Financial Analysis of AMP Limited

This article provides a detailed financial analysis of AMP Limited, including its governance and ownership structure, performance ratio analysis, share price graph, and market value ratios. The analysis includes short term and long term solvency ratios, asset utilization, profitability ratios, and market value ratios. The article also includes a graph reflecting the share price movement of AMP Company and All ordinary share price index.

RUNNING HEAD: Financial Analysis of AMP Limited
1
Name of the student
Topic- Financial Analysis of AMP Limited
University name

Table of Contents
Introduction...........................................................................................................................................3
1. Description of AMP Limited.....................................................................................................3
2. Governance and Ownership structure............................................................................................4
3. Performance ratio analysis of AMP Limited..................................................................................7
Short term solvency ratio...................................................................................................................7
Proving the equation.........................................................................................................................9
Long term Solvency ratios.................................................................................................................9
Asset utilization...............................................................................................................................10
Profitability ratios............................................................................................................................11
Market value ratios..........................................................................................................................13
4. Share price graph of the AMP Limited........................................................................................14
4.1 Graph reflecting the share price movement of AMP Company and All ordinary share price
index 14
4.2 The comparison between the Share price movement of AMP Limited and share price movement
of all ordinary stock exchange.........................................................................................................14
5. Announcements...........................................................................................................................16
6. Research via internet....................................................................................................................16
6.1 Beta calculation...................................................................................................................16
6.2 Computation of required rate of return by using CAPM method...............................................17
6.3 Determining the investment method (Conservative investment)................................................17
7. Computation of the weighted average cost of capital...................................................................18
7.1 Computed Cost of Capital through Capital Assets Pricing model........................................18
7.2 Implications that a higher WACC on investment decision........................................................18
8. Debt ratio consideration of AMP Limited....................................................................................19
8.1 Stable Debt to equity ratio of company..........................................................................................19
Dividend policies of company..............................................................................................................20
Letter of recommendation..................................................................................................................20
Conclusion...........................................................................................................................................21
9. References...................................................................................................................................22
10. Appendix.................................................................................................................................24

Financial Analysis of AMP Limited 3
Introduction
With the increasing ramified changing economic factors, each and every organization
needs to run business effective by using the financial tools and techniques in determined
approach. There are several financial tools such as ratio analysis, capital budgeting analysis,
top down analysis, bottom up analysis which could be used by the management of Company
to increase the overall outcomes. It is observed that AMP Company has increased its
profitability throughout the time.
.
1. Description of AMP Limited
The AMP Limited is a financial service company working in Australia and New Zealand
providing superannuation benefits and investment products, insurance and financial advice
and Banking product. It includes the entire home loan and saving account service for clients
(AMP limited. (2018).

2. Governance and Ownership structure
It is analysed that the CEO of Company is Craig Meller who takes all the managerial and
operations decisions in effective manner.
Rank Name Ag
e
Company Compensatio
n
shares
2 George R.
Roberts
74 KKR & Co LP 113,712 44,650
3 Henry R. Kravis 74 KKR & Co LP 113,434 44,650
4 Hock E. Tan 66 Broadcom Inc 103,211 98,323
5 Rob Roy 49 Switch Inc 94,638 89,444
6 Alex A.
Molinaroli
Johnson Controls
International PLC
78,282 9,042
7 Michael Rapino 52 Live Nation
Entertainment Inc
70,616 58,632
8 Yasuhiro Sato 65 Mizuho Financial
Group Inc
70,000 0
9 Mario J. Gabelli 75 GAMCO Investors Inc 69,414 0

Financial Analysis of AMP Limited 5
10 Leslie Moonves 68 CBS Corp 69,333 43,696
11 Christopher
Terrill
50 ANGI Homeservices
Inc
68,798 3,800
12 Andrew N.
Liveris
63 DowDuPont Inc 65,689 12,174
13 Jeffery Fairburn 51 Persimmon PLC 63,697 0
14 W. Nicholas
Howley
65 TransDigm Group Inc 61,023 0
15 Douglas R.
Lebda
48 LendingTree Inc 59,591 0
16 Simon Anthony
Peckham
55 Melrose Industries
PLC
57,849 0
17 Douglas S.
Ingram
55 Sarepta Therapeutics
Inc
56,866 11,608
18 Thomas E.
Dooley
Viacom Inc 53,648 0
19 Ronald Clarke 62 Fleetcor Technologies
Inc
52,644 15,127
20 Stephen Kaufer 55 TripAdvisor Inc 47,933 28,578

21 Gregory B.
Maffei
56 Qurate Retail Inc
QVC Group
47,810 2,293
22 Stephen B Burke 59 Comcast Corp 46,537 5,338
23 Brian
Duperreault
70 American
International Group
Inc
43,087 11,157
24 Kathleen
Eisbrenner
NextDecade Corp 43,086 42,145
25 Dirk Van de Put 57 Mondelez
International Inc
42,443 30,002
(Yahoo Finance, 2017).
Share holder details of company

Financial Analysis of AMP Limited 7
3. Performance ratio analysis of AMP Limited
The ratio analysis helps in evaluating the financial performance of AMP Limited by setting
the relation between two factors. (AMP Limited, 2015).
Short term solvency ratio
1. Current ratio
The current ratio of AMP Limited has reduced which shows that company has lower down its
investment in the current assets. However, company has zero investment in its inventory
(AMP Limited, 2017).
Liquidity ratio Years
2017 2016
Current ratio .0025 .0031
Quick ratio .0025 .0031

Interpretation
The AMP Limited has zero investment in its inventory and lowers down its investment in its
current assets (Dahir, Mahat, and Ali, 2018).
This ratio reflects that company needs to increase its investment in its operating assets if it
wants to create value in its investment. It will assist AMP Limited to meet the current
demand of the client in market.
Quick ratio
The quick ratio of company is same as with its current ratio. There is no inventory
and expenses which company needs to make for the better and effective functioning.

Financial Analysis of AMP Limited 9
Proving the equation
Providing equation 2014 2015 2016 2017
Net profit After tax/OE 0.55154
0.47597938
5 0.42241 0.34557
EBIT/TA*NPAT/EBIT*TA/OE 0.55154
0.47597938
5 0.42241 0.34557
.
Long term Solvency ratios
Debt to equity
The debt to equity of AMP Limited shows that company has high financial leverage
in its business. It is considered that AMP Limited needs to lower down its debt portion if it
wants to maintain effective sustainable business in long run. Nonetheless, reduction in the
overall debt portion will also increase the cost of capital of the business.
Computation of debt to equity of Company
3. Debt Ratio
2014 2015 2016 2017
A. Total Liabilities 1,26,470 1,30,813 1,32,519 140802
B. Total assets 1,34,855 1,39,708 1,40,060 1,48,085.0
0
(A/B) 94% 94% 95% 95%
Interpretation
The debt of equity of company has been around 95% which shows that company need
to lower down its debt portion to make its debt to equity to 70:30 i.e. 30 % debt portion and
70% equity portion.

Gearing ratio discussion
The gearing ratio of Company is very low which shows that company has been paying
very low interest payment on its debt portion (AMP. 2017).
Gearing Ratio
2014 2015 2016 2017
Gearing Ratio 5% 6% 4% 4%
This ratio shows that company will be solvency even if it has less return on its
business.
Asset utilization
1. Inventory turnover ratio
The inventory turnover ratio reflects that company has zero inventory turnovers which show
that company has not blocked capital in its business.
Efficiency ratio Years
2017 2016
Inventory turnover ratio 0 0
Asset turnover ratio 0.120 2.10
Receivable turnover ratio 0 0
Days' sales in inventory 0 0
Days' sales in receivables 0 0
(AMP, 2017)

Financial Analysis of AMP Limited 11
2. Assets turnover ratio
The assets turnover ratio of AMP Company is too low which shows that company has been
blocking less funds in its business.
3. Debtor turnover ratio
The debtor’s turnover ratio of company has been kept zero due to its non-effective sales and
loss of its business. Company has been dormant to manage its business.
Profitability ratios
The profitability ratio f AMP Company shows that company had faced loss in 2016 which
converted into the profit in 2017.
Return on assets
1. Rate of Return on Assets
2014 2015 2016 2017
A. Net income 884 972 -344 848
B. Total assets 1,34,855 1,39,708 1,40,060 1,48,085
(A/B) 0.66% 1% 0% 1%
Interpretation
The return on assets of company has been zero in 2016 which increased to 1% in 2017. It is
good start for the AMP Company to revive its busienss in long run.
Return
2. Rate of Return on Equity
2014 2015 2016 2017
A. Net income available to equity
shareholders. 884 972 -344 848
B. Shareholder’s Equity 8,186 17,981 7,462 7,202.00
(A/B) 10.80% 5.41% -4.61% 11.77%

Interpretation of the data
The return on equity of AMP Company has increased to 11% which reflects that
company has added value in its business. It is analyzed that as compared to 2016, AMP
Company has increased its profitability which will positively impact the business of AMP
Company.

Financial Analysis of AMP Limited 13
Market value ratios
1. Earnings per share
The earing per share of company which will be available to shareholders will be zero.
Company will not give any benefit to its shareholders for some time period.
Market Value ratios Years
2017 2016
Earnings per share - 2.80 - 7.40
P/E ratio - -
Dividend pay-out
ratio - -
The market value ratio of company has shown the negative results.
Price to earnings ratio
The price earnings ratio has increased by 10% since last one year. It has reflected that AMP
Company is surviving its business by implementing effective business strategies.
Dividend payment ratio
The dividend payout ratio of AMP Company is zero. It shows that company has been
plugging back its profit in its business.

4. Share price graph of the AMP Limited
4.1 Graph reflecting the share price movement of AMP Company and All ordinary
share price index
4/1/2016
6/1/2016
8/1/2016
10/1/2016
12/1/2016
2/1/2017
4/1/2017
6/1/2017
8/1/2017
10/1/2017
12/1/2017
2/1/2018
4/1/2018
0
1
2
3
4
5
6
AMP Limited (AMP.AX)
AMP Limited (AMP.AX)
(Yahoo Finance, 2017)

Financial Analysis of AMP Limited 15
4.2 The comparison between the Share price movement of AMP Limited and share
price movement of all ordinary stock exchange
6/1/2016
8/1/2016
10/1/2016
12/1/2016
2/1/2017
4/1/2017
6/1/2017
8/1/2017
10/1/2017
12/1/2017
2/1/2018
4/1/2018
0
1
2
3
4
5
6
-0.25
-0.20
-0.15
-0.10
-0.05
-
0.05
0.10
0.15
Average Return
AMP Limited (AMP.AX) null 4.425838 Average Return
(Yahoo finance, 2017)
Introduction
The AMP Limited has been performing well in market as since two years, it has
increased the share price of company. The below give data shows the trend of share price of
AMP Company and all ordinary index share.
Analysis
The above graph reflects that AMP Limited has high fluctuation in its share price
which shows that company has maintained highly unstable business in long run. It is
observed the share price fluctuation in the share price have aroused due to negative factors of
the market and sluggish market condition at large.
Conclusion
The lower profitability and high financial leverage of company have negatively
impacted the share price movement of company. In addition to this, the beta of company
is .62 which shows the positive indicator for the future growth of the business.

5. Announcements
There are several announcement have been made which will directly and indirectly impact
the share price movement of the AMP limited company.
Company has raised more capital in market by issue of shares.
The strategic alliance taken by AMP Company will positively increase the overall outcomes
and assist in surviving the company in long run.
Company has made high amount of investment in its research and development department
which will eventually create value on its investment in long run.
6. Research via internet
Stock information and Beta calculation
The beta calculation has been done by using the share price of the AMP Limited since last
two years and all ordinary indexes (AMP Limited. (2015).
6.1 Beta calculation
The beat calculation below
SUMMARY OUTPUT
Regression
Statistics
Multiple R
0.1690
7
R Square
0.0285
8
Adjusted R
Square
-
0.0156
Standard Error
0.0237
8
Observations 24
ANOVA
df SS MS F Significance F
Regression 1 0.00037 0.00037 0.64736 0.42967

Financial Analysis of AMP Limited 17
Residual
2
2 0.01244 0.00057
Total
2
3 0.01281
Coefficient
s
Standard
Error t Stat P-value
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercept 0.00972 0.00489 1.9878 0.05942 -0.0004 0.01987 -0.0004 0.01987
X Variable 1 0.06239 0.07754 0.80459 0.42967 -0.0984 0.2232 -0.0984 0.2232
The beta value of company is .062 which shows that if the market changes by 1 % then there
will be changes in the price of AMP Limited by .062 points in the same direction.
6.2 Computation of required rate of return by using CAPM method
E(R) = Rf +( β∗R p)
E(R) = expected Amount of rate of return
Rf = Risk free % rate of return
β = Computed Beta
Rp= Market premium risk factor (AMP Limited, 2017).
Calculation of Required rate of return
Risk free rate (A) 4%
Beta (B) 0.062389179
Market Risk premium (C) 6%
Required rate of return [A+(B*C)] 4.37%
(Please see the excel)
Notes- the RF risk free rate of return has been computed by using the 10 years risk free rate
of return.

6.3 Determining the investment method (Conservative investment)
After evaluating the annual report of company, it could be inferred that AMP Limited has
been following the conservative investment method in its investment strategies. It is the
investment strategies which are used by company when it found that company has no better
options to create value on its investment.
It is evaluated that AMP limited has been facing loss in its business due to the negative
business trend. It is analyzed that company has failed to create value in its busienss due to the
sluggish market condition. The conservative investment method is followed to make the
company survive in this market. However, in 2017, company had good amount of
profitability in 2017 which shows that company will survive in long run effective.
7. Computation of the weighted average cost of capital
7.1 Computed Cost of Capital through Capital Assets Pricing model
Cost of capital= KE= 4.37%
The cost of capital is computed by using the CAPM model.
Cost of debt- 1.93%
The cost of debt is computed by using the interest payment and debt portion (Brigham, and
Ehrhardt, 2013).
WACC = cost of debt* portion of the debt capital+ cost of Equity * portion of the Cost of
equity
WACC Capital Amount Cost of capital % of portion WACC
Equity 7,202 4.37% 5% 0.21%
Debt 1,40,802 0.42% 95% 0.40%
Total capital 1,48,004 WACC 0.61%
The weighted average cost of capital is too low which shows that company has created value
in its investment

Financial Analysis of AMP Limited 19
7.2 Implications that a higher WACC on investment decision
The weighted average cost of capital of the AMP limited is very low which shows the
positive indicator for Company to undertake the investment projects. It is analyzed that if
AMP Limited has higher weighted average cost of capital then it will negatively impact the
investment decisions of Company (AMP Limited. (2017).
8. Debt ratio consideration of AMP Limited
8.1 Stable Debt to equity ratio of company
Debt to equity
The debt to equity of AMP Limited reflects that company has high financial leverage
in its business. It is considered that AMP Limited needs to lower down its debt portion if it
wants to maintain effective sustainable business in long run. Nonetheless, reduction in the
overall debt portion will also increase the cost of capital of the business.
Computation of debt to equity of Company
3. Debt Ratio
2014 2015 2016 2017
A. Total Liabilities 1,26,470 1,30,813 1,32,519 140802
B. Total assets 1,34,855 1,39,708 1,40,060 1,48,085.0
0
(A/B) 94% 94% 95% 95%
Interpretation
The debt of equity of company has been around 95% which shows that company need
to lower down its debt portion to make its debt to equity to 70:30 i.e. 30 % debt portion and
70% equity portion. Since last five years, AMP Limited has maintained stable debt to equity
ratio. However, there is very less interest payment which company needs to make and will
reflects that company has to make very less amount of interest payment (Easton., et al.,
2018).
Gearing ratio discussion
The gearing ratio of Company is very low which shows that company has to pay very
less amount of interest payment on its debts. It will also Company to increase its overall
outcomes in effective manner (AMP.Limited 2017).

Gearing Ratio
2014 2015 2016 2017
Gearing Ratio 5% 6% 4% 4%
This ratio shows that company will be solvency even if it has less return on its
business (Chen, et al. 2018).
Dividend policies of company
Annual report on dividend policies of AMP Limited reflects that the company is
following a profit based dividend policy in order to attract the investment. Only when
company had profit in its business it issued the dividends to the customers. In the last five
years company has not issued any dividend to the customers or shareholders, which shows
that the company is continuously lacking in terms of promoter’s investment to regain or
survive business making big loss to the AMP Limited. In this order just to regain the profit
making business for the company, AMP Limited has followed some re-engineering
strategies. However, in 2017, company has done a profit making business but it did not issue
the dividends to its shareholders in order to plug back its sustainability of future investment.
This resulted in less number of new investments for the company. After analysing the report,
it is observed that this dividend policy based on profit is useful for AMP Limited to survive
and perform well in sluggish conditions of the market (Lisowsky, Minnis, and Sutherland,
2017).
Letter of recommendation
To,
Directors of AMP Limited
Company is facing the issues influenced by the several positive and negative impacts
of the market condition. From the report analysis is has been recorded that the company is
facing a loss in its business in long run. Irrespective this continuous poor performance
company has made a profitable business in the year 2017 but company business also recorded
high financial leverage and les return on capital employed that is not good for the company
business in long run. Company has a zero inventory ratio as there was neither any cost of
operation nor it made any sales. Company has maintained only its debt equity of 95% which

Financial Analysis of AMP Limited 21
is too high and will result to the less level of cost of capital and its business in the long term.
Company had fluctuating share price which was very less in the year 2016 and higher in2017.
This fluctuating share price is not good to attract new investment for company’s future
business and making a negative impact on the company profile in the market. This can be
inferred from the financial analysis that the lower cost of capital company is recording is the
only element of the business making a positive impact on the business growth and this can be
used by the management in preparing an effective strategy to maintain this lower cost of
capital and regain the market value of company along with showing a profitable business
(Altman, et al. 2017).
Conclusion
There are several financial tools that have been used to analysis and evaluate the
financial performance of AMP Limited. It is observed from the above financial analysis that
the company has faced a dramatic loss in the last five years. But in the year 2017, company
has shown a profit comparative to that of in 2016. Including this fact, in the last five years
graph of share price issued by the company has shown a total downfall of 10% which reflects
a poor business of the company. The increasing profit and company’s ability to survive could
be measured by using its gearing ratio and profitability which company has increased
throughout the time. Now in the end, it could be inferred that AMP limited needs to increase
the current assets and lower down the debt portion if it wants to survive in long run.

9. References
Altman, E.I., Iwanicz‐Drozdowska, M., Laitinen, E.K. and Suvas, A., 2017. Financial
Distress Prediction in an International Context: A Review and Empirical Analysis of
Altman's Z‐Score Model. Journal of International Financial Management &
Accounting, 28(2), pp.131-171.
AMP Limited (2015). Annual report. Available at
https://corporate.amp.com.au/content/dam/corporate/shareholdercentre/files/reports/2018/
Investor_and_annual_reports/2017%20annual%20report%2020%20March%202018.pdf.,m.,
Accessed on 22nd May 2018
AMP Limited. (2016). Annual report. Available at
https://corporate.amp.com.au/content/dam/corporate/shareholdercentre/files/reports/2018/
Investor_and_annual_reports/2017%20annual%20report%2020%20March%202018.pdf., Accessed
on 22nd May 2018
AMP Limited. (2017). Annual report. Available at
https://corporate.amp.com.au/content/dam/corporate/shareholdercentre/files/reports/2018/
Investor_and_annual_reports/2017%20annual%20report%2020%20March%202018.pdf., .,
Accessed on 22nd May 2018
AMP Limited. (2018). Annual report. Available at
https://corporate.amp.com.au/content/dam/corporate/shareholdercentre/files/reports/2018/
Investor_and_annual_reports/2017%20annual%20report%2020%20March%202018.pdf., ., ,
Accessed on 222nd May 2018
Brigham, E.F. and Ehrhardt, M.C., 2013. Financial management: Theory & practice.
Cengage Learning.
Chen, C.W., Collins, D.W., Kravet, T.D. and Mergenthaler, R.D., 2018. Financial statement
comparability and the efficiency of acquisition decisions. Contemporary Accounting
Research, 35(1), pp.164-202.

Financial Analysis of AMP Limited 23
Dahir, A.M., Mahat, F.B. and Ali, N.A.B., 2018. Funding liquidity risk and bank risk-taking
in BRICS countries: An application of system GMM approach. International Journal of
Emerging Markets, 13(1), pp.231-248.
Easton, P.D., McAnally, M.L., Sommers, G.A. and Zhang, X.J., 2018. Financial statement
analysis & valuation. Cambridge Business Publishers.
Lisowsky, P., Minnis, M. and Sutherland, A., 2017. Economic growth and financial statement
verification. Journal of Accounting Research, 55(4), pp.745-794.
Morningstar, 2018 retrieved, Available at http://www.morningstar.com/funds.html/ Accessed
on 22nd May, 2018
Yahoo finance, 2018 Available at https://in.finance.yahoo.com/., Accessed on 22nd May,
2018

10. Appendix
AMP Limited (AMP.AX)
Particulars (Amount in
Million 2014 2015 2016 2017
AUD$ AUD$ AUD$
EBIT 14,990 11,679 13,880 15,789
Interest 685 732 551 585
Net profit 884 972 -344 848
Total Assets 1,34,855 1,39,708 1,40,060 1,48,085
Total Liabilities 1,26,470 1,30,813 1,32,519 1,40,802
Shareholders' Equity 8,186 8,519 7,462 7,202
1. Rate of Return on Assets
2014 2015 2016 2017
A. Net income 884 972 -344 848
B. Total assets 1,34,855 1,39,708 1,40,060 1,48,085
(A/B) 0.66% 1% 0% 1%
x
2014 2015 2016 2017
A. Net income available to equity
shareholders. 884 972 -344 848
B. Shareholder’s Equity 8,186 17,981 7,462 7,202.00
(A/B) 10.80% 5.41% -4.61% 11.77%
3. Debt Ratio
2014 2015 2016 2017
A. Total Liabilities 1,26,470 1,30,813 1,32,519 140802
B. Total assets 1,34,855 1,39,708 1,40,060 1,48,085.0
0
(A/B) 94% 94% 95% 95%
Gearning Ratio
2014 2015 2016 2017
Gearning Ratio 5% 6% 4% 4%

Financial Analysis of AMP Limited 25
Date
Adj
Close AMP Limited (AMP.AX)
Adj Close (All ordinary
share index)
Average
Return
30-04-
2016 null null
31-05-
2016
4.4258
38 4947.899902
30-06-
2016
4.9833
57 - 5151.799805 0.04
31-07-
2016
4.5116
11
-
0.09 5316 0.03
31-08-
2016
4.6965
61 0.04 5447.799805 0.02
30-09-
2016
4.0650
16
-
0.13 5310.399902
-
0.03
31-10-
2016
4.1806
51 0.03 5644 0.06
30-11-
2016
4.4830
81 0.07 5529.399902
-
0.02
31-12-
2016
4.4475
01
-
0.01 5525.200195
-
0.00
31-01-
2017
4.3407
61
-
0.02 5402.399902
-
0.02
28-02-
2017
4.7905
58 0.10 5502.399902 0.02
31-03-
2017
4.9570
25 0.03 5719.100098 0.04
30-04-
2017
4.6703
31
-
0.06 5675
-
0.01
31-05-
2017
4.7998
06 0.03 5761 0.02
30-06-
2017
4.9847
69 0.04 5903.799805 0.02
31-07-
2017
4.7165
72
-
0.05 5947.600098 0.01
31-08-
2017
4.6493
02
-
0.01 5761.299805
-
0.03
30-09-
2017
4.7840
64 0.03 5764 0.00
31-10-
2017
4.9188
27 0.03 5773.899902 0.00
30-11-
2017
4.9958
34 0.02 5776.299805 0.00
31-12-
2017
5.0535
89 0.01 5744.899902
-
0.01
31-01-
2018
5.0920
93 0.01 5976.399902 0.04
28-02-
2018 4.99
-
0.02 6057.200195 0.01
31-03- 4.04 - 6167.299805

2018 0.19 0.02
30-04-
2018 3.93
-
0.03 6130.399902
-
0.01
23-05-
2018 3.93 - 6131.399902 0.00