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Report on Accounting- Doc

   

Added on  2020-03-16

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ACCOUNTING

Medical Australia LimitedExecutive summaryAn analysis of the company can be done with the aid of various factors such as ratio analysis,debt valuation, share valuation, cost of capital, market analysis, etc. In this report, the majoremphasis is on the financial strategy of the company. The selected company for the report isMedical Australia Limited. The report sheds light on the various components of debt, ratio,market evaluation and the financial management of the company is revealed in an appropriatemanner. The overall analysis indicates that the company has low beta and hence, is a good betwhen it comes to downturn. 2

Medical Australia LimitedContentsI.Debt Valuation.....................................................................................................................................4i.Short-term and long-term debts..........................................................................................................4ii.Debt structure.....................................................................................................................................4iii.Proportion of short-term to long-term debts......................................................................................4II.Share Valuation...................................................................................................................................5i.Calculation of Cost of Equity:.............................................................................................................5ii.Revenue, earning, EPS........................................................................................................................5iii.P/E Approach...................................................................................................................................6iv.Most reasonable...............................................................................................................................7v.Valuation of the company stocks.........................................................................................................7III.Cost of Capital.................................................................................................................................8i.Calculation of WACC.........................................................................................................................8ii.Company’s tax rate..............................................................................................................................8iii.Difference in the cost of debt and the cost of equity........................................................................8iv.Pros and cons of including current liabilities in the cost of capital calculation................................8v.Major value of the WACC calculation................................................................................................9vii.Capital structure...............................................................................................................................9viii.Optimal capital structure..................................................................................................................9IV.Market Analysis.............................................................................................................................10i.Financial performance.......................................................................................................................10ii.Overview of the company..................................................................................................................11iii.Other discussion............................................................................................................................11Reference:.................................................................................................................................................12Appendix...................................................................................................................................................133

Medical Australia LimitedI.Debt Valuation i.Short-term and long-term debtsThe long-term debts are those that are due for a period exceeding 12 months. In the caseof Medical Australia Limited, the long-term debt comprises of trade creditors andpayables. The non-current liabilities are the obligations and for the company, it is thelong-term debt as they are not due in the present course of time. a.On the other hand, the short-term debt comprises of the debts that are due in ashort course of time that is within a span of 12 months. The current liabilities ofthe company such as trade creditors, income in advance, payroll liabilities,accruals, etc are the short-term debts.ii.Debt structureThe debt structure of the company can be commented with the help of debt-equity ratio.As per standard industrial norms, the debt-equity ratio should not exceed 1. This meansthat a higher reliance on the debt will affect the performance of the company as moreinterest payment will be required. b.As per the computation of the ratio, it can be seen that the debt-equity of thecompany stands below 0.50 that means it is in synchronization with the industrialstandards as the company does not contain a major reliance on debt.iii.Proportion of short-term to long-term debtsWhen it comes to the short-term debts it can be said that the company has utilized moreof short-term debts. This implies the company operates with a motto of better operationin the short-term. Such debts are due for payment in a span of 12 months and hence, thecompany does not have the obligation of the longer term. On the contrary, the long-termdebt comprises of the trade payable and provisions that decreased in comparison to the4

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