Analysis of Reliance Worldwide

Analysis of Reliance Worldwide 1
ANALYSIS OF RELIANCE WORLDWIDE
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Analysis of Reliance Worldwide 2
Executive Summary
The paper aims to investigate and evaluate financial performance of Reliance Worldwide
Company based on financial ratio analysis, share valuation and share price movement. From
the ratio analysis, it was found out that RWC is profitable through increased ROE, ROA as
well as net margin. Further, it was found out that RWC is liquid enough in settling most of its
short-run or current liabilities through its current assets. This was based its relatively high
current and quick ratios which were above one. It was also found that RWC share price was
doing relatively good over the past two years with significant increase being observed over
the years. As such, it would be recommendable for the investor to add RWC share in her
portfolio.

Analysis of Reliance Worldwide 3
Table of Contents
Executive Summary...................................................................................................................2
Introduction................................................................................................................................4
Calculation and Analysis of Performance Ratio........................................................................4
Liquidity Ratios......................................................................................................................5
Current Ratio.......................................................................................................................5
Quick Ratio.........................................................................................................................6
Working Capital..................................................................................................................6
Financial Leverage Ratios......................................................................................................7
Debt/asset ratio...................................................................................................................8
Debt/equity..........................................................................................................................8
Asset Utilization Ratios..........................................................................................................9
Asset turnover.....................................................................................................................9
Inventory turnover............................................................................................................10
Receivable turnover..........................................................................................................11
Profitability Ratios................................................................................................................12
Net Margin........................................................................................................................12
ROE..................................................................................................................................13
ROA..................................................................................................................................14
Market Value Ratios.............................................................................................................15
EPS....................................................................................................................................15
Graphical Representation of Reliance Worldwide Corporation Share Price and Comparison of
Its Share Price Movements with All Ordinaries Index............................................................16
Share Valuation........................................................................................................................18
Conclusion................................................................................................................................19

Analysis of Reliance Worldwide 4
Recommendation......................................................................................................................19
REFERENCES.........................................................................................................................20

Analysis of Reliance Worldwide 5
Introduction
Reliance Worldwide Corporation commonly known as RWC is the Australian-based firm that
manufactures, designs as well as suppliers water flow and provide solution and control
products for use in wall plumbing (Reliance Worldwide Corporation 2017). It manufactures
brass push-to-connects plumbing fittings. The company chief products comprises of
thermostatic products, control valves, pipe and fittings as well as other products the Fitting
and pipe comprises of the plumbing fittings, related products for repair and installation of the
water reticulation systems as well as piping (Financial Times 2018).
Calculation and Analysis of Performance Ratio
Financial ratios are usually conducted by comparing at least two items reported in financial
statements. In other words, ratios are considered as mathematical comparisons of the
financial statements (Innocent, Mary & Matthew 2013). This assists internal organization
management, investors and creditors among others comprehend how well the company is
doing and those areas that require some improvements. They are crucial in determining an
entity’s financial position since they are easy to comprehend and easy to calculate. Further,
ratios are used in comparing different firms across the sector and with their competitors
(Higgins 2012). They enable analysts to compare organizations across the sectors, to identify
their weaknesses and strengths. Ratio analysis can be classified as liquidity, profitability,
market value, solvency or leverage as well as efficiency ratios.
Liquidity Ratios
Such ratio are useful in analysing capacity of Reliance Worldwide Corporation Ltd in settling
off both its short-term debts once they are due and long-term debts once they are current
(Innocent, Mary & Matthew 2013). They show Reliance Worldwide Corporation Ltd cash

Analysis of Reliance Worldwide 6
level and it capacity in turning other total assets to cash in order to settle its current debts. To
be more specific, these ratios are measures of how easy Reliance Worldwide Corporation Ltd
able to raise sufficient cash. In this case, acid test, working capital and current ratios would
be used in evaluating the capacity of Reliance Worldwide Corporation Ltd to raise sufficient
cash.
Current Ratio
This ratio is useful in this case since it would help in examining the capacity of Reliance
Worldwide Corporation in resolving short-term arrears by use of its current assets (Innocent,
Mary & Matthew 2013). Basically, the ratio helps Reliance Worldwide Corporation creditors
and investors in understanding its liquidity level and how easily the firm would be in settling
its current debts. As such, Reliance Worldwide Corporation current ratio would be as
follows:
2016 2017
Current ratio 254,376/ 69,732 = 3.65 313,916/ 117,902 = 2.66
Table 1: Current ratio
As per Table 1 above, it is clear that RWC current ratio decreased over the last two years
though was far much above 1. This implies that for the last two years, RWC was able to settle
its short-term or current debts using its current assets.
Quick Ratio
Also referred to the acid test would be useful in measuring the capacity of Reliance
Worldwide Corporation Ltd in resolving its short-run debt commitments by use of most
liquid form of assets (Innocent, Mary & Matthew 2013). Basically, the ratio helps in