Financial Accounting of Green Power Energy Limited

RUNNING HEAD: Financial accounting of Green Power Energy Limited
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Topic- a Financial accounting of Green Power Energy Limited
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Table of Contents
Introduction...........................................................................................................................................3
1. Description of Green Power Energy Limited.............................................................................3
2. Governance and Ownership structure............................................................................................4
3. Performance ratio analysis of Green Power Energy Limited.........................................................5
Short term solvency ratio...................................................................................................................5
Proving the equation.........................................................................................................................6
Long term Solvency ratios.................................................................................................................6
Asset utilization.................................................................................................................................7
Profitability ratios..............................................................................................................................8
Market value ratios..........................................................................................................................10
4. Share price graph of the Green Power Energy Limited................................................................11
4.1 Graph reflecting the share price movement of Green Power Energy Limited and All ordinary
share price index.............................................................................................................................11
4.2 The comparison between the Share price movement of Green Power Energy Limited and share
price movement of all ordinary stock exchange...............................................................................11
5. Announcements...........................................................................................................................13
6. Research via internet....................................................................................................................13
6.1 Beta calculation...................................................................................................................13
6.2 Computation of required rate of return by using CAPM method...............................................14
6.3 Determining the investment method (Conservative investment)................................................15
7. Computation of the weighted average cost of capital...................................................................15
7.1 Computed Cost of Capital through Capital Assets Pricing model........................................15
7.2 Implications that a higher WACC on investment decision........................................................16
8. Debt ratio consideration of Green Power Energy Limited...........................................................16
8.1 Stable Debt to equity ratio of company..........................................................................................16
Dividend policies of company..............................................................................................................17
Letter of recommendation..................................................................................................................18
Conclusion...........................................................................................................................................18
9. References...................................................................................................................................19
10. Appendix.................................................................................................................................20

Financial accounting of Green Power Energy Limited 3
Introduction
There are several internal and external factors which affect the present and future condition of
the corporate. In this report, several financial tools such as ratio analysis, du Pont analysis,
capital budgeting, and WACC methods have been used to identify whether the company has
been performing well in market or not. In this report, financial analysis tools have been used
to gauge the financial performance of financial accounting of Green Power Energy Limited.
The main outcome of this report is that Green Power Energy Limited has destructed its
business in the long run and resulted in the negative business throughout the time.

1. Description of Green Power Energy Limited
Green Power Energy Limited is an Australian company which is indulged in providing
energy and search and development of coal to liquid project in Australia. It has several other
subsidies which are engaged in providing energy support program to other corporations on a
commercial level (Green Power Energy Limited (2018).
2. Governance and Ownership structure
The present CEO Of Company is Gerard King who takes all the imperative decisions for the
future growth of the business.
The below given are the key managerial person of the Green Power Energy Limited
Name Position Start Date
Mr Gerard Arthur King Executive Director, Executive Chairman 4 Nov 1985
Mr Edwin Edward Bulseco Non-Executive Director 28 Mar 2017
Mr Simon Peters Non-Executive Director 6 Dec 2016
(Yahoo Finance, 2017)
Shareholder details of the company

Financial accounting of Green Power Energy Limited 5
(Green Power Energy Limited, 2017)
3. Performance ratio analysis of Green Power Energy Limited
The ratio analysis tools are used to set the relation between two financial factors of the
business and identify whether Green Power Energy Limited has been performing well or not
Throughout the time (Green Power Energy Limited, 2015).
Short-term solvency ratio
1. Current ratio
The current ratio of Green Power Energy Limited divulged that how well company could
manage its short term and long term liabilities by using the current assets (Green Power
Energy Limited, 2017).
Liquidity ratio Years
2017 2016
Current ratio .05 0.07
Quick ratio .04 0.06
Interpretation
Green Power Energy Limited has maintained its current ratio to .05 times in 2017 which is
0.02 points lower as compared to last year data. However, Green Power Energy Limited has
lower down its current liabilities as compared to last year (Dahir, Mahat, and Ali, 2018).
Quick ratio
The quick ratio reflects Green Power Energy Limited’s immediate capacity to pay off
its short term and long term debts from its current assets. It reflects that company has lower
down its quick ratio by .02 points since last one year

Proving the equation
Providing equation
201
4 2015 2016 2017
Net profit After tax/OE -0.6667 -0.5 -3 -0.5
EBIT/TA*NPAT/EBIT*TA/OE -0.6667 -0.5 -3 -0.5
This all amount of Green Power Energy Limited shows the negative results and depicts that
soon company will destruct its business if it continues like this.
Long term Solvency ratios
Debt to equity
The debt to equity of Green Power Energy Limited reveals the relationship between the debt
and equity of the company. The ideal debt to equity of Green Power Energy Limited should
be 70:30 i.e. 70 % part of the capital should be debt and 30% part of the capital should be
equity. It is observed that company has lower down its financial leverage by increasing its
total assets investment.
Computation of debt to equity of Company
Debt Ratio
2014 2015 2016 2017
A. Total Liabilities 1 1 1 1
B. Total assets 3 3 1 4.00
(A/B) 33% 33% 100% 25%
Interpretation
The debt to equity of Green Power Energy Limited has been zero which reflects that
company is totally dormant and has no functioning throughout the time. However, the in
2016 it had 100% debt to equity in 2017 which reflected the highly risky business. In 2017
the debt to equity company went down to 25% which shows the positive results for the
sustainable future of the company.