Financial Information for Decision Making

Running head: FINANCIAL INFORMATION FOR DECISION MAKING
Financial information for decision making
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FINANCIAL INFORMATION FOR DECISION MAKING 1
1. Executive summary
The report will focus on is to analyse the financial performance of Bega Cheese Limited
through measuring the efficiency ratios, profitability ratios, gearing ratios and liquidity ratios
over the years from 2014 to 2016. The efficiency ratios and liquidity ratios of the company
are revealing that the company is capable in generating return, collecting of dues and paying-
off the short-term obligations. However, though the company improved its profitability
position in 2017 as compared to 2016, both the year’s profitability ratios are significantly low
as compared to 2014. Further, the financial risk of the company also increased over the years
from 2014 to 2016.

FINANCIAL INFORMATION FOR DECISION MAKING 2
Table of Contents
1. Executive summary.............................................................................................................1
2. Introduction.........................................................................................................................3
3. Ratio calculation and interpretation....................................................................................3
Profitability ratio........................................................................................................................3
Return on shareholder’s equity..............................................................................................4
Return on total asset...............................................................................................................4
Net profit margin....................................................................................................................4
Efficiency ratio...........................................................................................................................5
Account receivable turnover..................................................................................................5
Inventory turnover..................................................................................................................6
Asset turnover........................................................................................................................6
Liquidity ratio.............................................................................................................................6
Current ratio...........................................................................................................................6
Quick ratio..............................................................................................................................7
Gearing ratio...............................................................................................................................7
Debt to asset ratio...................................................................................................................7
Gearing ratio...........................................................................................................................8
4. Conclusion..........................................................................................................................8
Appendix..................................................................................................................................11

FINANCIAL INFORMATION FOR DECISION MAKING 3
2. Introduction
Established in 1989, Bega Cheese Limited is the Australian company that carries on
its operation mainly in Bega of New South Wales. However, the company was formed as the
cooperative agricultural company and listed as public company during 2011. The company
produces and delivers cheese products of high quality through more than 100 firms of dairy.
The company’s main business products include cream cheese and powdered milk. Other
products dealt by the company are various nutritional products like milk protein concentrate
and Lactoferrin. The company supplies its products over more than 50 nations all over the
world. The company belongs to the cheese manufacturing industry of Australia and holds
almost 15.70% of the market. The growing trend of Australian cheese industry is increasing
the investor’s interest in this industry. Main competitors of the company are Devondale
Murray Goulburn, Fonterra Co-op Group, Lion Nathan National Foods and Warrnambool
Cheese and Butter. About 27% of total revenues are generated from the major business of the
company and 50% of revenue are generated from retail cheese and processed cheese (Bega
Cheese, 2018).
3. Ratio calculation and interpretation
Profitability ratio
Ratio Formula 2016 2015 2014
Profitability ratio
Return on shareholder's
equity
Net income / shareholder's
equity
8.99 3.96 22.92
Return on total asset Net income / total assets 5.05 2.25 12.03
Net profit margin Net profit / Sales *100 2.41 1.12 6.18