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Business Strategy and Entrepreneurship in Construction

   

Added on  2021-01-01

24 Pages6713 Words166 Views
Construction BusinessStrategy andEntrepreneurship

Table of ContentsINTRODUCTION...........................................................................................................................1TASK...............................................................................................................................................11. Examine and discuss the overall performance of each corporations......................................12 Comparison of the overall performance of the corporations..................................................83. Recommendations to Mr. Benson Evans regarding collaboration........................................114. Justification for recommendation..........................................................................................12CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................14APPENDIX....................................................................................................................................15

INTRODUCTIONBusiness strategy defined as the long term plans and goals of the organisation and it isimplemented to lead the business towards growth. It takes the business to a powerful competitiveposition and financial execution. Business strategies are formed by the management of theorganisation to attain the predetermined goals and objectives (Benavides-Velasco, Quintana-García and Guzmán-Parra, 2013). Entrepreneurship is the function of leading, running andlaunching a business that have long term goals to be achieved. It is the ability of an entrepreneurto develop a running business or a new business start-up.This report is based on a comparison of two different corporations, Mirvac group andStockland group. Hotel Properties Ltd is one of the leading resort development corporations inSingapore. It is willing to collaborate with one the corporation from Mirvac and Stocklandgroup. Business management consultant of Hotel Properties Ltd will examine the overallperformance of these two corporations, it includes Capital structure, leverage, liquidity,efficiency, performance and growth measures of the corporations. When the examinations isdone, then he will make recommendation according to the above mentioned factors. Thecomparisons is based on the ratios and financial statements of the organisation.TASK1. Examine and discuss the overall performance of each corporationsMirvac and Stockland Group are the two Australian corporations whose overallperformance 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 withwhom he wants to collaborate in future for strengthening its presence and market shares in SouthEast Asia and Australasia regions. For this evaluation business management consultant comparesboth groups overall performance on the basis of last five years financial statement. Consultantstudy 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 toform its capital structure. Organisation overall operations and development are finance byseveral sources of funds which measure its leverage position (Brush, 2013). Mirvac and1

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'scapital structure. Higher leverage ratio refers to assertive capital structure which impliescompany is using more debt than equity to finance its assets and lower leverage ratio means anon-progressive capital structure where company finance assets with more equity than debt. Debt to Equity Ratio: This ratio covers company's Financial leverage that indicatesamount of debt it is using to finance its assets related to the amount of shareholder'sequity (Bucheli and Wadhwani, 2014).Below calculations are done on the basis of companies financial statements which areattached in Appendix.Formula: Total Debt / Total EquityMirvac groupYears20132014201520162017Total debts3235.63746394139894136Total equity6010.86176646271807972Ratio0.540.610.610.560.52Interpretation: Mirvac group debt to equity ratio is lower than last year i.e. 0.52 whichshows company's favourable capital structure.Stockland GroupYears20132014201520162017Total debts5874.86602694276887568Total equity8194.98298878792549927Ratio0.720.800.790.830.76Interpretation:Stockland group debt to equity ratio is also lower than last year i.e. 0.76but 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 companywhich is calculated by dividing total assets by total equity. It indicates the portion ofcompany's assets which are financed by equity (Burns, 2016).Formula: Total Assets / Total EquityMirvac groupYears20132014201520162017Total Assets9246.49922104041116912108Total equity6010.86176646271807972Ratio1.541.611.611.561.522

Interpretation: Mirvac group equity multiplier ratio is frequently decreases from 2015 to2017 i.e. 1.52 that is good for company.Stockland GroupYears20132014201520162017Total Assets14069.714900157291694217495Total equity8194.98298878792549927Ratio1.721.801.791.831.76Interpretation: Stockland group equity multiplier ratio is often decreases from 2014 to2017 i.e. 1.52 that is good for company but it is still higher than Mirvac group which isunfavourable.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 liquidassets i.e. easily converted into cash in order to meet short term liabilities. These ratios are usedto access short term financial position (Colpan and Jones, 2016). Current, Quick, cash ratios andcash 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 shortterm liabilities on time. According to accounting principles 2:1 is supposed to be an idealcurrent ratio which means current assets of business should be at-least twice of itscurrent liabilities. Higher the ratio, the better it is because the organisation will be able topay its current liabilities more easily. Lesser than current ratio it indicates lack ofliquidity and storage of working capital. Formula: Current Assets / Current liabilitiesMirvac groupYears20132014201520162017Current Assets891.4198133464203Current Liabilities9118758541221866Ratio0.980.230.160.380.23 Interpretation: Mirvac group current ratio is good in 2013 i.e. 0.98 from last 5 yearsanalysis, 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 GroupYears20132014201520162017Current Assets1206.9350273342295Current Liabilities2801.89638811124852Ratio0.120.360.310.300.353

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 beingused to obtain sales. Business management consultant of hotel properties limited measuresMirvac and Stockland Group efficiency by analysing how well they uses their assets andliabilities internally. Higher the turnover ratio indicates the better use of capital or resources andin turn leads to higher profitability (DaSilva and Trkman, 2014).Fixed assets turnover ratio: It measures the efficiency of an organisation's long termcapital investments. It interpret the level of sales created by investments in productivecapacity. Formula: Sales / Fixed AssetsMirvac GroupYears20132014201520162017Sales1469.71845166322842245Fixed Assets83559726102711070511905Ratio0.220.190.160.210.19Interpretation: Mirvac group Fixed asset turnover ratio is good in 2013 i.e. 0.22 in last 5years, then its decreases in 2014-15. It again increase in 2016 and then decrease in 2017 i.e. 0.19which explain worst utilisation of company's resources.Stockland GroupYears20132014201520162017Sales1728.21862208023002646Fixed Assets12862.814550154561660017118Ratio0.140.130.130.140.15Interpretation: Stockland group current ratio is good in 2017 i.e. 0.15 from last 5 yearsrecords 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 investmentefficiency by total impact of both short and long term assets. Higher the total assetsturnover ratio, indicates how effectively company is using its entire funds (Drucker,2014).Formula: Sales / Total AssetsMirvac GroupYears20132014201520162017Sales1469.718451663228422454

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