Finance for business.

my assessment type is "company performance analysis" and we have choose ANZ bank..I have attached folder which gives detail information about what to do. no plagiarism .it covers 30 marks so please we need good one

Running head: Finance for business
Finance for business

Finance for business
Abstract
The reports included all the important factors which are relevant for the financial analysis and all
of them have been explained in an appropriate and detailed manner. All the working is made in
relation to the ANZ bank which is established in Australia. There has been a proper analysis of
the financial performance of the bank and the details of the operations performed by it have been
determined under the report. Proper calculations have been made for this and in that ratios have
been worked out. There was the determination of the profitability and efficiency of the company
and with that proper ascertainment of the position is made. The cash of the business is analyzed
so that adequate management in this respect is made possible. There has been an undertaking of
the sensitivity test by which the most sensitive element in the determination of net present value
was determined. The risks which were involved in the business processes have been identified
and also the incorporation of dividend policy is made. There has been an identification of
dividend payout for further actions to be taken.
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Table of Contents
Abstract............................................................................................................................................2
Introduction......................................................................................................................................4
Financial analysis in the context of ANZ Bank...............................................................................4
Company's Outline.......................................................................................................................4
Ratio analysis...............................................................................................................................5
Analysis of Cash management.....................................................................................................8
Sensitivity analysis......................................................................................................................9
Systematic and un-systematic risk.............................................................................................10
Dividend payout ratio and dividend policy...............................................................................11
Recommendations..........................................................................................................................12
Conclusion.....................................................................................................................................12
References......................................................................................................................................14
Appendix 1.....................................................................................................................................17
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Introduction
The changing environment calls for the improvement in the business so that it can deal with the
undergoing modifications in the market and its requirements. For this, it will be necessary that all
the aspects are evaluated in a continuous manner so that the required changes which are to be
made can be ascertained. There will be an analysis of the financial aspects in this report for the
ANZ bank. This will be involving the identification of the operations performed in the company
and the markets in which the same is done. The performance evaluation is the most important
part and that will be undertaken with the help of the ratio analysis. In that, all the important
variables which have an impact on the efficiency of the tasks and also on profitability will be
inculcated. The management of the business shall take into account the cash related factors so
that no problems arise in this respect. For the same, it will be required that proper analyzation of
the cash is made and then its management is made in a proper manner. This will be helping in
performing the business operations in an effective manner and attain the targets which have been
specified. The process which is involved in the calculation of net present value includes the use
of various variables and some of them have a great impact on the outcomes. All of them will be
identified with the help of the sensitivity analysis which will be performed in the report below.
The risks whether they are systematic or unsystematic will be identified so that they can be dealt
in an appropriate manner and does not harm the business. At last, there will be consideration of
the dividend policy and payout made by the company in the past few years.
Financial analysis in the context of ANZ Bank
Company's Outline
Banking is an important industry and ANZ is one which is operating in this sector. There are
various banking and financial services which are provided by it in the international sector. This is
considered as the largest company and lies in the top 100 ranks among the world. The
headquarter of the company is situated in Melbourne (Bloomberg, 2019). The company is
carrying out activities in various countries and that includes New Zealand, Australia, United
States, Europe, and Asia. The company is operating in such a manner that there is the
development of a sustainable environment which will be helping in the coming period (ANZ,
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2019). There are several services which are provided and for that three segments are used which
include retail, institutional and commercial.
The company enjoys various competitive advantages and in that it is considered that the business
is performing in a better manner than the others available in the market. This is due to the better
facilities which are provided by the company. There is a high increase which has been noted in
the portfolio of the company in relation to the home loans (Raskiewicz, 2013). Due to this, it is
able to take advantage of others in the local market. The company is following a proper dividend
policy and by that more investors are interested in making an investment in a company giving it
a chance to grow further.
Ratio analysis
The company is required to manage all the operations in such a manner that it attains the best
results. For this, it will be required that proper policy and formulated and in order to accomplish
this, there will need to make the evaluation. The business will be using various available tools
and techniques by which analyzation is made in an effective manner. The ratio analysis is one of
them and will be undertaken. In this, there will be a calculation of several ratios in which
different variables will be tested (Hu et al., 2012). The main categories which will be used in the
given case include efficiency and profitability. The profits which are made by the company in a
given term will be evaluated so that the overall test is carried out. The efficiency with which all
the operations are carried in the business will also be evaluated and for that also the calculations
will be made. Both of them will be helping the business in identifying the position so that
decisions can be taken for the coming period. The calculations in this respect are provided
below:
Particulars 2015 2016 2017 2018
Sales 34861 33343 35461
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Net profit 5720 6421 6416
Receivable 18596 4406 5504 2319
Average Receivable 11501 4955 3911.5
Total assets 889900 914869 897326 942624
Average
assets
902384.5 906097.5 919975
Efficiency ratios
The manner in which the working is made in the company is required to be tested and for that
efficiency, ratios are calculated. There will be various calculations which will be made in this
respect and in that the performance will be evaluated (Ahrendsen and Katchova, 2012). Asset
turnover and receivable turnover is calculated in which the revenue which is made by the assets
is determined and also the time's receivables are covered by the revenue will be determined. By
the help of them, the efficiency involved will be identified and so all the calculations in this
respect are provided hereunder:
Particulars Formula 2016 201
7
2018
Receivable turnover Net sales/Average Receivable 3.03 6.73 9.07
Asset turnover ratio Net sales/Average Total assets 0.04 0.04 0.04
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2016 2017 2018
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
Receivable turnover
Linear (Receivable
turnover)
Asset turnover ratio
Linear (Asset turnover
ratio )
The ratios are identified and it can be seen that there is an upward trend in the receivable
turnover. This is increasing and it shows that business is efficient in making the collection and
there will be no losses which will be incurred for the same (ANZ, 2018). The asset turnover is
constant and there is no increase or decrease in this.
Profitability ratios
The profitability is required to be measured and that is done with the help of these ratios. In this,
the earnings are compared with other variables so that earnings that are made can be evaluated
(Babalola and Abiola, 2013). The performance will be measured and in this, the return which is
made on the assets and sales will be determined. All the required calculations are provided
below:
Particulars Formula 2016 2017 2018
Return on assets Net profit/Total
assets*100
0.63% 0.72% 0.68%
Net profit ratio Net profit/Sales*100 16.41% 19.26% 18.09%
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2016 2017 2018
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Return on assets
Linear (Return on assets)
Net profit ratio
Linear (Net profit ratio)
The calculations are made and it can be analyzed that the return which is made on assets is
almost similar and there is earning which is mad on it. The net profit ratio is increasing and due
to that upward trend is followed which is beneficial for the company.
Analysis of Cash management
In the carrying out of the business, there is a need for the cash in performing all the operations.
For this, it is required that there shall be proper cash balance which shall be maintained by the
company (Kroes and Manikas, 2014). There will need to have the appropriate cash management
so that no issues arise in dealing with the cash requirements. It is possible to keep the cash in any
manner and there are various forms in which this can be done. Marketable securities are one of
them which can be kept as they are the securities which are in liquid format and can be converted
in cash at the point of the requirement (Barjaktarović and Marković, 2014). There is a convenient
and easy process which is involved for making cash from this and so investment in them shall be
made.
In the given case ANZ has made the investment in these securities and there are various
marketable securities which are involved in its assets. There are several such securities which
will be providing the company with the benefits. There is the income which is made by the
company on them in form of interest which is received (Corominas, Lusa and Olivella, 2012).
This is the additional earning which is made due to investment as this is not possible if all the
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cash is retained and not taken into any other use. There will be secured with the company that it
has adequate cash which can be used in the time of need and requirement.
Sensitivity analysis
In the company, there are various variables which are included and they will be impacting the
business in some or other manner. There is a need to identify them and the manner in which they
will be affecting the outcomes that are received. This will be undertaken with the help of the
available technique known as a sensitivity analysis (Iooss and Lemaître, 2015). This is the test in
which all the inputs and their impact on the output are evaluated. There is some or the other
impact which is made and for that this analysis is performed. There will be proper analyzation
which will be made and in that the company will be involving the factors affecting the profits
(Ruiz et al., 2012). The same analysis will be performed in the given case for the determination
of the net present value. In this, there are several elements which are involved such as selling
price, sales volume, fixed and variable cost.
For the performing of analysis, they all will be considered as they are the ones which affect the
results that are obtained. So, any change which will be made in relation to these variables will be
affecting the amount which is obtained as the net present value. There will be making of the
calculation in this respect and in that the net present value will be ascertained after inclusion of
the modification made (Pianosi and Wagener, 2015). This way the results which will be obtained
will be different from one another. The changes and all the calculation in this relation are
presented in appendix 1. All of the change which is taking place in the input and output will be
identified and recorded. By the help of that, the comparison among them will be made which will
be provided with the sensitivity level. The higher the change the more will be the element
sensitive. All the changes and sensitivity is calculated and represented in the table below:
Particulars Original Option 1 Option 2 Option 3 Option 4
NPV 3497442 2964905 2166099 2698636 3430875
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% Change in NPV (A) -15.226 -38.066 -22.84 -1.9033
Input changing Sales units selling
price
variable cost fixed cost
% change in Input (B) 10 10 10 10
Sensitivity (A/B) -1.5226 -3.8066 -2.284 -0.1903
From this, it can be noted that the highest change is in case of the selling price. So, it can be said
that the net profit will be affected the most by the change in the selling price of the company.
Systematic and un-systematic risk
In all the businesses that are performed there is a certain amount of the risk which is involved in
it. It is required that the same shall be taken into consideration and for that the identification of
them is required to be made. There is the inclusion of two types of risk in this which covers the
systematic and unsystematic risk. By them, there is an impact on the performance of the business
and so it is necessary that they shall be properly taken care off (Waemustafa and Sukri, 2016).
By the identification of them, it will be possible to design the system in such manner that they
are reduced. This will be making an improvement in overall business performance.
It is not easy for the business to make the proper identification of them and so there shall be a
continuous process which shall be involved in this. By this, all the risks will be identified on time
and corrective measures will be taken. The risk which will be a relation to the complete industry
or market is a systematic risk and it is not possible to control the same as they cannot be
determined always by the business (Gagliardini and Gouriéroux, 2013). The ones which are due
to business issues are unsystematic risks and they can be controlled by taking proper steps. The
ANZ also involves various such risks such as capital adequacy risk which is due to the
incapability to maintain the capital and is an unsystematic risk which can be controlled by taking
appropriate steps. Then come the compliance and credit risk which arise due to incompetency to
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fulfill the requirements which are specified. Under them, the obligations are not met on time and
that leads to risk arising (ANZ, 2018). Market risk, insurance risk, operations risk, technology,
and strategic risks are some of the other risks which are being faced by the ANZ bank in the
current scenario. Proper steps will have to be formulated by the company so that all of them and
their impact on the business is reduced.
Dividend payout ratio and dividend policy
The earnings which are made by the company are required to be taken into use in a proper
manner. The right to attain the benefit from them is not just with the company and the investors
will also be eligible for the portion of them. There will be proper distribution of the earning
among the company and the investors. The amount which will be distributed among the
shareholders will be identified as the dividend (King’wara, 2015). There are several specific
policies which are built in this respect and the payment is then made in accordance with them.
The ration will be calculated for this in which the payment will be compared with the earning
and that is known as the dividend payout ratio. This helps in evaluating the policy of the
company to pay dividends and if there is any need for the change then the same will be made for
the coming period. The ANZ is also having the policy in which the dividend at a high rate is
required to be paid.
Calculation of Dividend payout ratio
Particulars 2016 2017 2018
Dividend 5001 4609 4585
Earnings 5720 6421 6416
Dividend payout
ratio 87.43% 71.78% 71.46%
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The calculations which are made show that the company is paying the dividends to the investors
on time and that too at high rates. There is a payment of 71.46% in the current year.
Recommendations
The analysis which is made presented all the aspects of ANZ bank in a proper manner and in that
there is the consideration of various factors. There has been a collection of the information and
then several tests are conducted to evaluate the position of the business. There is the test of the
financial performance with the undertaking of ratio analysis and by that, it is determined that
there are profits which are made by the company. It will be required to make the proper decisions
with the help of outcomes and that way the profitability will be further improved. The sensitivity
test is performed and the selling price is determined to be the most sensitive one. There is the
payment of the dividend and for that payment, ratio is calculated and it is beneficial for the
company to keep the investors satisfied. The company can raise the additional capital by this and
that way the expansion will be made to attain further growth.
Conclusion
The above-presented report elucidates all the important concepts in relation to the financial
analysis of any company. In that, the information about the company and its operations has been
gained in the first part of the report. There is the identification of the areas in which the company
is providing its services and with that, the services which are being provided have also been
identified. There are several comparative advantages which are available with the company and
determination of all of them has been made. The company is operating in a profitable manner
and this has been determined by the help of the ratio analysis which has been performed. In that,
together with the profitability, there is the consideration of the efficiency also and for that also
certain ratios have been calculated. It has been observed that the selling price of the company is
affecting the net present value most and is most sensitive. This ascertainment has been made
with the use of the sensitivity analysis which is undertaken. By the use of this, the focus will be
made on the elements which affect the business the most. Then the cash management has been
undertaken and in that, all the marketable securities are considered. There is the requirement to
maintain the cash and same is identified in the report. The risks available in the business have
been determined with the help of which it will be possible for the company to take the proper
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steps to deal with them. The calculation of the dividend payout is also made in which the
payment made by the company has been identified and with that the policies in this respect have
also been considered.
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References
Ahrendsen, B.L. and Katchova, A.L. (2012) Financial ratio analysis using ARMS
data. Agricultural Finance Review, 72(2), pp.262-272.
ANZ. (2016) Annual report 2016. [Online] Available at
https://shareholder.anz.com/sites/default/files/anz_-_annual_report_2016.pdf [Accessed 26 May
2019]
ANZ. (2017) Annual report 2017. [Online] Available at:
https://shareholder.anz.com/sites/default/files/2017_anz_annual_report.pdf [Accessed 26 May
2019]
ANZ. (2018) 2018 Annual report. [Online] Available at:
https://shareholder.anz.com/sites/default/files/anz_2018_annual_report_final.pdf [Accessed 26
May 2019]
ANZ. (2019) Company Profile. [Online] Available at:
http://www.anz.com/australia/aboutanz/corporateinformation/company.asp [Accessed 26 May
2019]
ANZ. (2019) History of ANZ. [Online] Available at:
https://www.anz.com/australia/aboutanz/corporateinformation/historyofanz/default.asp
[Accessed 26 May 2019]
Babalola, Y.A., and Abiola, F.R. (2013) Financial ratio analysis of firms: A tool for decision
making. International journal of management sciences, 1(4), pp.132-137.
Barjaktarović, L. and Marković, M. (2014) Development of cash management products in Serbia
and an impact on the profitability of banks. Bankarstvo, 43(5), pp.48-69.
Bloomberg. (2019) Company Overview of ANZ Bank New Zealand Limited. [Online] Available
at https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=5487644
[Accessed 26 May 2019]
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Corominas, A., Lusa, A. and Olivella, J. (2012) A detailed workforce planning model including
non-linear dependence of capacity on the size of the staff and cash management. European
Journal of Operational Research, 216(2), pp.445-458.
Gagliardini, P. and Gouriéroux, C. (2013) Granularity adjustment for risk measures: Systematic
vs unsystematic risks. International Journal of Approximate Reasoning, 54(6), pp.717-747.
Hu, Z., Liu, Y., Gao, S., Liu, W., Zhang, W., Tong, X., Lin, L., Zong, K., Li, M., Chen, H. and
Zhou, L. (2012) Improved in situ Hf isotope ratio analysis of zircon using newly designed X
skimmer cone and jet sample cone in combination with the addition of nitrogen by laser ablation
multiple collector ICP-MS. Journal of Analytical Atomic Spectrometry, 27(9), pp.1391-1399.
Iooss, B. and Lemaître, P. (2015) A review on global sensitivity analysis methods.
In Uncertainty management in simulation-optimization of complex systems, 59, pp.101-122.
King’wara, R. (2015) Determinants of dividend payout ratios in Kenya. Research Journal of
Finance and Accounting, 6(1), pp.48-51.
Kroes, J.R. and Manikas, A.S. (2014) Cash flow management and manufacturing firm financial
performance: A longitudinal perspective. International Journal of Production Economics, 148,
pp.37-50.
Pianosi, F. and Wagener, T. (2015) A simple and efficient method for global sensitivity analysis
based on cumulative distribution functions. Environmental Modelling & Software, 67, pp.1-11.
Raskiewicz, O. (2013) One reason ANZ will grow quicker than its competitors. [Online]
Available at https://finance.nine.com.au/business-news/one-reason-anz-will-grow-quicker-than-
its-competitors/3d7fba9d-39fc-4239-9cec-9f8267ee01fd [Accessed 25 May 2019]
Ruiz, P.A., Foster, J.M., Rudkevich, A. and Caramanis, M.C. (2012) Tractable transmission
topology control using sensitivity analysis. IEEE Transactions on Power Systems, 27(3),
pp.1550-1559.
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Waemustafa, W. and Sukri, S. (2016) Systematic and unsystematic risk determinants of liquidity
risk between Islamic and conventional banks. International Journal of Economics and Financial
Issues, 6(4), pp.1321-1327.
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Appendix 1
Calculation of NPV at original values:
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Option 1: Calculation of NPV at Unit sales decrease by 10%:
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Option 2: Calculation of NPV at a decline in selling price by 10%:
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Option 3: Calculation of NPV at an increase in variable cost by 10%:
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Option 4: Calculation of NPV at the increase in cash fixed cost by 10%:
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