Financial Report

This financial report analyzes the financial position of Billabong International Limited, a retail company specializing in surf wear and outdoor clothing. The report evaluates the company's profitability, efficiency, liquidity, and leverage through various ratios. It highlights the company's losses, high debt, and the need for proper budgeting and expense reduction. Recommendations are provided to improve the company's financial position.

Running Head: Financial Report 0
Billabong International Limited
Financial Report
5/17/2019
The report has prepared so that the use of the accounting information can be understand. In this
report the practical are evaluated to know the monetary place of the company so that the knowledge
and skills of the accounting information can be ascertained. The annual report of the company
Billabong International Limited has been studies which are the merchandiser of surf wear and other
outdoor action clothing and their financial position is ascertained. By evaluating and ascertaining the
monetarist ratios of the company it is analyzed that the company has incurring the losses and they
have the high debt which is not good for the company. So for improving their financial position of the
company, they have to make the proper budgets and plans and also reduce their operating expenses.
As the company financial leverage position is also not good so by making the budgets and using the
proper marketing techniques, the company can improve their financial position.

Financial Report 1
Contents
Background Company Overview.................................................................................................................2
Analysis of the ratio....................................................................................................................................3
Conclusion and findings............................................................................................................................13
Recommendation.......................................................................................................................................14
References.................................................................................................................................................15
Appendix...................................................................................................................................................17

Financial Report 2
Background Company Overview
Billabong International Limited is a private company which deals in retail products of the
clothing. The company was founded in 1973 in the Gold Coast, Queensland, and Australia. The
company was originated by the Gordon Merchant. The company has the headquartered in the
Burleigh Heads, Queensland, and Australia. The company has earned the net revenue of A$1.27
billion and has the net income of the A$25.7 million in the year 2014 (Beaver, et al., 2015). After
the year 2014, the profit of the company has declined. The company is the surf company which
deals in the clothing products and it also produces some accessories such as the backpacks,
watches, snowboard products, etc.
The company engages in the delivery, advertising, wholesaling and trade of the
accessories, wetsuits, eyewear, etc. The company also provides the hardware products surf,
snow, skate, and sports accessories under the different brand names. The company operates only
online retail e-commerce products (Kanapickienė and Grundienė, 2015). The company offers
many products for more than the 2200 brands which include swimwear, jeans, t-shirts, shorts,
pants, jackets, sports eyewear, fleece tops, jumpers, sweaters, etc. The products of the Billabong
are sold to over the 60 countries world widely through the licensees and it can also be sold
directly from the company. In the Australia Billabong product is the leading product (Legg,
2017).

Financial Report 3
Analysis of the ratio
Profitability ratio: This ratio is the financial metrics of the company Billabong
International Limited as it benefits in examining the earning ability of the company. With the
help of this ratio, the company can evaluate how much profit or loss they have incurred and what
is the profitability position in the market (Abdul-Baki, 2014). The owners and investors use this
ratio so that they can evaluate the asset and equity of the company.
Return on Equity
=
Return on Asset = Net Profit / Total asset
Return on Equity
Year 2016 2017 2018
Net Loss -23,739 -77,129 -18,400
Shareholder's
Equity
259,289 175,244 160,488
Ratio -0.09155 -0.44012 -0.11465
Return on Asset
Year 2016 2017 2018
Net Loss -23,739 -77,129 -18,400
Total Asset 744,248 578,124 582,919
Ratio -0.0319 -0.13341 -0.03157
The above two ratios are analyzed so that the profitability of the company can be defined.
Return on asset is evaluated so that the profitability of the company can be determined in terms
of its assets. The company has incurred the loss every year so their profitability ratio is not good.
Return on asset is considered as the best when they are above 5% (Mules, et al., 2014). But in
this company in the year 2016 and 2018, the company has the ROA of 3% which is not
indicating the good performance

Financial Report 4
The return on equity is also evaluated so that the profitability of the company Billabong
International Limited can be evaluated in terms of its equity. The return on equity is considered
good in the company when it carries in the range between 15- 20%. In the year 2016, the net loss
of the company 23739 which has increased in the year 2017. In the year 2018, the company has
done better performance from the last two years but still, they had incurred the loss of 18400
(Billabong International Limited, 2018). In the year 2017 and 2018, the company has issued less
equity in comparison to the year 2016 which also results in declining their profit.

Financial Report 5
Efficiency Ratio: This ratio is helpful in analyzing the efficiency of the company. It
helps in evaluating and analyzing the assets, equities, and liabilities of the company (Terry-
Armstrong, 2014). As the company Billabong International Limited deals in the commercial
things so this ratio is helpful in tracking the performance. It measures the current performance of
the company and shows the capacity of the company to produce revenue by using its properties.
Asset Turnover Ratio = Net Revenue / Average Total Assets
Equity Turnover Ratio = Net Revenue / Average Shareholder's
Equity
Asset Turnover Ratio
Year 2016 2017 2018
Net Revenue 1,103,535 979,452 476,465
Average Total Asset 1146238 950248 871981
Ratio 0.962745 1.030733 0.546417
Equity Turnover Ratio
Year 2016 2017 2018
Net Revenue 1,103,535 979,452 476,465
Average Shareholder's
Equity
400081 304888.5 248110
Ratio 2.758279 3.212492 1.920378
The asset turnover ratio and the equity turnover ratio is evaluated so that the efficiency of
the company Billabong International Limited can be ascertained (Lantto and Sahlström, 2019).
The above two ratios are evaluated so that the efficiency ratio in the company can be determined
and the monetary situation of the company can be ascertained with the help of the assets and the
equity. With the help of the asset turnover ratio, the company can evaluate the sales income of
the company by using the assets of the company.
As the company is incurring the losses so they have a high turnover ratio. The net
revenue of the company is declining from the previous year 2016 and 2017 as a comparison to

Financial Report 6
the year 2018 (Billabong International Limited, 2018). The equity turnover ratio of the company
states the revenue of the company Billabong International Limited in relations to its shareholder's
equity. The average shareholder’s equity of the company is declining which is stating that the
company financial performance is not good.

Financial Report 7
Liquidity Ratio: This ratio of the company issued to determine the current position of
the company whether they can meet with the short term obligations or not. This is the ratios
which can be rapidly transformed into the money and they are the short term ratios which affect
the credibility of the company.
Current Asset
=
Current Asset / Current
liability
Liquid Asset
=
Liquid Asset/ Current
liability
Current
Asset
Year 2016 2017 2018
Current Asset 464,454 421,718 424,393
Current
Liability
197,932 174,489 188,051
Ratio 2.34653
3
2.41687
4
2.25679
7
Liquid Asset
Year 2016 2017 2018
Liquid Asset 278,898 259,407 234,684
Inventories 185,556 162,311 189,709
Current
Liability
197,932 174,489 188,051
Ratio 1.40906 1.48666
7
1.24798
1
The two ratios are evaluated which are the current ratio and the liquidity ratio which
helps in determining the short term obligations and the company Billabong International Limited
current asset. The liquescency situation of the company is very decent as the current ratio is
above 1 in the year 2016, 2017 and 2018 (Billabong International Limited, 2016). The company

Financial Report 8
Billabong International Limited has the ability to meet the short term obligation on time and they
have enough assets which can be easily converted into the cash. The liquid position of the
company is also good. The company Billabong International Limited has sufficient liquid assets
which can meet the short term obligations on time. In the liquid assets, the inventories are not
included but in the year 2018, the company has enough inventories which can meet the demands
of the people.

Financial Report 9
Gearing (Leverage): This ratio also helps in determining the financial situation of the
company as it helps in measuring the financial leverage of the company (Parent, et al., 2013).
This ratio assistance in evaluating the proportion of the company’s borrowed fund in relation to
its equity. High leverage is considered as good in the good which is more than 50% as it is
considered that high risk is taken by the company.
Debt Ratio
=
Total debt / Total asset
Equity
Ratio =
Equity / Assets
Debt Ratio
Year 2016 2017 2018
Total Debt 274,377 220,321 222,738
Total Asset 744,248 578,124 582,919
Ratio 0.36866
3
0.38109
6
0.38210
8
Equity
Ratio
Year 2016 2017 2018
Total
Equity
259,289 175,244 160,488
Total Assets 744,248 578,124 582,919
Ratio 0.34839
1
0.30312
5
0.27531
8
The debt ratio of the company Billabong International Limited is good as it is below 40
% in three years. The company can take the risk of generating enough cash flow services in
relation to its debt. The company can borrow more money as they didn't have high debt. Equity

Financial Report 10
ratio helps in analyzing how much assets the company has which were financed by their
investors. The company equity ratio is also good as it is less than the 0.4 which is indicating that
the company doesn't take any advantage of the increasing profit (Billabong International
Limited, 2017). In the year 2017 and 2018, the debt of the company is upper than the equity of
the company which is indicating that the company Billabong International Limited is not able to
make sufficient money to satisfy its debt obligation. The company has a high degree of debt
finance which is not good as per the context of the company.

Financial Report 11
Investment Ratios: This ratio helps in examining the concert of the company Billabong
International Limited shares (Pech, et al., 2015). This ratio is helpful for potential investors and
competitors in examining the performance of the company. It helps the investors in taking the
decisions about whether to invest in the company or not. The ratio is the relationship between the
amount invested in the company and the profit made by the company.
Net Profit
Ratio =
Net Profit/ Net Revenue
Gross Profit
Ratio =
Gross Profit/ Net Revenue
Net Profit
Ratio
Year 2016 2017 2018
Net Profit
Ratio
-23,739 -
77,129
-18,400
Net Revenue 1,103,53
5
979,45
2
476,465
Ratio -0.02151 -
0.0787
5
-
0.03861
8
Net Profit
Ratio
-2.15118 -
7.8747
1
-
3.86177
4
Gross Profit Ratio
Year 2016 2017 2018
Gross Loss -15,895 -
120,79
2
-16,241
Net Revenue 1,103,53
5
979,45
2
476,465

Financial Report 12
Ratio -0.0144 -
0.1233
3
-
0.03408
6
Gross Profit
Ratio
-1.44037 -
12.332
6
-
3.40864
5
The gross profit and the net profit ratio are evaluated so that the productivity of the
company can be ascertained. The company has incurred the loss in the three years which is
indicating that their financial position of the company. The company also suffered a loss in
evaluating gross profit. This is indicating that the investors of the company will not invest in the
company as there are not incurring any profit and their debt is also high which mean they will
not be able to pay their obligations on time (France and Pope, 2016). The company doesn’t have
the efficiency in converting their revenue to the profit and they have the high cost of the goods
sold and the operating expenses are high which are declining their profit. The company doesn’t
have the strong sales of the clothing products and it results in low down their profit.

Financial Report 13
Conclusion and findings
From the above report, it is concluded that the financial position of the company is not
good. Billabong International Limited doesn’t have made the good sales and their operating cost
expenses are also high which results in declining their profit. The debt of the company is very
high and its equity is very less which is indicating that the company will not able to pay its
obligations at the time. The company liquidity position is good as they have sufficient assets
which can be converted into the cash on time. They can pay the short term debts but to pay the
long term debts the company financial position is not good.
The financial ratios are analyzed so that the company’s financial position in the market
can be analyzed. These ratios are also evaluated so that the investors can determine whether to
make the investment in the company or not. In this report, different ratios are evaluated so that
the profitability, liquidity, efficiency, gearing and investment ratio can be determined. The
monetary leverage place of the company is not good as they have a high debt which is indicating
the company has lots of risks.
In this report, it is found that the debt of the company is upper than the equity of the
company which is representative that the company Billabong International Limited is not capable
to make enough cash to satisfy its debt obligation. The company has a high degree of debt
finance which is not good as per the context of the company. The company Billabong
International Limited has sufficient liquid assets which can meet the short term obligations on
time. As the company is incurring the losses so they have a high turnover ratio. The average
shareholder's equity of the company is declining which is stating that the company financial
performance is not good. So it is concluded that the investors will invest less in the company as
the monetary position of the company is not much stable.

Financial Report 14
Recommendation
After analyzing the financial position of the company it is recommended that the
investors will not resembling to invest in the Billabong International Limited as the financial
concert of the company is not decent and they were also incurring with many losses and debts. If
the investors will invest in the company than they will not get any high rate of interest and the
company also not paid a dividend in the last 5 years (Vogel, 2014). The debt of the company is
very high so to invest in the company is very risky and the chance of recovering the money is
less.
It is recommended that to improve the financial performance of the company has to
increase its sales by improving their services. The company has to reduce unnecessary expenses
and the operating cost as they are incurring very high. The company has to reduce its expenses
to improve its financial position of the company. The company has to adopt new marketing
techniques so that they can increase its sales in the clothing retailer. The company should focus
on giving the premium quality products and also give value to their customers. The company
should analyze their financial statements weekly so that information and the number can
properly check. The company has to make the proper budgets and plans to improve its financial
leverage (France and Pope, 2016).
The net profit and the gross profit of the company can be increased when the company
will reduce its utilities, labor cost, and insurance premiums. To increase the profit the company
Billabong International Limited also has to charge the relatable price of the competitors and
streamline the management cost of the company. The company should avoid taking more debts
now and they should make the proper plan to reduce their debt and improve their financial
position.

Financial Report 15
References
Abdul-Baki, Z., Uthman, A. B., & Sannia, M. (2014). Financial ratios as performance measure:
A comparison of IFRS and Nigerian GAAP. Accounting and management information
systems, 13(1), 82.
Ball, S. (2015). The Green Room: A Surfing-Conscious Approach to Coastal and Marine
Management. UCLA J. Envtl. L. & Pol'y, 33, 366.
Beaver, W. H., McNichols, M. F., & Rhie, J. W. (2015). Have financial statements become less
informative? Evidence from the ability of financial ratios to predict bankruptcy. Review
of Accounting studies, 10(1), 93-122.
Berger, A. N., & Bouwman, C. H. (2017). Bank liquidity creation, monetary policy, and
financial crises. Journal of Financial Stability, 30, 139-155.
Billabong International Limited, (2016). Annual Report. Retrieved From:
file:///C:/Users/SystemJP/Downloads/3379509_2001360047_BUACC1508BillabongAnn
ualReport%20(1).pdf (Accessed on: 18 May 2018).
Billabong International Limited, (2017). Annual Report. Retrieved From:
file:///C:/Users/SystemJP/Downloads/3379511_310867373_BUACC1508BillabongAnnu
alReport%20(1).pdf (Accessed on: 18 May 2018).
Billabong International Limited, (2018). Annual Report. Retrieved From:
file:///C:/Users/SystemJP/Downloads/3379510_1377840297_BUACC1508BillabongAnn
ualReport%20(1).pdf (Accessed on: 18 May 2018).
France, C., & Pope, N. (2016). The Effect of Offshore Shifts on Brand Attitude and Corporate
Image. In Looking Forward, Looking Back: Drawing on the Past to Shape the Future of
Marketing (pp. 305-308). Springer, Cham.
Giordani, P., Jacobson, T., Von Schedvin, E., & Villani, M. (2014). Taking the twists into
account: Predicting firm bankruptcy risk with splines of financial ratios. Journal of
Financial and Quantitative Analysis, 49(4), 1071-1099.

Financial Report 16
Kanapickienė, R., & Grundienė, Ž. (2015). The model of fraud detection in financial statements
by means of financial ratios. Procedia-Social and Behavioral Sciences, 213, 321-327.
Lantto, A. M., & Sahlström, P. (2019). Impact of International Financial Reporting Standard
adoption on key financial ratios. Accounting & Finance, 49(2), 341-361.
Legg, M. (2017). Class Actions, Litigation Funding and Access to Justice.
Mules, R. (2014). Exporting for success: How small and large businesses negotiate the
task. Busidate, 22(3), 2.
Parent, M., O’BRIEN, D. A. N. N. Y., & Slack, T. (2013). Organisation theory and sport
management. In Managing Sport Business (pp. 125-146).
Pech, C. O. T., Noguera, M., & White, S. (2015). Financial ratios used by equity analysts in
Mexico and stock returns. Contaduría y Administración, 60(3), 578-592. Putra, Y. H. S.
(2013). A Contemporary Accounting Approach in Detecting Potential Red Flag and
Performance of Extreme Sport Apparel Company. El Muhasaba: Jurnal Akuntansi, 3(2).
Terry-Armstrong, N. (2014). Billabong: A company in financial crisis. Busidate, 22(3), 4.
Vogel, H. L. (2014). Entertainment industry economics: A guide for financial analysis.
Cambridge University Press.

Financial Report 17
Appendix
Return on
Equity
Year 2016 2017 2018
Net Loss -23,739 -77,129 -18,400
Shareholder's
Equity
259,28
9
175,24
4
160,48
8
Ratio
-
0.0915
5
-
0.4401
2
-
0.1146
5
Return on Asset
Year 2016 2017 2018
Net Loss -23,739 -77,129 -18,400
Total Asset
744,24
8
578,12
4
582,91
9
Ratio -0.0319
-
0.1334
1
-
0.0315
7
Asset Turnover
Ratio
Year 2016 2017 2018
Net Revenue
1,103,53
5 979,452 476,465
Average Total
Asset 1146238 950248 871981
Ratio
0.96274
5
1.03073
3
0.54641
7

Financial Report 18
Equity Turnover
Ratio
Year 2016 2017 2018
Net Revenue
1,103,53
5 979,452 476,465
Average Shareholder's
Equity 400081
304888.
5 248110
Ratio
2.75827
9
3.21249
2
1.92037
8
Current
Asset
Year 2016 2017 2018
Current Asset 464,454 421,718 424,393
Current
Liability 197,932 174,489 188,051
Ratio
2.34653
3
2.41687
4
2.25679
7
Liquid Asset
Year 2016 2017 2018
Liquid Asset
278,89
8 259,407 234,684
Inventories
185,55
6 162,311 189,709
Current
Liability
197,93
2 174,489 188,051
Ratio 1.4090 1.48666 1.24798

Financial Report 19
6 7 1
Debt Ratio
Year 2016 2017 2018
Total Debt 274,377 220,321 222,738
Total Asset 744,248 578,124 582,919
Ratio
0.36866
3
0.38109
6
0.38210
8
Equity
Ratio
Year 2016 2017 2018
Total
Equity 259,289 175,244 160,488
Total Assets 744,248 578,124 582,919
Ratio
0.34839
1
0.30312
5
0.27531
8
Net Profit
Ratio
Year 2016 2017 2018
Net Profit
Ratio -23,739
-
77,129 -18,400
Net Revenue
1,103,53
5
979,45
2 476,465
Ratio -0.02151
-
0.0787
5
-
0.03861
8
Net Profit
Ratio
-2.15118 -
7.8747
-
3.86177

Financial Report 20
1 4
Gross Profit Ratio
Year 2016 2017 2018
Gross Loss -15,895
-
120,79
2 -16,241
Net Revenue
1,103,53
5
979,45
2 476,465
Ratio -0.0144
-
0.1233
3
-
0.03408
6
Gross Profit
Ratio -1.44037
-
12.332
6
-
3.40864
5