RAMSAY HEALTH CARE LIMITED RHC (doc)

RAMSAY HEALTH
CARE LIMITED RHC

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Forecasting.......................................................................................................................................1
Sales Growth..........................................................................................................................1
Inflation rate in Australia:......................................................................................................4
Asset Turnover Ratio ATO....................................................................................................6
PM..........................................................................................................................................7
Free cash flow.........................................................................................................................7
Net dividend payout ratio.......................................................................................................8
Cost of debt & Cost of equity.................................................................................................9
................................................................................................................................................9
VALUATION................................................................................................................................10
Dividend discount model (DDM) .......................................................................................10
Residual income model ......................................................................................................10
Residual operating income model........................................................................................11
Free cash flow model............................................................................................................11
SENSITIVITY ANALYSIS..........................................................................................................11
MANAGEMENT CONSULTING ADVICE................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
The forecast plays a main role in managerial planning and better operational control by
the business professionals. It determines the future growth of firm in respective period which
will be helpful to the professionals in administrating the costs, resources utilised in each business
planning. There will be consideration of various past records which in turn will have positive
impacts over the growth of firm's revenue. It also enables the workforce to make productive
efforts as well as make them able to meet the targeted goals in required time. Further, the report
will be consists of various models which benefits the firm in making effective valuation.
Therefore, it comprises with financial analysis and primary aims for business in understanding
the internal environment of organisations to ascertain the appropriate strategies and growth of
business sales in past five years.
Forecasting
Sales Growth
In relation with analysing the sales growth of the entity in the respective period it can be
said that there are various operations which are needed to be made by the business professionals
as to have risen in the income of firm. Ramsay Healthcare Limited will be assistive as they will
have appropriate growth and revenue from the market in relation with making effective analysis
over the business (Azad, Raza and Zaidi, 2018). The sales forecast will be relevant with the
predicted quantity and prices of the firm. Moreover, it can be said that there will be no
consideration of historical details and operational influences of the firm. There will be influences
of various economic factors such as inflation, GDP, population growth etc. therefore, in relation
with the growth of Ramsay Health Care Limited it can be said that there will be consideration of
various operational tasks and investing activities. However, the influences of various changes
will be effective in rising the sales growth of this entity. The consumers' satisfaction creates a
memorable experience in them. In accordance with the treatment they have received through
firm's operational practices. Moreover, there has been decline in the productivity and sales level
of business in terms with dealing with the patients.
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2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
0
1.18
1.49
1.18
1.00 1.06 1.06 1.06 1.06 1.06
S ales rev enue
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
0
2000000
4000000
6000000
8000000
10000000
12000000
14000000
S ales rev enue
Interpretation: In relation with analysing the operational practices of the entity as to
have satisfactory rise in the revenue and gains of the business it can be said that there has been
rise in the level of sales volume over the period. It has been estimated by the professionals that
RHC will be profitable in the coming time as they will have risen in the sale volume of the firm.
Moreover, it can be said that there will be no consideration of historical details and operational
influences of the firm. There will be influences of various economic factors such as inflation,
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GDP, population growth etc. therefore, in relation with the growth of Ramsay Health Care
Limited it can be said that there will be consideration of various operational tasks and investing
activities. However, the influences of various changes will be effective in rising the sales growth
of this entity. The consumers' satisfaction creates a memorable experience in them. In
accordance with the treatment they have received through firm's operational practices. Moreover,
there has been decline in the productivity and sales level of business in terms with dealing with
the patients. On the other side, as to analyse the revenue growth of business there are various
area which needed to be understand and determined by the business professionals.
Therefore, the estimations over the gross domestic production which in turn will be
helpful as to analyse the capital requirements of the firm as well as the growth of entity in
meeting the operational needs (Ward and Calabrese, 2018). Therefore, there will be requirements
of analysing the GDP rate of Australia in the respective period. Thus, in the below listed chart
there is clear analysis on the basis of various changes in the GDP rate of the country. In 2012
there has been the highest increment in this ratio such as it was 3.63. In addition, in the following
years the fluctuations in GDP rate of Australia is on consistent level. Therefore, it can be said
that the firm will have effective earning and revenue generation for the period 2013 the GDP was
2.57, in 2014 it was 2.61, in 2015 it was 2.42 and in 2016 it was 2.77. Thus, it can be said that
there has been stable trade and payments system in the economic environment of country. There
will be a satisfactory rise in the per capita income of the residents in the nation which will be
helpful to government in balancing the economic stability in the country.
3

2009 2010 2011 2012 2013 2014 2015 2016
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
1.81 2.01
2.37
3.63
2.57 2.61 2.42
2.77
GDP
Inflation rate in Australia:
Inflation refers to that term which indicates the overall increase in the consumer Price
Index (CPI) over time which consequently falling the purchasing power of the currency in the
country. Australia's economy was one of the world's largest economies (Hajek, 2018). The
Australian economy is highly dependent on its mining sector as well as on its agricultural sector
in order to grow. Australia majorly exports its good and services to eastern Asian countries, most
prominently China. Australia's GDP has increased significantly in the past few years which helps
in quick recovery from the 2008 financial crisis.
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Above statistic shows the inflation rate of Australia from 2012 to 2017. The inflation rate
is calculated using the price increase of a defined product in the market. From the above data it
can be concluded that inflation rate is majorly increasing till 2014 after that it gets subsequently
lower from 2013 to 2016 and in 2017, there is a hike of 0.72%. All these figure indicates that
there is an increase in consumer price index or CPI from 2011 to 2014 which indicates that huge
rise in the pricing of goods and services leads to decrease the currency rate in Australia, which
had a great impact on its economic growth. The average inflation rate in Australia was at about
1.97 percent in March 2018 compared to the previous year (Hou and et.al, 2018). According to
the ABS, consumer price inflation (CPI) rose by 0.52% in the March quarter, seeing the annual
rate lift to a more than two-year high of 1.98%. This inflation data confirms that pricing
pressures in the Australian economy is still weak as the economy is still running below potential
and competition in numerous industries remains intense.
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Illustration 1: Inflation Rate in Australia
Source: Australia: Inflation rate from 2012 to 2022* (compared to
the previous year). 2017

Asset Turnover Ratio ATO
In accordance with analysing the profitable and efficiency of firm the Asset Turnover
ration will be helpful and appropriate as to have clear analysis over the market. This is the ration
with bring the informative details relevant with the ability to implicate the use of such resources
in the product revenue of the firm. Thus, it has been estimated by the professionals of various
organisations that the ATO needed to be remain constant as well as it must bring the productive
and helpful approaches to the satisfactory revenue gains (Rauch and Wende, 2015). On the other
side, as per analysing the Assets turnover rations of RHC itb can be said tat there has been
several fluctuations in this ratio during the period. Thus, there will be appropriate analysis over
the revenue and the techniques of analysing the efficiency of the firm in using the assets for the
productive gains. Thus, in the year 2008 the ATO ratio was 1.02, in 2009 it was 1.04, in 2010 it
was 1.01, in 2011 it was 1.05, in 2012 it was 1.11, in 2013 it was 1.08, in 2014 it was 1.14, in
2015 it was 1.2, in 2016 it was 1.08 and in 2017 it was 1.04. Therefore, in accordance with such
variations in ATO ratio of the firm it can be said that the firm is making effective utilisation of
the assets (Ramsay Health Care Ltd, 2017). However, it will be suggested to the business
professionals that they must bring satisfactory changes into operations of the firm which will be
effective and helpful as to meet the targeted goals of entity.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
0.9
0.95
1
1.05
1.1
1.15
1.2
1.25
1.02
1.04
1.01
1.05
1.11
1.08
1.14
1.2
1.08
1.04
A TO
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PM
In relation with analysing the profit margin of the of a firm it can be said that it brings the
appropriate information and knowledge regarding the changes in the operational needs and
business efficiency of the firm. Therefore, it determines the appropriate changes in operational
activities as well as revenue generation of the firm in reaching the operational activities and
performances which brings the clear analysis over the business efficiency and skills to meet the
financial needs on time (Ucal and Oksay, 2011). However, in relation with analysing profitability
of Ramsay Health Care Limited it can be said that there will be fruitful changes into operations
which in turn will have effective changes in the operations.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
0
1
2
3
4
5
6
7
2.77 2.73
4.15
5.05
5.71 6.07 5.9
5.08 5.06
5.57
P M
Gross profit margin is the key indicator of any business's overall health. From the given
image it can be concluded that the profit margin of the organization is continuously increasing
over the time. Initially it was 2.77% in June which gradually increases till 6.07% in July, and
then eventually started to decline to 5.57% in August. This shows that there is great fluctuation
in the profit margin of the organization.
Free cash flow
There has been increment in the net cash flow of the firm which will be effective and
helpful to the business as to appropriate control over the inflows and outflows of the firm. Thus,
it has been aimed at having satisfactory increment as well as positive outcomes (Azad, Raza and
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Zaidi, 2018). Thus, the favourable results indicates that the firm is capable of using its operating
income into operational productivity and efforts. On the other side, if it reflects the negative
outcomes than it has been determined here that the firms is obtaining the capital gains from a
shareholder's investments in the business.
2011 2012 2013 2014 2015 2016 2017
-0.4
-0.2
0
0.2
0.4
0.6
0.8
0.33
-0.02
-0.13
0.71
-0.18
0.52
0.14
FCF
In accordance with the free cash flows of Ramsay Health Care Limited it can be said that
there has been huge changes in the outcomes. Therefore, some times it reflects the negative
results on which it can be said that there are various changes in the operations. In 2011 it was
0.33, in 2012 it was -0.02, in 2013 it was -0.13, in 2014 it was 0.71, in 2015 it was -0.18, in 2015
it was 0.52 and in 2016 it was 0.14. Thus, it can be said that in those years when the firm has
negative outcomes which reflects that the in some times thee firm has had obtained the revenue
form market or through external sources while many of the times they have implicated in use
their own resources for operations.
Net dividend payout ratio
This is the ratio which indicates the ability of firm in making payment to its shareholder
in the due period. Hoverer, after analysing the outcomes of Ramsay Health care Limited it can be
said that there is a profitable dividend payable by the professionals to the shareholders (Hajek,
2018). However, it will be influential and beneficial to the firm in context with attracting the
large number of investors into operation.
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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
0
20
40
60
80
100
120
99.7 94.9
82.5
75.2 73.9 72.4 75.2 76
63.4
73.5
P ay out ratio
Cost of debt & Cost of equity
2016 2017 2018 2019 2020 2021 2022
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
Debt E quity Ratio
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VALUATION
Dividend discount model (DDM)
It refers with discounting model means it is procedure for valuing a inventory rate by
discounting predicted dividends to the present values, if the value increase from the DDM is also
increasing their current trading rate for share, then the stock is in quantitative. It also consit with
value of stock is equal to net income per share are dividing with discount rate are less then net
profit growth rates (Holloway and Galvin, 2016). This model is based upon the intrinsic value of
goods it can be estimated by the expected value of the cash flow it will increase their price in the
future. The DDM is also related with the formula of the present value its variables include the
net income per share, the discount rate is also required rate of return and the expecting rate of
dividend growth. RAMSAY Health care also used this method for knowing the present sales of
their business and rate of return is also expected in the future. It is very helpful for this company
if this model doesn't work proper so this organisation don't pay out ,ore dividend their
employees. The main motive of this health care to generate their income with using this model
but if in case this model not work so they can not pay the dividend more. So it is beneficial for
this corporation. It is very simple and straight forward calculation of this method, it help to
assuming a time of high growth followed by lower remain growth period.
Residual income model
It is part of stock prices that is above or below books of values it is also known as real
value of s inventory (Holloway and Galvin, 2016).. It is important for analyse the value per
share. RAMSAY health care also apply this model it is very helpful for valuation of cost or
equity capital. It is help full for calculating the income, economic values added and market
valued added it also defining the use of residual income models. It is used in inner value of the
common stock. So this health care also use this method when it show the value of recognition in
residual income and other present value method it is fundamental of this model it also show the
strength and weakness of this company so they why this health industry using this model. The
main aim of this company to retain their business for long term so they almost this model for
stability of their hospital (Mikkonen, and et.al, 2016). This method also explaining the
accounting issue when they applying residual income model it also helps for evaluating their
stock is valued, fairly valued or some time undervalued so that time also help to show the actual
result of this firms. This method is very important to show the real income of company.
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These are model help to show the real sale of the business. The main aim of this
company to generate their sales with using these model. So it is very helpful for long run
business.
Residual operating income model
Free cash flow model
SENSITIVITY ANALYSIS
MANAGEMENT CONSULTING ADVICE
CONCLUSION
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REFERENCES
Books and Journals
Holloway, I. and Galvin, K., 2016.Qualitative research in nursing and healthcare. John Wiley &
Sons.
Mikkonen, and et.al 2016. Culturally and linguistically diverse healthcare students’ experiences
of learning in a clinical environment: a systematic review of qualitative studies.International
journal of nursing studies. 54. pp.173-187.
Azad, A. M. S., Raza, A. and Zaidi, S. S. Z., 2018. Empirical Relationship between Operational
Efficiency and Profitability (Evidence from Pakistan Exploration Sector). Journal of
Accounting, Business and Finance Research. 2(1). pp.7-11.
Ward, D. M. and Calabrese, T., 2018. Accounting fundamentals for health care management.
Jones & Bartlett Learning.
Hajek, P., 2018. Predicting corporate investment/non-investment grade by using interval-valued
fuzzy rule-based systems—A cross-region analysis. Applied Soft Computing. 62. pp.73-85.
Hou, X. D., and et.al, 2018. Effect of constituents molar ratios of deep eutectic solvents on rice
straw fractionation efficiency and the micro-mechanism investigation. Industrial Crops
and Products. 120. pp.322-329.
Ucal, M. and Oksay, S., 2011. The solvency ratio of external debt (SRED) as an indicator of
debt crisis: the case of Turkey. Int J Eco Res. 2. pp.166-172.
Rauch, J. and Wende, S., 2015. Solvency prediction for property-liability insurance companies:
Evidence from the financial crisis. The Geneva Papers on Risk and Insurance-Issues and
Practice. 40(1). pp.47-65.
Online
Ramsay Health Care Ltd. 2017. [Online]. Available through
:<http://financials.morningstar.com/ratios/r.html?t=RHC&region=AUS>.
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