Financial Decision Making of A 2 Milk and Tanui Group Holdings Limited

The study titled “Financial Decision Making of A 2 Milk and Tanui Group Holdings Limited” analyzes the financial decision making of A 2 Milk and Tanui Group Holdings Limited. It includes a financial statement trend analysis and recommendations for both companies.

Running head: FINANCIAL DECISION MAKING OF A 2 MILK AND TAINU GROUP
HOLDINGS LIMITED
Financial Decision Making of A 2 Milk and Tanui Group Holdings Limited:
Name of the Student:
Name of the University:
Student ID:
Author note:

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FINANCIAL DECISION MAKING OF A 2 MILK AND TAINU GROUP HOLDINGS
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Executive Summary
The study titled “Financial Decision Making of A 2 Milk and Tanui Group Holdings Limited”, is a
financial analysis of a New Zealand listed company A 2 Milk and a Maori company, Tainu Group
Holdings Limited. The study discusses the business environment of the Maori company and also
does a horizontal and vertical financial statement trend analysis of both the company for the
purpose of financial decision making. In the study, on the basis of the financial analysis, necessary
recommendations are suggested to both the companies and it is concluded that A 2 Milk company
has a stronger financial position than the Tanui Group Holdings.

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Table of Contents
1. Introduction......................................................................................................................................4
2. Critical Analysis of Tainui Group Holdings’ Operating Environment:..........................................4
2.1 Economic and Social Environment:..........................................................................................4
2.2 Legal Environment:...................................................................................................................4
2.3 Taxation System:.......................................................................................................................5
2.4 Accounting Standard and Reporting System:............................................................................5
2.5 Iwi/Maori Value in Business:....................................................................................................6
3. Analysis of Financial Statements and Valuation of Financial Assets:............................................6
3.1 Common Size Analysis..............................................................................................................6
3.1.1. Horizontal Common Size Analysis....................................................................................6
3.1.2. Vertical Common Size Analysis:.....................................................................................11
3.2 Ratio Analysis:.........................................................................................................................15
3.2.1 Quick ratio and Current Ratio:..........................................................................................15
3.2.2. Return on Equity:.............................................................................................................17
3.2.3 Net Profit Margin..............................................................................................................18
4.1 Liquidity ratios.............................................................................................................................21
4.1.1. Inventory management........................................................................................................21
4.1.2. Receivable Management......................................................................................................22
4.1.3. Payable Management...........................................................................................................23
4.2 Profitability Ratios.......................................................................................................................25
4.2.1 Inventory management.........................................................................................................25

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4.2.2 Receivable management.......................................................................................................26
4.2.3 Working Capital Management..............................................................................................27
5. Recommendations..........................................................................................................................29
6. Conclusion.....................................................................................................................................29
References and Bibliography.............................................................................................................31
Appendix............................................................................................................................................34

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1. Introduction
A2milk Limited and Tainu Group Holdings are both New Zealand based companies, out of
which the A2Milk is NZX registered company, whereas the Tainui Group Holdings Limited is a
Maori company (thea2milkcompany.com, 2019). Even after being from the same country and
environment, there is a huge different in the both businesses, because they are a completely
different type of organisations. Hence, both the sector is analysed critically through their operating
environment, trend analysis of their financial statement and also by analysing the liquidity,
profitability, working capital management and inventory management.
Tainui Group Holdings Limited is kiwi based private company. The company is owned by
the Waikato Tainui of iwi. The company provides services in tourism, has its main interests in
fisheries, property, tourism and forestry. The company was founded in the year 1998, having its
headquarters in Hamilton, New Zealand and have invested in many properties across the world
(Henry, Dana & Murphy, 2018).
2. Critical Analysis of Tainui Group Holdings’ Operating Environment:
2.1 Economic and Social Environment:
New Zealand as one of the most developed country in the world it has one of the largest
GDP in the world. The overall GDP of New Zealand is $20,585.28 crores, and the exchange of the
currency of New Zealand to United States is $0.67.
Thus, the same economic environment is applicable to the Maori businesses also, and hence
due to such rich economy, the businesses have a great advantages on its assets owned. The value of
the business gets affected by the country’s economy, and thus the Maori businesses have a great
business value.

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2.2 Legal Environment:
The Legal environment of Maori businesses is based on its operations, where the business is
mainly based on assets owned collectively and thus governed by specific legislations that only
applies to the Maori land and assets. The Acts under which the legislations are applicable are – The
Maori Reserved Lands Act (1997), the Maori Fisheries Act (2004) and Te Ture Whenua Maori act
(1993). The Maori organisation’s operations under this act, helps in protecting their business and
their consumer as well.
The Governance and the acts are related to the Maori land and resources, and thus
undertaken based on an agreement, which is Treaty settlements. Treaty settlements is an agreement
helps the Maori organisation in purchasing and selling their assets under a special clause, to the
government agencies, since the company cannot sell their assets or deal with any agency directly.
Treaty settlements are most of the time is finalised by the Act of Parliament, which includes the law
in terms of settlement, and also includes provision related to assets acquisition, assets management
and governance (Henry, Dana & Murphy, 2018).
2.3 Taxation System:
The iwi/Maori organisations follows the New Zealand taxation systems, and follows the
New Zealand Taxation rules. Taxes are collected in New Zealand are received at a national level by
the Inland Revenue Department (IRD) on the behalf of the Government of New Zealand. Maori
company according to the New Zealand tax standard, pays the standard tax rate on the total revenue
of the company.
In the new tax reform statement of 2017-2018, the taxes are charged on the income started
$14,000 with a tax rate of 10.65%, and from $14,000 to $48,000 tax rate charged is 17.5%, and the
maximum tax rate charged is 48% from the amount above $70,000. Hence, this specific rate chart
is also used by the Maori companies to pay its annual tax on its revenue generated from its
operations. Considering their income, a tax rate will be charged from the companies.

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2.4 Accounting Standard and Reporting System:
The New Zealand follows the NZ-IFRSs Standards and Interpretation, which also followed
by the Maori Companies to prepare their financial statement and financial report. The companies in
New Zealand prepares and presents the financial report on the basis of New Zealand accounting
standard and approved by the External Reporting Board.
2.5 Iwi/Maori Value in Business:
Maori businesses have implemented some concepts and principles in their businesses
approaches. The first policy is the “Te kaupapa pakihi”, which means ‘The foundation of the
business’, which refers to the fundamental principles of the businesses, across the business domains
irrespective of the size of the business. This fundamental includes many policies- (i) Putake, (ii)
Turanga, (iii) Tikanga, (iv) Kaitiakitanga, (v) Rangatiratanga, which are described properly in their
social report. The above fundamentals describes their principle of leadership, origin of the business
and others.
3. Analysis of Financial Statements and Valuation of Financial Assets:
3.1 Common Size Analysis
3.1.1. Horizontal Common Size Analysis
Horizontal balance sheet trend analysis of A 2 Milk company, for five year of periods:

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Particular 2013 2014 2015 2016 2017 2018
Current Asset
Cash & short term deposits 100.00% 79.15% 38.13% 1138.56% 174.48% 281.32%
Trade and other recivables 100.00% 112.24% 146.00% 113.68% 160.49% 89.87%
Prepayments 100.00% 83.03% 484.49% 156.45% 238.14% 100.16%
Inventory 100.00% 752.43% 86.80% 1084.52% 54.11%
Current tax asset 100.00%
Total current asset 100.00% 107.20% 118.37% 301.36% 141.59% 195.93%
Non-current asset 100.00%
Property,plant and equipment 100.00% 89.05% 101.51% 87.06% 103.22% 116.07%
Investments in subsidiaries 100.00%
Non-current recivables in associates and joint ventures 100.00%
Loans to subsidiries 100.00%
Goodwill 100.00% 112.99% 103.83% 94.43%
Other Financial asset 100.00% 301.15%
Other Intangible asset 100.00% 138.14% 148.55% 95.23% 223.85% 0.00%
Deffered tax 100.00% 95.95% 115.88% 183.31% 58.89% 248.77%
Total non-current asset 100.00% 103.26% 111.09% 97.86% 308.85% 252.82%
Total asset 100.00% 105.85% 115.95% 236.48% 163.66% 210.09%
Liabilities and shareholders equity
Liabilities
Current liability
Loans from subsidiries 100.00%
Account Payable 100.00% 147.81% 158.64% 233.34% 107.83% 162.85%
Current tax liabilities 100.00% 3.33% 1788.24% 291.33% 163.10%
Total current liabilities 100.00% 144.22% 161.97% 265.29% 133.25% 162.92%
Non-current liabilities
Accounts payable 100.00% 155.00% 152.42% 120.63% 43.86% 120.00%
Deffered tax liability 100.00% 3.46%
Total non-current liabilities 100.00% 155.00% 1037.10% 20.68% 37.59% 120.00%
Total liabilities 100.00% 144.29% 168.00% 254.89% 132.92% 162.88%
Stockholders equity
Share capital 100.00% 102.39% 100.05% 151.27% 102.88% 105.41%
Retained earnings 100.00% 99.96% 108.72% -16.77% 2173.80% 305.95%
Foreign currency translation reserve 100.00% 307.43% 85.69% 158.50%
Employee equity settled pyments reserve 100.00% 165.06% 135.87% 175.79% 168.67% 1014.90%
Total Equity 100.00% 97.85% 99.97% 226.98% 181.46% 230.12%
Total liabilities & Eqity 100.00% 105.85% 115.95% 236.48% 163.66% 210.09%
Balance sheet trend analysis
Table 1: Table showing balance sheet trend analysis of A2 Milk Ltd
(Source: As Created by Author)
The above trend analysis shows the change in the equity have increased to 230.12% in the
year 2018 from the base year of 2013, where the change of liability has reduced to 162.88% in the
end of 2018, from which it can be assumed that the company is slowly approaching towards equity
financing than debt financing.
The below is the horizontal income statement trend analysis of A 2 Milk for five years:

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Particular 2013 2014 2015 2016 2017 2018
Sales 100.00% 117.30% 139.94% 227.71% 168.58% 155.21%
Cost of sale 100.00% 116.70% 141.79% 200.72% 141.80%
Gross margin 100.00% 118.39% 136.66% 277.50% 174.51% 176.21%
Interset income 100.00% 157.99% 32.97% 334.67%
Other revenue 100.00% 60.54% 136.61% 89.54% 101.82%
Administartive expenses 100.00% 146.47% 130.77% 175.89% 120.02% 145.66%
Finance Cost 100.00% 67.50% 160.49% 157.69% 65.85% 102.22%
Distribution expenses 100.00% 130.05%
Marketing expenses 100.00% 214.31% 105.64% 321.83% 127.31%
Occupancy expenses 100.00% 268.24% 108.55% 155.15%
Other expenses 100.00% 130.69% 166.52% 140.73% 79.41% 117.61%
Profit before tax and share of associate / joint venture earning 100.00% 23.43% 61.56%
Share of net profits/loss of associates 100.00% 36.60%
Profit before tax 100.00% 13.94% 177.92% 4082.67% 266.45% 203.25%
Income tax expenses 100.00% 68.01% 474.93% 648.37% 222.77% 179.75%
Profit after tax 100.00% 0.24% -20910.00% -1455.57% 297.82% 215.88%
Other comprehensive income/loss 100.00%
Items that will be not be reclassified to profit or loss 100.00%
Items that may be reclassified to profit or loss 100.00%
Foreign currency translation gain/loss 100.00% 194.17% -21.21% -350.21% 56.75% 3.90%
Listed investment fair value gain 100.00% 813.20%
Total Comprehensive income/loss 100.00% 248.73% 25.34% -2383.03% 376.90% 298.03%
Table 2: Table showing Income Statement trend analysis of A2 Milk Ltd
(Source: As Created by Author)
From the above table it can be concluded that the company have tried to maintain a good
and constant growth on its profit, but as shown in the table in the year 2016 it has incurred a huge
loss for that period, however the company have managed to recover that in the next year.
Figure 1: Figure showing total comprehensive income/loss of A2 Milk Ltd
(Source: As Created by Author)

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The above chart is the graphical representation of the above horizontal income statement
trend analysis of the company, where the 4th bar is showing the loss in the year 2016.
Horizontal balance sheet trend analysis of Tainu Group Holdings, for last five year of
periods:
Particular 2013 2014 2015 2016 2017 2018
Current Asset
Cash and cash equivalents 100.00% 109.72% 102.82% 102.29% 109.41% 186.37%
Trade and other recivables 100.00% 167.09% 110.13% 125.16% 856.82% 19.87%
Other financial assets 100.00%
Inventory 100.00% 348.67% 4.17% 146.69% 635.99% 117.98%
Biological assest- livestock 100.00% 98.68% 302.43% 142.17% 117.47%
Non-current asset classified as held for sale 100.00% 1.77%
Total current asset 100.00% 117.81% 97.30% 198.29% 106.80% 113.35%
Non-current asset 100.00%
Other receivables 100.00% 163.38% 291.80% 110.84% 8.40% 106.73%
Other financial assets 100.00% 104.66% 156.78% 101.21% 103.63% 119.96%
Investments in associates 100.00% 196.72% 99.11%
Investments in Subsidiaries 100.00%
Intangible assets 100.00% 219.13% 46.40% 105.31% 101.87% 100.62%
Biological assets - trees 100.00% 105.95% 109.53% 122.72% 135.07% 136.29%
Property,plant and equipment 100.00% 155.14% 100.39% 105.45% 69.82% 106.95%
Investment properties 100.00% 103.60% 102.99% 69.95% 105.55% 112.67%
Te Wherowhero title properties 100.00% 124.39% 103.61% 134.95% 171.90% 98.36%
Total non-current asset 100.00% 113.66% 112.88% 86.61% 99.20% 108.46%
Total asset 100.00% 114.42% 109.95% 105.22% 101.59% 110.07%
Liabilities and shareholders equity 100.00%
Liabilities 100.00%
Current liability 100.00%
Trade and other payables 100.00% 207.20% 64.84% 89.26% 68.27% 107.42%
Accured revenue 100.00% 98.91%
Interest bearing liabilities 100.00% 0.41% 3596.77% 4687.26%
Advances- subsidiaries 100.00% 1.41%
Other financial liabilities 100.00% 836.42% 120.66% 534.98% 16.99% 104.31%
Total current liabilities 100.00% 84.29% 76.97% 741.02% 7.34% 107.11%
Non-current liabilities 100.00%
Accured revenue 100.00% 98.86%
Other payables 100.00% 39.96%
Interest bearing liabilities 100.00% 144.00% 117.10% 15.67% 298.55% 116.72%
Deffered tax liability 100.00%
Other financial liabilities 100.00% 28.99% 163.85% 32.85% 201.26% 83.45%
Total non-current liabilities 100.00% 136.57% 116.01% 16.05% 366.46% 112.35%
Total liabilities 100.00% 124.66% 110.00% 94.20% 61.94% 111.82%
Stockholders equity 100.00%
Accumulated comprehensive revenue and expenses 100.00% 110.08%
Retained earnings 100.00% 111.30% 110.96% 109.17%
Revaluation reserves 100.00% 76.51% 106.07% 108.62% 105.63% 90.80%
Non-controling interest 100.00% 175.09% 62.04% 102.46%
Total Equity 100.00% 111.22% 109.93% 109.09% 113.60% 109.78%
Waikato-tainui Balance sheet trend analysis

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Table 3: Table showing balance sheet trend analysis of Tainu Group Holdings
(Source: As Created by Author)
In the above table, the change of the assets and liabilities is shown in percentage where it is
also being observed that the financial position of the company is very strong as the growth change
of the assets is higher than that of the liabilities.
Horizontal income statement trend analysis of Tainu Group Holdings for last five years:
Particular 2013 2014 2015 2016 2017 2018
Revenue 100.00% 117.50% 110.80% 98.82% 88.10% 69.10%
Other income 100.00% 650.00% 39.56% 105.16% 205.63% 87.08%
Total income 100.00% 122.14% 107.50% 98.93% 90.23% 69.85%
Expenses 100.00% 131.29% 118.29% 94.24% 109.12% 68.74%
Finance cost-bank loans 100.00% 99.75% 125.97% 87.85% 61.92% 76.78%
Finance income - Short term deposits 100.00% 160.94% 116.32% 85.55% 98.64% 128.11%
Share of net profits/loss of associates 100.00% 150.00% 296.84% 584.08% 26.70% -113.54%
Net operating profit for the year 100.00% 129.66% 68.17%
Other gains- net 100.00% 104.87% 45.98% 312.10% 231.80% 35.39%
Other income 100.00% 166.77%
Social investment 100.00% 68.56%
Surplus from tribal activities 100.00% 345.47%
Settlement 100.00% 29.90% 333.77% 19.22%
Grant expenses 100.00% 86.31% 364.19% 39.31%
Net profit before tax 100.00% 62.56% 115.74% 98.00% 175.32% 77.31%
Tax credit 100.00% 193.81% -0.39%
Net profit for the year 100.00% 63.99% 117.49% 94.38% 175.35% 76.88%
Other comprehensive income/loss 100.00%
Gain/loss on revaluation of farm and other properties 100.00% -439.83% 26.74% 150.55% 204.77% -114.62%
Share of other comprehensive income 100.00% -201.01%
Total Comprehensive income/loss 100.00% 67.18% 113.72% 94.92% 174.94% 74.79%
Table 4: Table showing Horizontal Income Statement trend analysis of Tainu Group
Holdings
(Source: As Created by Author)
The company has shown in 2015 and 2017 the most impressive growth, because the net
income of both the year is showing the more than 100%, as per the base year. In 2017 the income is
the highest in the last five year, but the net operating income and the total income for the year is not

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the highest, which means they managed to earn the maximum profit for that year by reducing
expenses and the costs.
Figure 2: Figure showing total comprehensive income/loss of Tainu Group Holdings
(Source: As Created by Author)
3.1.2. Vertical Common Size Analysis:
The below is the vertical balance sheet trend analysis of A 2 Milk company, for five year of
periods:

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Particular 2013 2014 2015 2016 2017 2018
Current Asset
Cash & short term deposits 27.88% 20.85% 6.86% 33.01% 35.19% 47.12%
Trade and other recivables 33.67% 35.70% 44.95% 21.61% 21.19% 9.06%
Prepayments 3.31% 2.60% 10.86% 7.18% 10.45% 4.98%
Inventory 1.02% 7.28% 5.45% 25.01% 8.27% 8.87%
Current tax asset 0.29%
Total current asset 65.88% 66.72% 68.12% 86.81% 75.10% 70.04%
Non-current asset
Property,plant and equipment 14.21% 11.96% 10.47% 3.85% 2.43% 1.34%
Investments in subsidiaries
Non-current recivables in associates and joint ventures 0.52%
Loans to subsidiries
Goodwill 12.94% 13.81% 12.37% 4.94%
Other Financial asset 18.04% 25.86%
Other Intangible asset 4.19% 5.47% 7.01% 2.82% 3.86% 2.09%
Deffered tax 2.25% 2.04% 2.04% 1.58% 0.57% 0.67%
Total non-current asset 34.12% 33.28% 31.88% 13.19% 24.90% 29.96%
Total asset 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Liabilities and shareholders equity
Liabilities
Current liability
Loans from subsidiries
Account Payable 96.95% 99.31% 93.78% 85.85% 69.65% 229.82%
Current tax liabilities 2.41% 0.00% 1.97% 13.80% 30.26% 30.32%
Total current liabilities 99.36% 99.31% 95.75% 99.65% 99.90% 99.93%
Non-current liabilities
Accounts payable 0.64% 0.69% 0.63% 0.30% 0.10% 0.07%
Deffered tax liability 3.63% 0.05%
Total non-current liabilities 0.64% 0.69% 4.25% 0.35% 0.10% 0.07%
Total liabilities 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Stockholders equity
Share capital 140.59% 147.10% 147.20% 98.10% 55.62% 25.47%
Retained earnings -40.02% -40.88% -44.46% 3.28% 39.35% 52.31%
Foreign currency translation reserve -3.62% -11.37% -9.74% -6.80%
Employee equity settled pyments reserve 3.05% 5.15% 7.00% 5.42% 5.04% 22.21%
Total Equity 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
a2 Milk Company Limited
Table 5: Vertical balance sheet trend analysis of A 2 Milk company
(Source: As Created by Author)
The below is the vertical income statement trend analysis of A 2 Milk company for the last
five years:

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Particular 2013 2014 2015 2016 2017 2018
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of sale -64.34% -64.00% -64.85% -57.16% -48.08% -49.66%
Gross margin 35.66% 36.00% 35.15% 42.84% 44.34% 50.34%
Interset income 0.31% 0.41% 0.10% 0.14%
Other revenue 0.39% 0.20% 0.20% 0.08% 0.05% 0.04%
Administartive expenses -8.51% -10.62% -9.93% -7.67% -5.46% -5.12%
Finance Cost -0.13% -0.07% -0.08% -0.06% -0.02% -0.01%
Distribution expenses -4.40% -3.40% -2.91%
Marketing expenses -4.80% -8.77% -6.62% -9.36% -7.07% -7.98%
Occupancy expenses -0.18% -0.41% -0.32% -0.22%
Other expenses -13.32% -14.84% -17.66% -10.92% -5.14% -3.90%
Profit before tax and share of associate / joint venture earning 9.42% 1.88% 0.83%
Share of net profits/loss of associates -3.94% -1.23%
Profit before tax 5.48% 0.65% 0.83% 14.84% 23.45% 30.71%
Income tax expenses -1.11% -0.64% -2.18% -6.20% -8.20% -9.49%
Profit after tax 4.37% 0.01% -1.35% 8.63% 15.25% 21.22%
Other comprehensive income/loss
Items that will be not be reclassified to profit or loss
Items that may be reclassified to profit or loss
Foreign currency translation gain/loss -2.46% -4.07% 0.62% -0.95% -0.32% -0.01%
Listed investment fair value gain 2.25% 11.79%
Total Comprehensive income/loss -1.91% -4.06% -0.73% 7.69% 17.19% 33.00%
Table 6: Vertical income statement trend analysis of A 2 Milk company
(Source: As Created by Author)
The percentage change of the A2Milk’s overall net profit shows the overall change in the
net profit over years resulted to 33.00%, which is comparatively very impressive, the company has
a constant growth in the net income, which is managed by reducing its expenses.
Vertical balance sheet trend analysis of Tanui Group Holdings, for five year of periods:

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Particular 2013 2014 2015 2016 2017 2018
Current Asset
Cash and cash equivalents 16.96% 16.26% 15.20% 14.78% 15.92% 26.95%
Trade and other recivables 0.82% 1.20% 1.20% 1.43% 12.04% 2.17%
Other financial assets 4.04% 4.05%
Inventory 0.43% 1.30% 0.05% 0.07% 0.43% 0.46%
Biological assest- livestock 0.09% 0.08% 0.21% 0.29% 0.33% 0.37%
Non-current asset classified as held for sale 14.85% 0.26%
Total current asset 18.29% 18.84% 16.67% 31.41% 33.02% 34.01%
Non-current asset
Other receivables 1.98% 2.82% 7.49% 7.89% 0.65% 0.63%
Other financial assets 2.48% 2.27% 3.23% 3.11% 3.17% 3.46%
Investments in associates 1.47% 3.81% 4.19% 8.11% 7.30%
Investments in Subsidiaries
Intangible assets 2.24% 4.28% 1.81% 1.81% 1.81% 1.66%
Biological assets - trees 0.48% 0.45% 0.45% 0.52% 0.69% 0.86%
Property,plant and equipment 9.77% 13.24% 12.09% 12.12% 8.33% 8.09%
Investment properties 58.94% 53.37% 49.99% 33.24% 34.53% 35.35%
Te Wherowhero title properties 4.35% 4.73% 4.46% 5.72% 9.68% 8.65%
Total non-current asset 81.71% 81.16% 83.33% 68.59% 66.98% 65.99%
Total asset 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Liabilities and shareholders equity
Liabilities
Current liability
Trade and other payables 8.94% 14.87% 8.76% 8.30% 9.15% 8.79%
Accured revenue 0.05% 0.05%
Interest bearing liabilities 13.76% 0.05% 1.48% 73.42%
Advances- subsidiaries 0.20%
Other financial liabilities 0.07% 0.49% 0.54% 3.07% 0.84% 0.79%
Total current liabilities 22.78% 15.40% 10.78% 84.80% 10.05% 9.62%
Non-current liabilities
Accured revenue 17.77% 15.71%
Other payables 0.51% 0.16%
Interest bearing liabilities 70.93% 81.93% 87.22% 14.51% 69.92% 72.98%
Deffered tax liability 1.16%
Other financial liabilities 5.78% 1.34% 2.00% 0.70% 2.27% 1.69%
Total non-current liabilities 77.22% 84.60% 89.22% 15.20% 89.95% 90.38%
Total liabilities 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Stockholders equity
Accumulated comprehensive revenue and expenses 98.46% 98.73%
Retained earnings 96.26% 96.34% 97.24% 97.32%
Revaluation reserves 2.51% 1.73% 1.66% 1.66% 1.54% 1.27%
Non-controling interest 1.23% 1.94% 1.09% 1.03%
Total Equity 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Waikato-Tainui Common size Balance sheet
Table 7: Vertical balance sheet trend analysis of Tanui Group Holdings
(Source: As Created by Author)
Vertical income statement trend analysis of Tainu Group Holdings for last five years:

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Particular 2013 2014 2015 2016 2017 2018
Revenue 99.13% 95.36% 98.29% 98.18% 95.86% 94.84%
Other income 0.87% 4.64% 1.71% 1.82% 4.14% 5.16%
Total income 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Expenses -58.32% -62.69% -68.98% -65.71% -79.47% -78.21%
Finance cost-bank loans -21.30% -17.39% -20.38% -18.10% -12.42% -13.65%
Finance income - Short term deposits 6.39% 8.42% 9.11% 7.88% 8.61% 15.80%
Share of net profits/loss of associates 0.49% 0.61% 1.67% 9.89% 2.93% -4.76%
Net operating profit for the year 27.27% 28.95% 19.65% 19.18%
Other gains- net 47.48% 40.77% 17.44% 55.01% 141.32% 71.60%
Other income 64.18% 153.23%
Social investment -41.41% -40.65%
Surplus from tribal activities 22.76% 112.58%
Settlement 109.45% 26.80% 83.20% 16.17%
Grant expenses -11.11% -7.85% -26.60% -10.57%
Net profit before tax 173.09% 88.66% 95.46% 94.56% 183.73% 203.35%
Tax credit 2.02% 3.65% -0.01% -1.11%
Net profit for the year 173.09% 90.68% 99.11% 94.55% 183.73% 202.25%
Other comprehensive income/loss
Gain/loss on revaluation of farm and other properties -1.09% 3.93% 0.98% 1.49% 3.37% -5.54%
Share of other comprehensive income -0.92% 2.65%
Total Comprehensive income/loss 172.00% 94.61% 100.09% 96.04% 186.19% 199.36%
Waikato-Tainui Common Income Statement analysis
Table 8: Vertical income statement trend analysis of Tainu Group Holdings
(Source: As Created by Author)
Tainu Group Holdings for the last five years which is showing the percentage change in the
overall management of the income and expenses of the company. The company’s net income
changes in the year 2017, where the company have managed generate the maximum profit for the
company.
3.2 Ratio Analysis:
3.2.1 Quick ratio and Current Ratio:
The following is the calculation of Quick Ratio and Current ratio calculations for the last
five years of Tainu Group Holdings:

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FINANCIAL DECISION MAKING OF A 2 MILK AND TAINU GROUP HOLDINGS
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Figure 3: Current Ratio of Tainu Group Holdings
(Source: As Created by Author)
Tainu Group Holdings’s liquidity management is not that impressive for each year, where in
the year 2017, the company has the maximum amount current assets, with sufficient liquidity, but
in the year 2015, the company reported less number of liquid assets.
The following is the calculation of Quick Ratio and Current ratio calculations for the last
five years of A 2 Milk Limited:

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FINANCIAL DECISION MAKING OF A 2 MILK AND TAINU GROUP HOLDINGS
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Figure 4: Quick Ratio of A 2 Milk Limited
(Source: As Created by Author)
The quick ratio for A2Milk company is calculated by dividing its working capital (current
assets - current liabilities) for a year by its inventories for that year. The above graph states that the
company’s liquidity for the year 2017 is much more than the other year, and in the year 2015, the
same is the lowest.
3.2.2. Return on Equity:
Tainu Group Holdings Return on Equity ratio:
Figure 5: Return on Equity of Tainu Group Holdings
(Source: As Created by Author)
The return on equity of the Tainu Group Holdings at the 2012 is the maximum, but other
years’ comparative has the very less return on equity, which means the company doesn’t able to
generate maximum profit from the shareholder’s fund in the last four years.

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Return on Equity ratio of A 2 Milk Limited:
Figure 6: Return on Equity ratio of A 2 Milk Limited
(Source: As Created by Author)
The above ratio shows A2Milk limited’s profitability from the capital generated from equity
of the company. The graph shows that the company manages to earn a good portion of profitability
from the equity in the last 3 years, but before that, in 2014, the company had a very less return on
equity and in the year 2013 the company failed miserably to generate return on equity.
3.2.3 Net Profit Margin
The following is the calculation of Net Profit Margin ratio calculations for the last five
years of A 2 Milk Limited:

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Figure 7: Net profit margin ratio of A 2 Milk Limited
(Source: As Created by Author)
The above graph for A2Milk Limited shows a constant growth on the ratio over last 3 years,
where in the year 2013, the company couldn’t generate much revenue to contribute in its profit, and
in the year 2014, the net profit margin of the company is showing a negative balance, which means
that the company fails miserable to generate profit from its revenue. However it had an immense
growth in the last 3 years and in 2017, the company has the maximum net profit margin value.
The following is the calculation of Net Profit Margin ratio calculations for the last five
years of Tanui Group Holdings:

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FINANCIAL DECISION MAKING OF A 2 MILK AND TAINU GROUP HOLDINGS
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Figure 8: Net profit margin ratio of Tanui Group Holdings
(Source: As Created by Author)
The net profit margin for Tainu Group Holdings is stable over five years, and in the last two
years the profitability of the company from its revenue have increase even more and in the year
2017, the company has the maximum number of profit as per the graph.
3.3 Working Capital Management Analysis
Working capital ratio helps to identify the flow of cash in the organization and the
performance of the whole operating cycle of the business. If the working capital ratio of the
company is less than 1 then the company is unable to meet the short term obligations of the
business. The higher the ratio, better the flow of cash in the business which further indicates the
working capital ratio of the company is effective in that case.
3.4 Capital Budgeting Decision Analysis
Capital Budgeting of a company is used for evaluating the potential expenditures or
investments which are important amounts considered in this case. The capital budgeting decision is

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FINANCIAL DECISION MAKING OF A 2 MILK AND TAINU GROUP HOLDINGS
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analyzed in case of the large projects and further evaluating by using such tools and techniques
helps to identify and further take decisions regarding the acceptance or the rejection of the projects.
4.1 Liquidity ratios
4.1.1. Inventory management
The following is the calculation of Inventory turnover ratio calculations for the last five
years of Tanui Group Holdings:
Figure 9: Inventory turnover ratio of Tanui Group Holdings
(Source: As Created by Author)
From the above result of Tainu Group Holdings Company it can be stated that in the last
five years the company, the company had the best inventory management in the year 2015, which is
represented by the bar 2 in the above graph.
The following is the calculation of Inventory turnover ratio calculations for the last five
years of A 2 Milk Company:

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Figure 10: Inventory turnover ratio of A2 Milk Ltd
(Source: As Created by Author)
The inventory turnover ratio for the year 2014 of A2Milk is more than any other year, hence
in the year 2014, the inventory management of the company is far better than the other year. The
company does have a stable inventory management for each year.
4.1.2. Receivable Management
Tanui Group Holdings Average trade receivables turnover ratio:

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FINANCIAL DECISION MAKING OF A 2 MILK AND TAINU GROUP HOLDINGS
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Figure 11: Average Trade Receivables Turnover ratio of Tanui Group Holdings
(Source: As Created by Author)
As shown in the above table the average trade receivable of A2Milk for each year is same,
which means the ratio is constant, that it does have the major difference to show the difference in
each year in the average trade receivable turnover.
A 2 Milk Company Average trade receivables turnover ratio:
Figure 11: Average Trade Receivables Turnover ratio of A2 Milk Ltd
(Source: As Created by Author)
The above is the graphical representation of the ratio which is calculated by the net credit
sales of Tainu Group Holdings for each year and the average trade receivable of the company for
each year. Similarly, A2milk company, the result of the ratio for the company is also showing same
for very year, which means that the account trade receivable in this case is also constant like the
previous case.
4.1.3. Payable Management
Average trade payables turnover ratio of Tanui Group Holdings:

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FINANCIAL DECISION MAKING OF A 2 MILK AND TAINU GROUP HOLDINGS
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Figure 12: Average Trade Payables Turnover ratio of Tanui Group Holdings
(Source: As Created by Author)
The above table shown a comparison of Tainu Group Holdings’s payable management of
each year, where the base year or the year 2013 has the maximum value of the average trade
payable turnover, which means in the year 2013, the company has the best payable management.
Average trade payables turnover ratio of A 2 Milk:
Figure 13: Average Trade Payables Turnover ratio of A2 Milk Ltd

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FINANCIAL DECISION MAKING OF A 2 MILK AND TAINU GROUP HOLDINGS
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(Source: As Created by Author)
The above is the average trade payable ratio for the company A2Milk limited in 2015 has
reported a higher growth. The graph represents that the payable management of the company is
quite good and constant as there is no major differences between the other years and also the
A2Milk company has the better Payable management than the Tainu Group Holdings.
4.2 Profitability Ratios
4.2.1 Inventory management
Inventory turnover ratio of Tanui Group Holdings:
Figure 14: Inventory turnover ratio of Tanui Group Holdings
(Source: As Created by Author)
Tainu Group holdings has the maximum inventory management in the year 2014, hence can
say that the company’s profitability from the inventory is better in the year 2014.
Inventory turnover ratio of A 2 Milk Company

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FINANCIAL DECISION MAKING OF A 2 MILK AND TAINU GROUP HOLDINGS
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Figure 15: Inventory turnover ratio of A2 Milk Ltd
(Source: As Created by Author)
A2Milk limited has the maximum inventory management in the year 2014 and the
company’s profitability from the inventory is better in the year 2014, but the company is however it
has a better inventory management than the Tainu Group Holdings.
4.2.2 Receivable management
Average trade receivables turnover ratio of Tanui Group Holdings:

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FINANCIAL DECISION MAKING OF A 2 MILK AND TAINU GROUP HOLDINGS
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Figure 16: Average trade receivables turnover ratio of Tanui Group Holdings
(Source: As Created by Author)
As already discussed above in the liquidity ratios, this is the average trade receivable
turnover of the company Tainu Group Holdings. The profitability cannot be determined from its
trade receivables as it is constant for every year.
Average trade receivables turnover ratio of A 2 Milk Company:
Figure 17: Average trade receivables turnover ratio of A 2 Milk Company
(Source: As Created by Author)
The average receivable turnover for the company A2Milk is also constant for every year,
hence the profitability of the company cannot be calculated from its trade receivables.
4.2.3 Working Capital Management
Working capital ratio of A 2 Milk Company:

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Figure 18: Working Capital turnover ratio of A 2 Milk Company
(Source: As Created by Author)
A2Milk limited have very balanced working capital management in the year 2017,
and has the better working capital management in the last five years. To attain efficiency,
the company has made sufficient investment in the working capital management.
Working capital ratio of Tainui Holdings Company:
Figure 19: Working Capital turnover ratio of Tainui Holdings Company

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FINANCIAL DECISION MAKING OF A 2 MILK AND TAINU GROUP HOLDINGS
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(Source: As Created by Author)
The above graph states that Tainu Group Holdings doesn’t invest much in their working
capital and has a poor working capital management as compared to A2Milk Limited.
5. Recommendations
Followings are some of the critical recommendations for A 2 Milk Company on the basis of
the above discussions:
 The company has not generated more profit from their earnings. Thus, the company should
make better expense plan, as their ratio of the income and the expense is very low.
 The company’s liquid assets is very low, thus the financial position and the value getting
affected. Hence, the company should focus on the increase of the liquid assets.
Followings are some of the critical recommendations for Tanui Group Holdings on the basis of
the above discussions:
 The company working capital management is very poor as analysed above, thus the
company should increase their allocation to the working capital to maximize their earnings
from operations or they can prepare a reserve from the surplus of the company.
 Maori’s owned assets are their strongest point, but they are unable to manage their
expenses, so they should be more depending on debt financing than equity financing to
minimize its cost, and hence they have more than enough assets to repay its debt, it will not
affect the financial position of the company.
6. Conclusion
From the above Statement it can be concluded that A 2 Milk has a strong financial position,
as the debt to asset ratio of the company is quite higher than the requirement. It can also be
concluded that the main reason of the company’s successful operations is due to overall economical

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and legal environment of New Zealand. These business environment is giving comparative
advantages to the both the company from the external competitors. It can also can be concluded
from the above discussion about the tanui group Holdings is the cultural and social environment of
the company helps the company in its growth. The Maori company have a very strong financial
position, but the very less liquid cash to meet its debts, due to it’s the restrictions of their trading
and operations.

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References and Bibliography
"A2M Annual Report FY18 - The A2 Milk Company (ASX:A2M)." Listcorp.com. N.p., 2019.
Web. 7 Apr. 2019.
A2M Annual Report FY18 - The A2 Milk Company (ASX:A2M). (2019). Retrieved from
https://www.listcorp.com/asx/a2m/the-a2-milk-company/news/a2m-annual-report-fy18-
1956165.html
(2019). Retrieved from
https://thea2milkcompany.com/wp-content/uploads/A2_AR_2013_v16_web.pdf
(2019). Retrieved from
https://thea2milkcompany.com/wp-content/uploads/A2ML00022_a2_REPORT_Spreads_v
LR.pdf
(2019). Retrieved from
https://thea2milkcompany.com/wp-content/uploads/A2ML00022_a2_REPORT_Spreads_v
LR.pdf
(2019). Retrieved from https://thea2milkcompany.com/wp-content/uploads/The-a2-Milk-2016-
2017-Annual-Report-spreads.pdf
Spiller, C., Erakovic, L., Henare, M., & Pio, E. (2011). Relational well-being and wealth: Māori
businesses and an ethic of care. Journal of Business Ethics, 98(1), 153-169.
Henry, E. Y., Dana, L. P., & Murphy, P. J. (2018). Telling their own stories: Māori
entrepreneurship in the mainstream screen industry. Entrepreneurship & Regional
Development, 30(1-2), 118-145. Gordon, G. (2015). Culture in Corporate Law or: A Black
Corporation, a Christian Corporation, and a Maori Corporation Walk into a Bar. Seattle UL
Rev., 39, 353.

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FINANCIAL DECISION MAKING OF A 2 MILK AND TAINU GROUP HOLDINGS
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Zapalska, A., & Brozik, D. (2017). Māori female entrepreneurship in tourism industry. Turizam:
međunarodni znanstveno-stručni časopis, 65(2), 156-172.
Chen, C., Zhang, J., & Delaurentis, T. (2014). Quality control in food supply chain management:
An analytical model and case study of the adulterated milk incident in China. International
Journal of Production Economics, 152, 188-199.
Jianqin, S., Leiming, X., Lu, X., Yelland, G. W., Ni, J., & Clarke, A. J. (2015). Effects of milk
containing only A2 beta casein versus milk containing both A1 and A2 beta casein proteins
on gastrointestinal physiology, symptoms of discomfort, and cognitive behavior of people
with self-reported intolerance to traditional cows’ milk. Nutrition journal, 15(1), 35.

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Waikato.ac.nz. N.p., 2019. Web. 7 Apr. 2019.
Tgh.co.nz. N.p., 2019. Web. 7 Apr. 2019.
Tgh.co.nz. N.p., 2019. Web. 7 Apr. 2019.
Tgh.co.nz. N.p., 2019. Web. 7 Apr. 2019.
Waikatotainui.com. N.p., 2019. Web. 7 Apr. 2019.

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Appendix
In the followings the horizontal common size analysis of A 2 Milk Company is evaluated.
The below is the horizontal balance sheet trend analysis of A 2 Milk company, for five year of
periods:
Particular 2013 2014 2015 2016 2017 2018
Current Asset
Cash & short term deposits 100.00% 79.15% 38.13% 1138.56% 174.48% 281.32%
Trade and other recivables 100.00% 112.24% 146.00% 113.68% 160.49% 89.87%
Prepayments 100.00% 83.03% 484.49% 156.45% 238.14% 100.16%
Inventory 100.00% 752.43% 86.80% 1084.52% 54.11%
Current tax asset 100.00%
Total current asset 100.00% 107.20% 118.37% 301.36% 141.59% 195.93%
Non-current asset 100.00%
Property,plant and equipment 100.00% 89.05% 101.51% 87.06% 103.22% 116.07%
Investments in subsidiaries 100.00%
Non-current recivables in associates and joint ventures 100.00%
Loans to subsidiries 100.00%
Goodwill 100.00% 112.99% 103.83% 94.43%
Other Financial asset 100.00% 301.15%
Other Intangible asset 100.00% 138.14% 148.55% 95.23% 223.85% 0.00%
Deffered tax 100.00% 95.95% 115.88% 183.31% 58.89% 248.77%
Total non-current asset 100.00% 103.26% 111.09% 97.86% 308.85% 252.82%
Total asset 100.00% 105.85% 115.95% 236.48% 163.66% 210.09%
Liabilities and shareholders equity
Liabilities
Current liability
Loans from subsidiries 100.00%
Account Payable 100.00% 147.81% 158.64% 233.34% 107.83% 162.85%
Current tax liabilities 100.00% 3.33% 1788.24% 291.33% 163.10%
Total current liabilities 100.00% 144.22% 161.97% 265.29% 133.25% 162.92%
Non-current liabilities
Accounts payable 100.00% 155.00% 152.42% 120.63% 43.86% 120.00%
Deffered tax liability 100.00% 3.46%
Total non-current liabilities 100.00% 155.00% 1037.10% 20.68% 37.59% 120.00%
Total liabilities 100.00% 144.29% 168.00% 254.89% 132.92% 162.88%
Stockholders equity
Share capital 100.00% 102.39% 100.05% 151.27% 102.88% 105.41%
Retained earnings 100.00% 99.96% 108.72% -16.77% 2173.80% 305.95%
Foreign currency translation reserve 100.00% 307.43% 85.69% 158.50%
Employee equity settled pyments reserve 100.00% 165.06% 135.87% 175.79% 168.67% 1014.90%
Total Equity 100.00% 97.85% 99.97% 226.98% 181.46% 230.12%
Total liabilities & Eqity 100.00% 105.85% 115.95% 236.48% 163.66% 210.09%
Balance sheet trend analysis