Corporate Finance

Running head: CORPORATE FINANCE
Corporate Finance
Name of the Student:
Name of the University:
Author’s Note:

CORPORATE FINANCE
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Table of Contents
Answer to Question 1......................................................................................................................2
Requirement i...............................................................................................................................2
Requirement ii.............................................................................................................................3
Requirement iii............................................................................................................................4
Answer to Question 2......................................................................................................................4
Requirement i...............................................................................................................................5
Requirement ii.............................................................................................................................5
Answer to Question 3......................................................................................................................5
Requirement i...............................................................................................................................6
Requirement ii.............................................................................................................................6
Answer to Question 4......................................................................................................................7
Requirement i...............................................................................................................................7
Requirement ii.............................................................................................................................8
Answer to Question 5......................................................................................................................8
Letter of Recommendation..........................................................................................................9
Reference.......................................................................................................................................10

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Answer to Question 1
Requirement i
Particulars Formula 2018 2017 2016 2015
Return on Assets
(ROA)
Net profit or loss
after tax -59607000 -5927320 2594111 -1369099
total assets 102289000 144120641 68999509 28553537
(Net profit after
tax/total assets) = -0.582731 -0.0411275 0.0375961 -0.0479485
Return on Equity
Net profit or loss
after tax -59607000 -5927320 2594111 -1369099
Ordinary Equity 19975000 66278503 29865468 12924529
(Net profit or loss
after tax/ Ordinary
Equity) = -2.98408 -0.0894305 0.0868599 -0.1059303
Debt Ratio
Total liabilities 82314000 77842138 39134041 15629008
Total Assets 102289000 144120641 68999509 28553537
(Total liabilities
/Total Assets ) =
0.80472 0.5401179 0.5671641 0.547358
Figure 1: Table Showing key ratios of the Business
Source: (Created by the Author)
Requirement ii
Return on Assets (ROA) is an indicator of how well an organization puts to use its assets
and lays out how profitable an organization is with respect to its total assets (Robinson et al.
2015). ROA takes into account a company’s debt, while ROE does not. ROE only measures the

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return on a company’s equity, leaving out the liabilities. The return on equity and return on assets
is considered to be one of the indicators of the success of the business.
As per the Balance sheet of the company Murray River Organics Group Limited there
had been reduction in inventories, property, plant and equipment meaning the company is
disposing off the assets and hence there is low return or rather negative one (Asx.com.au. 2019).
The negative ROE is an alarming factor for the business and reflects that the management of the
company is not able to meet the expectations of the shareholders and considerable adjustment
need to be made by the management of Murray River Organics Group Limited. The return on
assets is also an important factor which needs to be considered as well as this estimate is related
to the performance of the business in terms of the assets which is utilized by the business
(Dahmen and Rodríguez 2014). Therefore, the total assets and operating expenses of the
business plays a vital role in deciding whether the returns which is generated by the business are
appropriate or not.
Requirement iii
The computation which is shown in the table above reveals that the ROA is greater than
ROE in 2018 as ROE is dependent on earnings on equity. Since there is low profit, there is no
dividend paid, hence return on equity is low (Fernández and Gulan 2015). Return on assets is
comparatively high to return on equity as the assets have been put to use and they earned a
return, though it was negative (Bentley, Omer and Sharp 2013). The return on assets is shown to
be higher than the ROE on equity as the same is dependent on the total assets which is used by
the business while ROE is dependent on the total equity figure which is demonstrated in the
balance sheet of the company.