Financial Analysis of BAPCOR

FINANCIAL ANALYSIS OF
BAPCOR
Running Head: Financial Analysis of BAPCOR

Financial Analysis of BAPCOR
(i) Executive Summary
This report provides financial analysis of our company (BAPCOR) and its
comparison with our competitor (ADAIRS). Our company generates lower profits
using its total resources as compared to our competitor. This report provides
recommendation to improve its profitability.
BAPCOR is a major automotive after-market parts, equipment, accessories and
services supplier having widespread network of more than 900 sites in Australia,
New Zealand and Thailand. ADAIRS is a leading home furnishings retailer operating
more than 160 stores in Australia and New Zealand.
The report lists the objectives and long-term plan of both the companies. The main
objectives of BAPCOR is to increase its existing network, to grow its home-brand
product content and to increase its presence in Asia. The main objectives of ADAIRS
is to improve its distribution network, increased focus on product differentiation and
range expansion, to have one of the best omni-retail capabilities and to increase its
international presence.
The report calculates the financial ratios of both the companies using financial
information from their 2019 annual reports. Various ratios calculated in this report are
liquidity ratios, efficiency ratios, solvency ratios, profitability and return ratios.
This report discusses the difference related to liquidity, capital structure and asset
management efficiency between BAPCOR and ADAIRS. It is seen that the overall
liquidity of our company is higher than our competitor’s liquidity. Our company has
high total liabilities on its balance sheet in proportion to its total assets. But the
interest-bearing borrowings are not that high. Our competitor has lower financial
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Financial Analysis of BAPCOR
leverage as compared to our company. Our operating profits are nearly ten times our
annual interest obligations but it is still lower than our competitor’s. The overall asset
management efficiency of our company is lower as we produce lower sales from our
total assets than our competitor. It can be due to our large balance sheet because of
various business acquisitions that have not yet contributed enough to the overall
revenues.
The report identifies that our operating profitability as well as returns on
shareholders’ investments are lower than our competitor’s. To increase its
profitability, we need to overcome the issues relating to excessive competitive
pressure and loss-making immature stores. So, it is recommended that the
management should focus on increasing the efficiency of its existing stores. Also,
our company should spend more on advertisement and R&D to have more pricing
power.
Finally, this report discusses the extent of capital expenditures by both the
companies in 2019. It is noticed that our firm’s capital expenditures were quite higher
than the competitor and they were financed by the mix of debt and equity.
Contents
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Financial Analysis of BAPCOR
(ii) Objectives and long-term plans......................................................................3
(iii) Financial Ratios............................................................................................. 6
(iv) Liquidity, capital structure and asset management efficiency...........................7
(v) Operating profitability.................................................................................... 8
(vi) Returns on shareholders’ investment...........................................................10
(vii) Capital expenditures.................................................................................... 11
(viii) Conclusion and Recommendations..............................................................12
(ix) References.................................................................................................. 14
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