Investment and Portfolio Management

Running head: INVESTMENT AND PORTFOLIO MANAGEMENT
Investment and Portfolio Management
Name of the student:
Name of the university:
Author’s note:
Table of Contents

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Investment and Portfolio Management
Section 1:....................................................................................................................................4
Executive summary......................................................................................4
Introduction:...............................................................................................................................4
A2 Milk Company:................................................................................................................4
Bega Cheese Company:.........................................................................................................5
Ratio analysis of A2 Milk Company:.........................................................................................5
Ratio analysis to Bega cheese:...................................................................................................7
Comparison with competitors....................................................................................................7
Conclusion:................................................................................................................................7
Appendices:................................................................................................................................8
A2 Milk Company:................................................................................................................8
Bega cheese company:.........................................................................................................13
Section 2:..................................................................................................................................18
Answer to question 1:...............................................................................................................18
Answer to question 2:...............................................................................................................18

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Investment and Portfolio Management
Section 1:
Executive summary:
The purpose of this report is to analyze the financial condition of A2 Milk Company and
Bega Cheese limited company. The product analysis, along with its primary place of
business, is analyzed along with the competitive advantage it has over its competitors. The
reason for its growth is seen, and its future forecast is based on the analysis of the statement
of financials.

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Investment and Portfolio Management
Introduction:
A2 Milk Company:
The following report is about A2 Milk Company, leading innovative research-
oriented Company which produces a product different from the entire dairy industry. The
Company presented in this report is the A2 Milk Company. The Company was established in
2000, New Zealand. The Company focused on examining the properties of A1 protein in
Milk and wanted to produce Milk free of A1 protein. It was finally able to launch its product
A2 Milk in the year 2003 after getting a lot of dairy farmers to agree to their new researched
Milk. The Company has its businesses spread across New Zealand, United States of America,
Australia and some countries in Australia (Kirk et al. 2017). The primary focus of business is
in Australia with its products available in every major supermarket in Australia. One of the
primary reason for the success of the product was in 2007 when a book about the side effects
of a1 protein was released, and sales boosted for a2 Milk. This incident acted as a catalyst for
the A2 Milk Company and started on its path to grow as a growth Company. This Company
targets the group of consumers who are health conscious as well as those who are quite not
comfortable digesting Milk products. The focus of report is analysing the economic health of
the establishment along with to explain the risk management policy of the Company. The
uniqueness of its products attracted people who cannot consume Milk due to stomach
problems got appealed to a2 Milk. The differentiated product of the Company makes it stand
out among all other competitors and makes A2 Milk a monopoly in the dairy industry due to
its unique product (thea2milkcompany.com/ 2019).

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Investment and Portfolio Management
Bega Cheese Company:
Bega Cheese, public organization implied on Australian dairy product company. The
Company presented in the assignment is “Bega Cheese Company’. Firm was established in
1899 in New South Wales in Australia. Currently, Bega cheese is the biggest milk entity in
“Australia”, the estimation approximately to 7775 million. The Company has its businesses
spread across bega, New South Wales, and some countries in Australia. The primary focus of
business is in Australia with its products available in every major supermarket. The
differentiated product of the Company makes it stand out among all other competitors and
makes Bega Cheese a monopoly in the dairy industry due to its unique product. The different
major business segments are included in the main milk products; those products are “cream
cheese’, cheese and milk powder.
Ratio analysis of A2 Milk Company:
Current assets: The “current ratio” indicates “short term liquidity” of an organization. The
“current ratio” of A2 Diary Organization incline favorable situation, it has remained an
growing style. The indication which is involving higher growth of the company which can be
favored to higher “trade receivables” that is involving proper imbursement and lesser
evasions and less possibility for avoidances due to good clients (Bicu, Chen and Elliott 2017).
Quick ratio: The quick ratio is a proper extent of “liquidity” than present rate and involves
the competency of A2 Milk Company in order to achieve instant cash supplies of the
business. The Organization has a higher-growth ratio that can enhance towards up going
monetary and liquid positions and increased investment in considering short period stocks
with lower maturity of less than three months (Donangelo 2014).
Cash flow operating ratio: This indicates of the money incurred by the firm in order of
meeting the instant liquidity requirements. The particular ratio was even weak in 2016,
however it upgraded radically in 2018, and mostly it is because of better consumer payment
with maintaining lower amount of faults. The Organization contains a higher ‘liquidity ratio”
and could achieve liquidity necessities whenever it is needed appropriately.
Gross profit: “Gross profit” is evaluated by including net revenue of certain reduction and
returns less the COGS. The increased gross profit is due to an increase in sales revenue and a
little fall in the price of goods sold (Kim, Kraft and Ryan 2013).

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Investment and Portfolio Management
Net profit: The net profit is the general profit inherited for the equity shareholders later
achieving all the expenditures. The increasing drift is to enhance betterment of the
supervision of the costs which is usually related to the management along with removal of
generic properties and increasing amount of sales revenue through improved advertisement
and building considering perfect and correct supply chain of spreading system.
Return on assets: The Company has a constructive and a uprising net profit and it
accumulates higher growth with incurring stable return focusing on assets that is representing
that administration is utilizing the cash for investing it perfectly in the industry and providing
better group in presentations out of the assets. The Firm financed in fixed assets such as plant
and equipment and conclude upsurge in intangible assets, involving the usage of assets in the
firm. (Oladipupo and Okafor 2013).
Return on equity: The return on equity generated by the Company is quite high and healthy,
indicating it to be a growth firm in its initial stage of expansion and expected to grow at this
rate shortly. The share capital was increased due to an increase in reserves as well, and even
after that the ROE has increased indicating a good profitability structure of the Company.
Account receivable turnover: The accounts receivable turnover is involving competency of
the firm for incurring unpaid dues from the debtors and later evaluates it accordingly. The
rise in “accounts receivable turnover” defines that the organization involves severe its credit
policy and gathering unsettled expenses on a appropriate basis (Palepu and Healy 2013).
Inventory turnover: This segment, which is known as inventory turnover, demonstrates the
amount of spells an organization trade its catalogue in a year. The inventory turnover ratio is
perfect for A2 Milk Company which can quickly trade seven to nine periods in a time. It
proves that firm consists an ideal inventory management system in habitation (Pozsar 2013).
Debt to equity ratio: The “debt to equity ratio” is used to analyze the Companies level of
leverage it has on a balance sheet. A higher level of this ratio is risky for investors as the
Company has a lot of creditors who they might have to pay first in case of bankruptcy. A2
Milk Company had higher leverage, but it has fallen over the years; this is due to raising
finance by issuing equity share over the years.
Debt to assets: This ratio helps to analyze the level of assets is acquired by debt. Since the
ratio is also in decreasing trend it tells us that the Company has acquired less assets with debt
but more with its own money or by issuing shares (Shin, Ennis and Spurlin 2015).

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Ratio analysis to Bega cheese:
Current ratio: To understand the liquidity position of a Bega Cheese Company to pay off its
obligations; generally, this ratio has mainly utilized by the creditors and the investors who
depend on such rate. A high current ratio is always a better comparison to the lower because,
in case of higher ratio, the company is able and can easily make payment of its liabilities.
Here the rate in the year of 2018 showing 1.69 and in 2017 it was 3.07, and in 2016 it's
showing 1.65 that means companies’ ability is increasing by day to day work, in 2017 the
company only can able to pay off liabilities up to 3.07 and in 2016 it decreasing 1.65. That
means if the company can continue with such a trend, it can quickly increase its ability
further.( Robinson etal. 2015).
Quick ratio: Quick ratio is a healthier degree of liquidity than current ratio which
demonstrates the competency of Bega cheese Company for meeting up instant cash supplies
of the company. The firm has an increasing quick ratio, which is focused to rising cash
section and also monetary counterparts with increasing level of investment procedure in short
term securities consisting of lesser maturity inclining to three months (Rusiana etal. 2018).
Receivable turnover: The Receivable turnover ratio indicates the time mostly required to
collect outstanding receivables. This turnover is on the decreasing trend focusing to greater
collection from debtors and through proper foundation. This display the clients are quite
creditworthy by generous to quick disbursements. (Kuehn, Simutin and Wang 2017).
Average days in inventory: The outstanding inventory ratio shows the amount of days the
business makes for selling the roster from the storeroom. Downward inclination is detected in
and it displays that firm can flog its stock rapidly due to increment business and successful
marketing policy involved in it (Velasquez and Hester 2013).
Inventory turnover: Inventory ratio is measured as an efficiency ratio, effective use in
inventory express by comparing COGS with an average inventory. It generally describes the
procedure that the firm controls their merchandise or how fast the stocks are turning in to
receivables through sales. Such proportions are required to be high that indicates the
favorable inventory management of the company. This ratio indicates whether the company
is overspending in buying inventories and wasting resources or not.
Here in case of this company, such ratio is indicating the continuous decreasing trend,
which implies the less favorable inventory management position of the company. In the year
2016 the rate was 5.38, in 2017 it was 5.95, and in the last year 2018, it was like 5.83.

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Investment and Portfolio Management
Return on assets: In the year 2016 the ratio was 0.05, in 2017 it was 0.17, and in the last
year 2018, it was like 0.03. The business has spent in “plant and machinery” also has an
increasingly of intangible assets which is mainly undergoing immense usage of capitals in the
firm. (Oladipupo and Okafor 2013).
Gross profit: Gross profit is defined through net assets of different discount and focuses on
lowering “cost of goods sold”. The increased “gross profit” is involved to increasing in sales
income and a small drift lowering in the price of goods sold (Kim, Kraft and Ryan 2013).
Here in case of this company, such ratio is indicating the continuous increasing trend, which
implies the less favorable inventory management position of the company. In the year 2016
the rate was 0.01, in 2017 it was 0.13, and in the last year 2018, it was like 0.19.
Account receivable turnover: Here the receivable ratio of the company is indicating the
continuous decreasing trend of its collection order from its due debtors. In the year 2016 it
was 5.88, in 2017 it was 5.10, and in the last year 2018, it shows 5.05, which means
company’s collections from the debtors are steadily decreasing compared to the previous year
collection. It is also representing that the financial condition of the company is also in an
unsuitable condition due to such groups. From the above ratio, it can be evaluated that the
company can decrease its financial terms if it continually maintains such collection trend.
Debt to asset ratio: Here in the year 2016 such ratio was 0.12 in 2017 it was 0.23, and in the
last year 2018, it representing such ratio was 0.25. From the evaluation it can be concluded
that from 2016 to 2017 it contained the increasing trend, however in the year 2018 it’s also
increasing, which means the financial position of the company is turning to a stable
conditions, because the amount company is acquiring from outsiders is lower compared to its
total assets otherwise company is making due payments to its lenders. Generally, such a
situation is representing the smaller liability of the company.
Comparison with competitors:
The comparison has been done with its competitor bega Cheese Company. Bega
Cheese Company has estimated an annual revenue of $500M. The estimated employees of
the company is 1250. The company generates $49.4k as its revenue per employee. A2 Milk
Company is being led by peter Nathan, who is the chief executive officer. It has 114
followers. The total estimated annual revenue was recorded at $4.5 M and estimated
employees were 91. As a result, Bega Cheese Company is more competitors in comparison to