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Financial Analysis Assignment: Financial Performance

   

Added on  2020-05-28

21 Pages5548 Words396 Views
Running Head: Finance For Managers 1

Finance For Managers2Executive SummaryThis report has been prepared to analyze the financial performance of an organization,Westpac Banking Corporation. In this report, for understanding the financial analysis process in a better way, financial statements of Westpac Banking Corporation Australia has been evaluated. Financial statements include income statement, cash flow analysis and balance sheet. This method assists the organization to make better decision about the profit, performance and the position of the company.

Finance For Managers3Introduction.......................................................................................................................3Company overview...........................................................................................................3Financial statements of the company................................................................................3Ratio analysis................................................................................................................3Horizontal analysis.......................................................................................................4Vertical analysis............................................................................................................5Cash conversion cycle..................................................................................................6Competitor’s analysis.......................................................................................................6Conclusion........................................................................................................................6References.........................................................................................................................8Appendix.........................................................................................................................10

Finance For Managers4Introduction:Analysis over financial reports of a company is a financial analysis process which is done by the financial analyst, chief financial officers, investors and other stakeholders of the company to evaluate the financial performance of the company. Financial reports of an organization include income statement, cash flow analysis and balance sheet. This method assists the organization to make better decision about the profit, performance and the positionof the company (Warren, Reeve & Duchac, 2011). Further, the analysis over the financial reports of the company is usually done by the financial analyst to evaluate the changes into the profits, performance and the position of the company. For understanding the financial analysis process in a better way, financial statements of Westpac Banking Corporation Australia has been evaluated. Company overview:Westpac Banking Corporation is normally known as Westpac. It is an Australian bankwhich offers financial services to its clients. Headquarter of the company is in Westpac place,Sydney. This bank is one of top 5 largest banks in Australia. Around 13.1 million people are entertained by this bank and it has the largest branch network in Australia. The total revenue of the company is continuously increasing and expressing about a better financial position of the company (Turner & Thayer, 2001). Further, this bank mainly offers the services related tofinance insurance, corporate banking, consumer banking, investment management, investment banking, credit cards, global wealth management and mortgages. Financial statements of the company:Financial statements of an organization include income statement, cash flow analysis and balance sheet. Financial statement analysis is a process which evaluates about the financial position of an organization. For this reports, financial statements of Westpac Banking Corporation has been analyzed. Through the evaluation over the financial statement of the company, it has been analyzed that the various changes have taken place into the performance of the company in last 3 years (Dixon and Monk, 2009). The income statement of the company expresses that the few negative changes have taken place into the profits of the company in 2016 in context with 2015. Further, the balance sheet and cash flow statementof the company expresses that the company is performing well in the industry. Ratio analysis:

Finance For Managers5For analyzing the financial statements in a better way, ratio analysis study has been done. Ratio analysis is one of the method of financial analysis which express about the various financial positions and the performance of an organization. Various ratios such as profitability ratios, efficiency ratios, liquidity ratios, solvency ratios etc have been calculated to reach over a conclusion. Profitability ratios of the company explain that the profit position of the company is quite good (Weygandt, Kimmel & Kieso, 2009). Net profit margin of the company is 23.37%, 24.78% and 23.44% in 2016, 2015 and 2014 respectively. It expresses that the profit margin has been reduced in 2016 but still, it is better. Further, the return on equity has also been evaluated and it has been found that the net profit of the company has been reduced in context of equity in 2016.Further, liquidity ratios have been calculated and the current ratio and quick ratios of the company has been measured for last 3 years. Current ratios and quick ratios of the company explain that the bank is required to enhance the level of the current assets in comparison with current liability to manage the short term debt obligation position. The position and the performance of the company in terms of managing the current assets and liabilities are not at all good (Hillier, Grinblatt & Titman, 2011). Further, the solvency and efficiency position of the company has also been analyzed to evaluate the performance of the company. Through the calculations, it has been evaluated that the capital structure position of the company is not competitive (Sadler, 2003). This company is required to reduce the level of the debt in terms of equity to make optimal capital structure (Gapenski, 2008). Further, the efficiency ratios of the company expresses that the company is required to reduce the level of the payment collection period so that the working capital of the company could be managed in a better way and at the same time, the cost of thecompany could also be controlled. Horizontal analysis:Further, for analyzing the financial statements of the company, horizontal analysis hasbeen done. Horizontal analysis explains about the changes in the financial reports of an organization in context with the last year financial reports. Horizontal analysis is one of the methods of financial analysis which express about the various changes into the financial position of an organization (Stratton, SAS Institute Inc., 2009). Further, it also explains that the changes are in the favour of the company or not. It is helpful for the company to analyze with competitive companies as well.

Finance For Managers6The study of horizontal analysis over income statement of the company depicts that the total income of the company has been reduced by 1.48% from 2015 in 2016. Further, it depicts that the net income of the company has been better from last year by 6.13%. It explains that the position of the company is getting better year by year. More, through the study, it has also been found that the net profit of the company has been lower by 7.17% in 2016. Further, it has also been added through the evaluation part that the company is requiredto look over the financial performance again and make few changes to enhance the performance (Snyder & Davenport, 2013). Further, the study of horizontal analysis over balance sheet of the company depicts that the total assets of the company has been enhanced by 3.33% from 2015 in 2016. Further, it depicts that the total liabilities of the company has been enhanced from last year by 2.90%. It explains that the position of the company is getting better year by year. More, through the study, it has also been found that the total equity of the company has been enhanced by 9.46% in 2016 (Marinovic, 2013). Further, it has also been added through the evaluation part that the company is required to look over the financial performance again and make few changes to enhance the performance.Vertical analysis:Further, for analyzing the financial statements of the company, vertical analysis has been done. Vertical analysis explains about the changes in the financial reports of an organization in context with the basic figures such as total income, total assets and total equity and liabilities of the company. Vertical analysis is one of the methods of financial analysis which express about the various changes into the financial position of an organization (Larcker, Richardson & Tuna, 2007). Further, it also explains that the changes are in the favour of the company or not. It is helpful for the company to analyze with competitive companies as well. The study of vertical analysis over income statement of the company depicts that the loans and leases are the main operations of the company through which income has been generated by the company. Further, it depicts that the total expenses level of the company hasbeen higher from last year in current year. It explains that the position of the company is getting bad and company is required to make few changes for its betterment. More, through the study, it has also been found that the net profit of the company has been lower by few % from 2015 in 2016 (Kinney & Rajborn, 2010). Further, it has also been added through the

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