Financial Statement Analysis of CSL Limited

The report provides a brief analysis of CSL Limited, giving insights into its financial performance for the past ten years. The report evaluates the current operations of CSL, identifies areas of cash flow, and recommends relevant investment and financing strategies. The report also includes a dividend valuation and share price movements analysis.

RUNNING HEAD: FINANCE
Business finance

Finance 2
Contents
Introduction.................................................................................................................................................3
Overview of CSL Limited...........................................................................................................................3
Purpose of financial statement analysis.......................................................................................................4
Analysis and evaluation of current operations.............................................................................................5
Dividend valuation....................................................................................................................................11
Share price movements..............................................................................................................................11
Identification of the areas of cash flow......................................................................................................12
Relevant investment and financing strategies............................................................................................13
Recommendation and Conclusion.............................................................................................................13
References.................................................................................................................................................14
Appendix...................................................................................................................................................15

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Introduction
The report provides a brief analysis of CSL Limited, giving bits of knowledge into its financial
performance for the past ten years. The historical money related information is gathered for the
years 2008 to 2017 including the the income statement, balance sheet and cash flow statement of
the organization. The report starts with a concise presentation about the organization and its core
practices. In the later part, the goals of conducting analysis of financial statements are clarified
alongside the assessment of current operations of CSL.
With a specific end goal to evaluate the financial statements of the organization, different ratios
are figured which estimates the profitability, solvency, efficiency and liquidity of CSL for the
long ten years. In addition, the supply and demand factors are also thought about while assessing
the current operations of the organization. The report likewise computes the estimation of stock
by utilizing dividend valuation model and tells the movements in organization's share price and
returns in the course of recent years. The analysis of all the calculation is done in the later part of
the report which helps in identifying the areas in the cash flow statement that can be improved.
In the last, the report recommends some applicable strategies for CSL in regard of financing and
investing that will help in enhancing the cash flow position. Additionally, a conclusion has been
provided covering all the findings of the report.
Overview of CSL Limited
CSL Limited is an Australia based biotechnology organization associated with the matter of
developing and distributing biotherapies. The core activities of the organization look into the
manufacturing, development, marketing, advertising and distribution of biopharmaceutical and
related items. It works through segments named as CSL Behring, CSL Intellectual Property and

Finance 4
Seqirus. The CSL Intellectual Property division is occupied with the matter of permitting the
property claimed or created by the organization to the outsiders which are not identified with the
organization. The Behring segment is engaged with assembling and advertising of plasma
treatments including plasma items. Seqirus manages the distribution, sale and assembling of
extensive variety of antibodies, antivenoms and other pharmaceutical items crosswise over
Australia and New Zealand. The segment also develops vitro diagnostic products through
Seqirus immunohematology (Reuters. 2018).
Looking at the current data, the organization has performed well as its revenue expanded from
$5902.34 million to $6590.60 million during 2017. Additionally the net income of the firm was
up to $1332.31 million from $1240.89 million. The organization is listed on ASX and is traded
with a ticker known as CSL.AX. The share price of the firm is $197.12 with the market
capitalization of $59,929.89 million (Reuters. 2018).
Purpose of financial statement analysis
Analysis of financial statements is basically a methodology of breaking down and assessing the
money related proclamations of the organization with the end goal of making appropriate
decisions. The primary goal of leading such assessment is to encourage the directors, executives,
managers and different stakeholders to take appropriate and pertinent judgments for the
organization. Assessing all the three statements will push the clients to appropriately
comprehend organization's financial position, productivity, liquidity and dissolvability (Penman,
2010). Cash flow statement assists in understanding the operating, investing and financing
exercises of the firm. Following are the purpose of conducting financial statement analysis:

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 The objective is to survey the past trends of the firm keeping in mind the end goal to
foresee the future execution. The examination gives details of past deals, income, net
profit in order to help the creditors and investors to pass judgment on the performance
and position of the firm (Pike and Neal. 2009).
 The analysis helps in anticipating the growth rates and earnings prospects for the firm
that are especially useful for the financial specialists while looking at the different
venture options. It helps in making a decision about the gaining capability of the
association.
 Another thought process is to foresee the indebtedness and insolvency conditions of the
organization. The investigation of articulations helps the supervisors and speculators to
play it safe before time and keep the firm away from the greatest misfortunes (Viney,
2009).
Analysis and evaluation of current operations
In order to analyze the statements from all the aspects, the method of ratio analysis has been used
under which various ratios are calculated for the past ten years. Thinking about the present
activities of the organization, different classifications of ratios are figured which evaluate the
execution and position of CSL Limited from 2008 to 2017.
Liquidity ratios: they measure the monetary wellbeing of the organization by looking at all the
current resources or assets against its current liabilities.
• Current ratio: It indicates how proficiently and successfully an organization satisfies
its present liabilities with its present resources.

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• Quick ratio: Another liquidity ratio which likewise assesses the financial strength of
the association considering the most fluid resources of the firm against its short-lived
liabilities (Gibson, 2011).
Both the ratios of CSL Limited have demonstrated fluctuating patterns in the previous ten years.
In 2010, the CR of the organization was 4.24 which diminished to 2.92 in 2011 because of the
critical decrease in resources and increment in liabilities. Nonetheless, after that the ratio
expanded till 2014 as a result of the consistent decrease in liabilities. The QR demonstrates the
same pattern from it was high in 2010 to a reduced one last year. This was due to the low cash
balance and expanded inventory of the business. The situation got reversed and QR increased
last year due to the upsurge in cash amount.
Profitability ratios: They assess the net profit of the organization from different perspectives.
As such, the ratios mirror the profitability position of the firm.
• Net profit ratio: It gauges the measure of net income earned by the organization
against its aggregate revenue.
• Return on equity: It assess the measure of return offered by the organization to its
shareholders and investors out of the income earned by it.
• Return on assets: The ratio estimates the pay made by the firm out of its aggregate
resources amid a specific year (Godwin and Alderman. 2012).
In 2009, the NPR of CSL was 24.79% which diminished to 22.16% in 2012 and after that an
upward pattern has been seen in the ratio till 2015. This change was because of the fact that sales
have shown huge upsurge as compare to the profits. In the most recent year, the ratio diminished
to 20.22% because of the proportionate increment in the turnover and net income. The ROE of

Finance 7
the firm expanded after 2012 as and when CSL began making high profits and giving significant
yields to its investors. It had the most noteworthy ROE of 50.20% out of 2015 which tumble to
42.27% a year ago.
The ROA demonstrated an expanding pattern after 2009 where the ratio was 12.51% that rose to
21.54% of every 2015 because of the proportionate increment in both the assets and profit. The
same get reduced in 2017 to 14.66% because of the huge increase in CSL's aggregate resources.
Efficiency ratios: They are called turnover ratios which estimates how effectively a firm deals
with its assets so as to create high income.
• Inventory turnover ratio: It indicates how frequently an organization converts its
stock into cash. The ratio mirrors the proficiency of the firm in dealing with the
measure of its inventory.
• Asset turnover ratio: It gauges the estimation of organization's deals that is produced
from its normal aggregate resources.
• Receivable turnover ratio: Another metric which determines the amount of time taken
by the organization to gather its receivables (Godwin and Alderman. 2012).
The ITR of the firm was 1.76 times in 2009 which diminished to 1.60 times in 2014. This was
because of the expanded COGS of CSL. The ratio additionally lessened to 1.41 times in a year
ago on account of the expanded stock. The ATR of the organization has demonstrated an upward
pattern after 2010 where it was 0.68 that expanded to 0.88 out of 2014. Further, it diminished to
0.79 out of 2017 because of the expanded normal aggregate resources. The DTR of CSL has
indicated consistent upsurge in the course of recent years mirroring the effective accumulation
from borrowers.

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Solvency ratios: These ratios measure the long haul dissolvability of the organization by
assessing its obligation and equity structure for the past years.
• Debt to equity ratio: It compares the total debt and total equity of the firm against
each other.
• Debt ratio: it measures the amount of assets that are financed through debt (Gibson,
2011).
The D/E ratio of the firm expanded in recent years because of the upsurge in CSL's obligation
part as contrast with its equity. Additionally, its debt ratio has revealed an upward pattern
reflecting expanded borrowings and high financial risk for the organization.
Supply and demand factors
Taking into account the increased revenue growth of CSL Limited, it tends to be interpreted that
the demand of CSL’s products has expanded always which supported up its sales in the previous
years. Likewise, the statistical data of the previous ten years mirrored that CSL's income
expanded always from 2008 to 2017. In 2008, organization reported the revenue worth $3419.73
million which came to $6590.60 million in the most recent year. This steady upsurge reflected
the increased demand of pharmaceuticals items in Australia. As indicated by the yearly report of
2017, the Immune Globulin Subcutaneous expanded at 10% because of the solid demand noted
in US and Europe.

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As indicated by the report created by National Blood Authority of Australia, it is seen that the
supply of plasma items has increased from 2012 to 2017. The plasma related items are been
obtained from CSL Behring (Australia) Pty Ltd keeping in mind the end goal to meet the
increasing clinical demand and to deal with the supply risks adequately. As indicated by the
report, in 2012 the CSL provided items worth $222.02 million which expanded to $351.83
million (NBA. 2018). This demonstrates that the supply and demand of plasma items have been
always expanded from the past years. Also the increased GDP of the country has resulted in
increased demand.
Cash flow statement analysis
The graph shows the cash inflow from operations of CSL Limited over the past years from 2008
to 2017. The cash flow constantly increased in the past years due to the strong collection of
debtors which contributed to the inflow of cash in the business. However, the amount reduced in
2017 to $1246.6 million because of the decrease in company’s efficiency in collecting its
receivables.

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2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
0
200
400
600
800
1000
1200
1400
1600
Cash flow from operating activities
Cash flow from operating
activities
Considering, the cash used in investing activities, it can be interpreted that the flow has been
increased in the past four years due to the investments made by the company during that time. As
per its report, it has announced a new investment in Liverpool site which cause the outflow of
cash.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
-1000
-900
-800
-700
-600
-500
-400
-300
-200
-100
0
Cash flow from Investing activities
Cash flow from Investing
activities

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The cash generated from financing activities was in 2009 at $1054.12 million. After that the
figures turns negative because of the low proceeds from the issue of shares. However, the
outflow has been reduced in the past years due to the issuance of borrowings which brings cash
in the business.
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
-3000
-2500
-2000
-1500
-1000
-500
0
500
1000
1500
Cash flow from financing activities
Cash flow from financing
activities
Dividend valuation
Dividend discount model
Estimated dividend per
share 1.43
Required rate of return 8.10%
Growth rate 0.57%
Value of stock $ 18.97

Finance 12
Share price movements
The graph outline share price and returns of CSL Limited with the market return of ordinaries
index. It very well may be seen that both the pattern lines are essentially near one another. It
tends to be seen that the organization offer negative returns when the market was negative and
offer positive returns when it was expanding (Yahoo Finance. 2018).
1/05/2008
1/12/2008
1/07/2009
1/02/2010
1/09/2010
1/04/2011
1/11/2011
1/06/2012
1/01/2013
1/08/2013
1/03/2014
1/10/2014
1/05/2015
1/12/2015
1/07/2016
1/02/2017
-20.00%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Share price movements
Average return (CSL)
Average return (ASX)
Months
%
At the point when contrasted and the stock valuation got from DDM model, it very well may be
deciphered that the current share price is $197.12 and the future esteem assessed is $18.97. This
implies the organization's shares will fall in future and the speculators have the chance to book
high benefits by selling the shares today and purchasing them in future. Additionally the
increased demand and supply boosted up the share price. However, the declined profitability
situation does not enable CSL to create significant yields to its investors.

Finance 13
Identification of the areas of cash flow
From the above examination, it very well may be deciphered that CSL need to enhance its
income position in order to enhance its profits and turnover. One of the regions recognized is that
CSL must spotlight on expanding its proceeds from the sale of property, plant and hardware.
This will in the long run bring cash in business and assists in setting off the cash utilized to buy
PPE. Additionally, the organization must issue high number of shares alongside the issue of
borrowing. Also, CSL ought to focus on its adjustments in working capital by gathering its
receivables and changing over its stock into money rapidly. Change in these zones will in the
long run enhance the money position of the organization.
Relevant investment and financing strategies
• Increase the sale of PPE and cut down the cost of acquiring or making investments in
property and equipment.
• Issuance of shares and proceeds from borrowings are some financing strategies that
can be applied (Peirson, Brown and Easton. 2015).
Recommendation and Conclusion
From the view point of shareholder’s wealth maximization, the organization has performed well
in the previous years as its share price has encountered an upsurge amid the time. It is said that
expansion in the share price will build the abundance of investors. In addition, the firm has solid
liquidity position yet need to work upon its profitability, effectiveness and dissolvability
circumstance. Likewise, it needs to enhance its income in order to make high revenue.

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References
Penman, S.H. 2010. Financial Statement and Security Valuation.4th ed., Australia: McGraw-Hill.
Peirson, Brown, Andrew Easton. 2015. Business Finance, 12 th edition. Australia: Mc-GrawHill,
Viney, C., 2009. McGrath’s Financial Institutions, Instruments and Markets, 6th edition,
Australia: McGrawHill,
Pike, R. and B. Neal. 2009. Corporate Finance and Investment: Decisions and Strategies, 6th
edition, Financial Times Prentice Hall, Limited.
NBA. 2018. National Supply Plan and Budget.
https://www.blood.gov.au/pubs/1617report.v2/part-2-annual-performance/objective-1-secure-
supply-blood-and-blood-products.html
Yahoo Finance. 2018. CSL Ltd (CSL.AX). https://finance.yahoo.com/quote/CSL.AX/cash-flow?
p=CSL.AX
Reuters. 2018. CSL Ltd (CSL.AX).
https://www.reuters.com/finance/stocks/company-profile/CSL.AX
Gibson, C. H. 2011. Financial reporting and analysis. USA: South-Western Cengage Learning.

Finance 15
Godwin, Norman H., and Wayne C. Alderman. 2012. Financial ACCT2. USA: Cengage
Learning.
Appendix
Liquidity ratios 2017 2016
201
5
201
4
201
3 2012 2011
201
0
200
9
200
8
Current ratio = Current
assets/Current Liabilities 2.84 2.78
3.5
7
3.7
9
3.6
0 3.63 2.92
4.2
4
4.0
4
3.1
2
Quick ratio = Quick
assets/Current liabilities 1.25 1.21
1.6
9
1.8
5
1.7
9 2.07 1.38
2.3
9
2.8
0
1.6
9
Profitability ratios
Net profit margin = Net
profit/Total sales
20.2
2%
21.0
2%
25.
26
%
24.
50
%
24.
57
%
22.1
6%
22.4
6%
23.
63
%
24.
79
%
19.
73
%
Return on equity = Net
income/Shareholders' equity
42.2
7%
48.3
9%
50.
20
%
41.
33
%
40.
45
%
28.7
1%
27.3
5%
21.
39
%
16.
88
%
24.
05
%

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Return on assets = Net
profit/Total assets
14.6
6%
16.4
3%
21.
54
%
20.
82
%
20.
35
%
16.9
2%
19.6
6%
15.
79
%
12.
51
%
14.
37
%
Efficiency ratios
Inventory turnover ratio =
Cost of goods sold/Average
inventory 1.41 1.55
1.5
3
1.6
0
1.5
1 1.63 1.46
1.4
7
1.7
6
1.6
2
Asset turnover ratio =
Sales/Average total assets 0.79 0.85
0.8
6
0.8
8
0.8
2 0.84 0.78
0.6
8
0.7
7
0.8
6
Receivable turnover ratio =
Sales/Average receivables 6.82 6.31
6.0
9
6.5
0
5.9
7 5.80 4.95
5.0
4
5.8
0
5.1
1
Solvency ratios
Debt to equity ratio = Total
debt/Total equity 1.26 1.22
0.8
3
0.6
0
0.5
6 0.37 0.11
0.1
1
0.1
3
0.3
4
Debt ratio = Total
liabilities/Total assets
65.3
2%
66.0
5%
57.
09
%
49.
63
%
49.
68
%
41.0
9%
28.0
9%
26.
19
%
25.
84
%
40.
23
%
Valuation of shares

Finance 17
Calculation of required rate of return (CAPM
model)
Market premium (Rm-Rf) 6%
Risk free rate (Rf) 2.76%
Beta (B) 0.89
Required rate = Rf + B*(Rm-Rf) 8.10%
Analysis of cash
flow statement
Cash flow from
operating activities
200
8
200
9 2010
201
1
201
2 2013 2014 2015 2016 2017
Net cash
used/provided
689.
25
102
4.82
1168
.49
101
8.11
120
5.8
1311.
7
1360.
7
1363
.6
1178
.6
1246
.6
Cash flow from
Investing activities
Net cash
used/provided
-
239.
21
-
449.
52
-
292.
95
-
209.
64
-
449
.5
-$
442.6
2
-$
401.2
4
-$
411.
95
-$
809.
12
-$
859.
61
Cash flow from
financing activities
Net cash
used/provided
-
225.
105 -
2352
-
128
-
194
-$
1,199.
-$
1,136.
-$
825.
-$
361.
-$
103.

Finance 18
11 4.12 .54 8.5 .7 84 38 40 96 11