1728 1862 2080 2300 2646
Ratio 0.115 0.155 0.182 0.195 0.192
Interpretation: Stockland group operating profit ratio is higher in 2016 i.e. 0.195 from last
5 years profit & loss statement, then its decrease to 0.192 in 2017 which is bad for company's
financial position.
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 Interest coverage ratio: It shows that how early and easily a company can pay its
interest and debts. It shows the relation between EBIT and interest of the company. It is
used to determine the ability of the company to pay interest on its loans and further debts
(Hitt and et. al., 2011).
Formula: Earning before interest and tax/ interest expenses
Mirvac group:
Year 2013 2014 2015 2016 2017
EBIT 463 529 475 542 624
Interest expenses 129 145 145 137 162
Ratio 3.589 3.648 3.276 3.956 3.852
Interpretation: Mirvac group interest coverage ratio is higher in 2016 i.e. 3.956 from last
5 years profit & loss statement, then it reduced to 3.852 which shows unfavourable financial
position.
Stockland Group:
Year 2013 2014 2015 2016 2017
EBIT 198 288 378 448 508
Interest expenses 53 16 113 252 83
Ratio 3.736 18.000 3.345 1.778 6.120
Interpretation: Stockland group interest coverage ratio is higher in 2014 i.e. 18.00 from
last 5 years income statement, then it decreases to 1.778 in 2016 and again increases to 6.120 in
2017 which and that is higher than Mirvac. It shows good financial position.
2 Comparison of the overall performance of the corporations
The comparison is based on the ratios which have been calculated above for two
corporations, Mirvac Group and Stockland Group.
Basis Mirvac Group Stockland Group
Profitability Overall profitability of the company
is good because the expenses are less
as compare to another company.
Approximate profitability of the
The profitability is a little weaker in
comparison of another because of the
expenses. It has more expenses that
affect the profitability. Approximate
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company is 850 of 5 years. profitability of the company is 880 for
a period of 5 years.
Total revenues The revenues of the company are
lower then other company but the
expenses are also lower, so the
operating income of the company is
higher as compare to another
company. Approximate revenues and
operating income are 2000 and 570
respectively for the same period as
mentioned above.
The revenues of the company are
higher but as compare to another
company the expenses are also higher
so the operating income is very low.
Approximate revenues and operating
income are 2200 and 450 respectively
for the same period as mentioned
above.
Total liabilities The liabilities of the company are
almost half of another company.
Approximate liabilities are 4000 for
the same period as mentioned above.
The liabilities are very high, almost
double of Mirvac Group. Approximate
liabilities are 7500 for the same period
as mentioned above.
Expenses The expenses of the company are
very low as compare to another
company, this is the main reason of
higher profitability of the company.
Approx expenses of 5 years are
1440.
The expenses are very high as compare
to another company and that's why the
profitability of the company is very
low. Approx expenses for a period of 5
years are 1850.
Mirvac group is a prime, varied property group which is established in Australia with an
unified development and asset administration ability. Mirvac Construction is one of the leading
building contractors in Australia. This the main reason why Hotel Properties Ltd. chosen it as an
option to be a part of their organisation. It has been involved in a broad variety of development
projects within the country.
Stockland Group is one of the largest diversified real estate group in Australia and it
covers whole life of housing solutions within Australia. It owns, manages and develop retail
town centres, workplace and provisional assets.
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This comparison is based on above mentioned two corporations which is based on
different ratios that shows the performance level, liquidity level, effectiveness level and growth
potentials of both the corporations.
a. Capital structure and leverage measure: Debt equity ratios of Mirvac Group from
2013 to 2017 are 0.54, 0.61, 0.61, 0.56 and 0.52 respectively and ratios for Stockland 0.72, 0.80,
0.79, 0.83 and 0.76 for the same period the ratios shows that Stockland has more debts as
compare to Mirvac and the shareholders contributions is lower than creditors in Stockland group.
Equity multiplier of Mirvac for the period of 2013 - 2017 are 1.54, 1.61, 1.61, 1.56 and 1.52
which is lower then Stockland's Equity multiplier that is 1.72, 1.80, 1.79, 1.83 and 1.76 for the
same period. Mirvac Group is more stronger then Stockland because it has more involvement of
shareholders as compare to other corporation. Capital structure of Mirvac is good as compare to
Stockland Group because it has lower fund of creditors and higher funds of shareholders for the
operations of the corporation which help to save monetary resources by saving interest that has
to be paid to creditors (Karlan and Valdivia, 2011). But equity multiplier shows the opposite side
because in Stockland Group more assets are purchased from equity so from this point of view
both organisations are equal.
b. Liquidity measure: Liquid strength of the company can be analysed by the
calculations of current ratio of the company and it shows the relation of current asset and
liabilities (Madhok and Keyhani, 2012). It is used to determine that how much current assets a
company is having as compare to current liabilities. Current ratios of Mirvac Group for the years
2013 - 2017 are 0.98, 0.23, 0.16, 0.38 and 0.23 respectively and the ratios for Stockland are 0.12,
0.36, 0.30, 0.31 and 0.35 respectively for the same period. If the performance is measured overall
then Stockland's performance in liquidity measure is good as compare to Mirvac Group.
Liquidity of Mirvac Group is higher then Stockland so the business management consultant will
consider it to be a part of the organisation as a collaboration.
c. Efficiency measure: Efficiency of the corporations can be measured through two
ratios, fixed asset turnover ratio and total asset turnover ratio. These ratios shows the efficiency
level of the corporations. Fixed asset ratios for Mirvac Group for the years from 2013 to 2017 are
0.22, 0.19, 0.16, 0.21 and 0.19 respectively and for Stockland these are 0.14, 0.13, 0.13, 0.14 and
0.15 respectively for the period 2013 – 2017. Ratio of Mirvac Group are higher as compare to
Stockland. It shows that Mirvac is more efficient and have more long term investments then
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Stockland Group. Total asset turnover ratios of Mirvac Group are 0.16, 0.19, 0.16, 0.20and 0.19
respectively for years 2013 to 2017 and these ratios of Stockland Group are 0.13, 0.12, 0.13, 0.14
and 0.15 for the same 5 years period. It shows that overall investment efficiency of Mirvac is
stronger than Stockland.
d. Performance measure: Return on total asset ratio of Mirvac Group for the year 2013
is 0.050 for 2014 it is 0.053 for 2015 it is 0.046 for 2016 it is 0.049 and for the year 2017 it is
0.052 and the ratios of Stockland Group for years 2013 - 2017 are 0.014, 0.019, 0.024, 0.026,
and 0.029 respectively. The ratios of Mirvac Group are higher then Stockland Group it shows
that Mirvac Group is using the assets more effectively and productively that will help the
company to grab a chance to be a better option for collaboration for Hotel Properties Ltd. Net
profit ratios of Mirvac Group are 23.537%, 24.228%, 36.681%, 45.228% and 51.849%
respectively for years 2013-2017 and for Stockland Group the ratios are 25.405%, 28.303%,
43.413%, 38.652% and 45.163% respectively for year 2013, 2014, 2015, 2016, 2017. In first
three years Mirvac Group has lower Net profit ratio then Stockland Group but in last two years
Mirvac Group has higher ratio of net profit. In first three years Stockland earn more profit and in
last two years Mirvac earned more net profit on net sales. In overall comparison Mirvac's
performance is good in comparison of Stockland.
e. Growth potentials: Operating profit margin ratios of Mirvac Group for the years 2013
- 2017 are 0.315, 0.287, 0.286, 0.237 and 0.278 respectively. Ratios of Stockland Groups for
same years are 0.115, 0.155, 0.182, 0.195 and 0.192 respectively. The ratios shows that Mirvac
Group is earning more operating profit then Stockland Group it has higher operating profit
margin ratios as compare to Stockland. Interest coverage ratios of Mirvac are for years from
2013 to 2017 are 3.589, 3.648, 3.276, 3.956 and 3.852 respectively and for Stockland the ratios
are 3.756, 18, 3.345, 1.778 and 6.120 respectively for the years 2013 - 2017. The ability of
paying interest earlier of Stockland is better then Mirvac but in 2016 it has lower interest
coverage ratio because of some issues. Growth potential level of Mirvac Group is higher then
Stockland Group because operating profit margin ratio of Mirvac is higher.
3. Recommendations to Mr. Benson Evans regarding collaboration
a) which corporation could be a better-capitalised and ideal partner
Better capitalised refers to that company, who has raised sufficient capital from investors
or company's own operating activities and able to operate without major financial difficulties.
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Business consultant identify better capitalised and ideal partner on the basis of above five
measures i.e. leverage, liquidity, efficiency, performance and growth which are discussed below:
First is leverage measures, Mirvac group is better capitalized in year 2017 than Stockland
because it leverage ratio i.e. debt to equity and Equity multipliers both are lower than Mirvac
group and both companies leverage ratio decreases from last year. Therefore business consultant
consider Mirvac Group capital structure more suitable as compare to Stockland.
Second is Liquidity measures, where Hotel properties limited business consultant
measures both company short term position with the help of liquidity measures i.e. current ratio.
Stockland group current ratio is higher than Mirvac and its ratio also increases from last year
which shows company is now able to pay its current liabilities more than last year but doesn't
reach to ideal current ratio. Hence, there is lack of liquidity in both companies.
Third is efficiency measures, business consultant analysis Mirvac group fixed and total
assets turnover is higher than Stockland which means higher turnover ratio implies better use of
resources that turns to higher profitability.
Fourth is performance measure, consultant examine Mirvac and Stockland group
performance with the help of return on total assets and net profit ratio. Mirvac group return on
total asset is higher than Stockland which means company is using its assets more effectively and
this ratio is also higher than last year. Similarly net profit ratio is also higher in Mirvac group
than Stockland that shows profit percentage earned by company on net sales.
Fifth is growth potentials measure, which is important for future profits and business
expansion. Business consultant use two ratios where Mirvac group's operating profit margin is
considered better and Stockland's interest coverage ratio is better. Mirvac operating profit margin
is higher than Stockland which shows the profit earn on sales after paying different cost of
productions but before income tax payment. Mirvac interest coverage ratio is less than Stockland
which shows Mirvac group pay interest on its loans and debts less frequently than Stockland.
b. which organisational form will be most appropriate for this potential partnership
Mirvac group will be the most appropriate corporation with whom Hotel Properties
Limited collaborate for fulfilling its strategic organisational goals as potential partnership in
residential and resort development. From the above comparison, Business consultant concludes
that Mirvac capital structure is wider than Stockland and analysis both corporations overall
performance on the basis various measures i.e. leverage, liquidity, efficiency, performance and
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growth. Out of these five measures of better-capitalisation four are completely in favour of
Mirvac group. It is considered more potential because its Leverage, Liquidity, Efficiency,
Performance is higher than Stockland. Leverage and Liquidity measures interpret that Mirvac
short term and long term financial position is sound.
Efficiency measures shows that Mirvac group is utilising their capital or resources in
such a way to achieve higher profits. Performance measures evaluate the performance of Mirvac
on the basis of evaluating ability of employees in performing a task to achieve predetermined
objectives. Business consultant measures Mirvac group growth potential by calculating its
operating profit margin that is higher than Stockland group that shows profit earned after its net
sales. Mirvac group interest coverage ratio is more in case of Stockland which is only one part of
growth measure so business consultant doesn't consider it essential measure for collaboration.
4. Justification for recommendation
Business management consultant of Hotel Properties Ltd. recommended Mirvac Group
for the collaboration because of its better performance which has been measured by various
ratios. It is best option for the collaboration because the ratios shows better capital structure and
leverage, liquidity, efficiency, performance measures and growth potentials of Mirvac Group as
compare to Stockland Group. Debt equity ratios of this organisation is better as compare to
another and it has more shareholder's involvement in the business which is beneficial for the
future of the company.
Current ratio shows the liquid strength of the corporation and it is higher of Mirvac group
as compare to Stockland group which means it is more financially stronger then other
corporation. This the main reason why business management consultant of Hotel Properties Ltd.
recommended this corporation rather then another. It is more suitable for the organisation to
collaborate. Fixed assets turnover ratios and total assets turnover ratios of Mirvac Group are
higher as compare to Stockland Group, Mirvac Group has invested more in fixed assets and long
tern investments which will be profitable for the company in long term. It will also be beneficial
for the company. It shows the higher efficiency level of the corporation (Schaltegger, Lüdeke-
Freund and Hansen, 2012).
Return on total assets shows effective level of using total assets within the organisation
and Mirvac Group's ratio is higher as compare to Stockland's ratio it means it uses the assets in
effective manner. If the assets are effectively used by the organisation it will save cost for the
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organisation and this can be a reason to recommend Mirvac rather then Stockland. Net profit
ratio used to analyse the total net profit on total assets. In earlier years Mirvac is not able to earn
good net profit but since last two years, it is earning good net profit so the business management
consultant analysed its performance of last two years and recommended it to collaborate with. It
also shows the good performance of the company in the market (Verbeke, 2013).
Operating profit margin ratio of Mirvac group is also higher as compare to Stockland this
ratio shows the growth potential of the corporation and it is earning more operating profit then
Stockland on net sales. It shows that the corporation is able to earn more operating profit which
means it will profitable for the organisation and will provide more benefits in future (Wells,
2013). The business management consultant have analysed all the above mentioned points then
he reached to the decision of recommendation. In all the comparisons Mirvac is proved as a
better option to the Hotel Properties Ltd.
CONCLUSION
In the above project report Business consultant of Hotel Properties Limited analysis and
compare two Australian corporations, i.e. Mirvac and Stockland Group for business expansion.
Business consultant evaluate both the corporations for identifying the best. Companies overall
performance is examine on the basis of their capital structure & leverage measures, liquidity,
efficiency, performance and growth potential measures. Debt to equity and Equity multiplier is
calculated for leverage measure so that consultant evaluate its debt obligations. Current ratio is
calculated for measuring their short term liquidity position of the company. Fixed and Total
assets turnover is measured identifying which corporation is more efficiently using their
resources. Return in total asset and Net profit ratio is calculated for evaluating corporations
performance. Operating profit margin and interest coverage ratio is measured to identify
corporations growth potential. With the help of these measures consultant make
recommendations with justification and finds Mirvac Group as a potential partner.
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Online
A Definition of What a Performance Measure Really Is, 2012. [Online]. Available through:
<https://www.staceybarr.com/measure-up/a-definition-of-what-a-performance-measure-
really-is/>
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APPENDIX
Financial statements of Mirvac Group
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Income statement
All numbers in thousands
Revenue 30/06/17 30/06/16 30/06/15 30/06/14
Total revenue 2422000 2436000 1763000 1917800
Cost of revenue 1373000 1484000 928000 1099900
Gross profit 1049000 952000 835000 817900
Operating expenses
Selling general and administrative 214000 217000 223000 136100
Others - - - 47300
Total operating expenses 1621000 1738000 1181000 1312900
Operating income or loss 801000 698000 582000 604900
Income from continuing operations
Total other income/expenses net 303000 377000 46000 -144200
Earnings before interest and taxes 801000 698000 582000 604900
Interest expense -122000 -188000 -145000 -144800
Income before tax 1104000 1075000 628000 460700
Income tax expense -60000 42000 18000 13400
Net income from continuing ops 1164000 1033000 610000 447300
Net income 1164000 1033000 610000 447300
Net income applicable to common
shares 1164000 1033000 610000 447300
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Balance sheet
Period ending 30/06/17 30/06/16 30/06/15 30/06/14
Current assets
Cash and cash equivalents 106000 354000 60000 97800
Short-term investments - 2000 11000 52000
Net receivables 227000 110000 73000 98700
Inventory 662000 750000 774000 598100
Other current assets 30000 25000 22000 830300
Total current assets 1027000 1246000 940000 1717800
Long-term investments 1218000 1073000 833000 623900
Property plant and equipment 34000 311000 262000 248700
Goodwill 67000 67000 36000 36400
Intangible assets 11000 12000 3000 2600
Other assets 9751000 8460000 8329000 7292300
Deferred long-term asset charges 395000 325000 413000 351900
Total assets 12108000 11169000 10403000 9921700
Current liabilities
Accounts payable 134000 87000 96000 79000
Short/current long-term debt 3054000 2926000 2722000 2747700
Other current liabilities 353000 385000 565000 401200
Total current liabilities 944000 1353000 887000 899400
Long-term debt 2848000 2313000 2710000 2531600
Other liabilities 344000 323000 344000 314400
Total liabilities 4136000 3989000 3941000 3745600
Stockholders' equity
Common stock 6819000 6812000 6804000 6796800
Retained earnings 1117000 230000 -437000 -697600
Treasury stock 36000 138000 95000 76900
Other stockholder equity 36000 138000 95000 76900
Total stockholder equity 7972000 7180000 6462000 6176100
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Net tangible assets 7894000 7101000 6423000 6137100
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Financial statements of Stockland Group
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