Monash Business School, ACC/ACF5903: Financial Analysis Report

This report provides a comparative financial analysis of PBT Holding Ltd. and Electronic Optic System (EOS) for the years 2016, 2017, and 2018, focusing on Return on Assets (ROA), profitability, and efficiency. The analysis includes a comparison of asset turnover ratios, EBIT, and operating revenue, revealing performance differences and identifying limitations in accounting information. The report also examines selected accounting policies, such as depreciation methods, and discusses the limitations of accounting data, including reliance on historical costs and the omission of non-monetary asset valuations. The assignment aims to critically interpret accounting information to make judgments about company performance, as per the requirements of ACC/ACF5903 at Monash Business School.

2019
Accounting financial analysis report

Contents
Answer-1....................................................................................................................................2
Answer-2....................................................................................................................................3
Answer-3....................................................................................................................................3
Answer-4....................................................................................................................................4
References..................................................................................................................................6

Answer-1
Comparison between PBT holding ltd and electronic optic system for organisations while
generating wealth
As an investor, it is important to examine PTB trend for the short medium term to check
whether the PTB Group Limited is able to meet the objectives and enhance overtime. While
considering the return on investment, the group fall short to achieve 20 percent of return on
equity. Whereas, return on assets of nearly 5.5 percent crosses AU Aerospace and defence
industry of nearly 4.1 percent. The company has been using its assets in an appropriate and
efficient way (Warrad, & Omari, 2015). The organisation`s profile is based on creating
volume. The main two key elements in accelerating growth is related to leasing with US
business units. When the company operates with potential to create sizeable fleet over long
term as being guaranteed by the MRO agreements (Christensen, Nikolaev, & Moerman,
2016). Operation imparts buying warehouse facilities so that the company enables itself to
access existing appropriate service quality without investing huge sum of money. PTB paced
up to 37 percent of operating profit as with the same period from 26 percent hike in revenue
generation. The gain spread over all the smaller divisions as being achieved in outsized gains
as being through scales, which achieves significant uplift in activities. The annual reports of
the company acquires software and license, which can contribute to financial benefits by
revenue generation as being capitalised to system and software (Christensen, Nikolaev, &
Moerman, 2016).
EOS tracking sources comprises of several advanced technological systems, which are
beyond. The company is not able to employ its resources in a better way due to financial
risks, which can adversely affect government that are company`s customers. When the
company expects revenue growth from replacement and upgrade many 15000+ conventional
deployment. Certainly, the company has improved its current performance of 2019 as

shareholders received total shareholder return of nearly 57 percent in one year. The process is
critical in order to achieve EOS price performance metrics for the network operations and
deployment by increasing the focus on Zero production focusing on EOS equipment needs.
The company fund space infrastructure from capital and forgive a share of future revenue.
Revenue generated from sale of space hardware dropped sharply where the company focuses
on resources in regards to the operational testing of the current sensor (Bril et al., 2017).
Answer-2
Comparison between companies through ROA (return on Assets) for 2016, 2017 and 2018
The asset turnover ratio calculates the value of organisation’s sales and the revenue relating
to the value of the assets. This ratio is used as an indicator of efficiency of assets, which the
company has been using the assets in order to generate revenue. Greater is the asset turnover
ratio then more efficient is the company (Garcia, Cintra, Cássia, & Lima, 2016). On the same
side, if the company is not performing well and has low asset turnover ratio then it has not
been using the assets while generating sales (Electro optic systems Holdings Limited, 2017).
PBT holding limited
Formula 2016 2017 2018
Return on Total assets Net Income ÷ Average Total Assets 0.02 0.18 -0.36
(Source: Annual reports, 2018)

2016 2017 2018
-0.60
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
1.00
1.20
Electro Optic Systems Holdings Limited
Formula 2016 2017 2018
Return on Total assets Net Income ÷ Average Total Assets -0.03 -0.29 0.16
1 2 3
-0.40
-0.30
-0.20
-0.10
0.00
0.10
0.20
Return on Assets
Extreme lower asset turnover ratio indicates that it has too heavy investments in assets and
considerable decline in revenue and sales. From the statements given in the annual reports, it
is seen that PBT holding group generates 2 percent of the return on assets in 2016, 18 percent
of return of assets on 2017, and then negative 36 percent in 2018 (PBT holding limited,
2016). The company has incurred negative net profit in 2018. On the other hand, Electro

Optic Systems Holdings Limited has generated negative 3 percent of return on assets for
2016, negative 29 percent in 2017, and 16 percent in 2018. Negative asset turnover ratio
indicates that the company has made too much investment in assets leading to decline in sales
as the assets might be purchased not out of reserves but accumulated profits (PBT holding
limited. 2016).
PBT holding Group
Particulars 2016 2017 2018
$ '000 $ '000 $ '000
Operating revenue 888096 594742 594094
EBIT 156723 17396 10440
EBIT/operating revenue 0.176470787 0.029249658
0.01757
3
Electro Optic Systems Holdings Limited
Particulars 2016 2017 2018
million $ million $ million $
Operating revenue 25514 23064 86339
EBIT -3785 -7692 6615
EBIT/operating revenue -0.148349926 -0.333506764
0.07661
7
EBIT/operating revenue 2016 2017 2018
PBT holding Group 0.176470787 0.029249658
0.01757297
7
Electronic optic system holdings limited -0.148349926 -0.333506764
0.07661659
3
The above comparison reveals that return and percentage of EBIT as compared to operating
revenues. It is estimated that a return of 12-15 percent is nearly appropriate where a company
performs well. PBT holding Group earns 17 percent in 2016, 2 percent in 2017 and 1 percent
in 2018. Electronic optic system holdings limited operates with negative 14 percent in 2016,
negative 33 percent in 2017, and 7 percent in 2018. While comparing the data, it is seen that
PBT holding Group has been performing good as compared to Electronic optic system
holdings limited.

Particulars 2016 2017 2018
$ '000 $ '000 $ '000
Operating revenue 888.096 594.742 59.4094
Average assets 6050.5 6711 517.5
operating revenue/Average assets 0.146780597 0.088621964 0.114800773
Particulars 2016 2017 2018
million $ million $ million $
Operating revenue 2.5514 2.3064 8.6339
Average assets 32.38 32.38 112.05
operating revenue/Average assets 0.078795553 0.071229154 0.077053994
Operating Revenue/Average Assets 2016 2017 2018
PBT holding Group 0.1468 0.0886 0.1148
Electronic optic system holdings limited 0.0788 0.0712 0.0771
PBT holding Group
Electro Optic Systems Holdings Limited
Operating revenue generates a percentage with the use of average assets. PBT holding limited
generates 14 percent in 2016, 8 percent in 2017 and 11 percent in 2018. Whereas, electronic
optic system holding limited generates 7 percent in 2016, 7 percent in 2017 and 7 percent in
2018. PBT holding limited generates greater revenue as compared to Electronic optic systems
limited.
Answer-3
Three accounting policies selected by the companies while comparing return on assets
Some of the important accounting policies include how organisation identifies revenue
reflects depreciation, cost flow system of identifying inventory, which lastly overview as the
type of development cost is capitalised (Garcia, Cintra, Cássia, & Lima, 2016). Equipment
and plants under the finance leasing as being stated at cost lessening accumulated impairment
and depreciation. Depreciation is availed on plant, equipment, and property. Depreciation is
calculated to write off the net cost and other revalued amount of every asset that is expected

over the useful life. Leasehold improvements have to be depreciated with the period within
the useful life (Garcia, Cintra, Cássia, & Lima, 2016).
(Source: Annual reports, 2018)
(Source: Annual reports, 2018)
EOS has created its financial reports on historical costing where the cost is based on fair
values of consideration as being given in the exchange of assets.

(Source: Electro Optic Systems Holdings Limited annual report 2018)
On the other hand, PBT holding has significant accounting policies reflects depreciation is
calculated on straight line and diminishing value that has been allocated to cost of each item
of property, net of further residual values, which is estimated useful to group (Garcia, Cintra,
Cássia, & Lima, 2016). Depreciation is on the basis of operating hours.
PBT holding ltd.
(Source: Annual reports, 2018)
Answer-4
Limitations of accounting information while generating wealth.
There are several limitations of the accounting data in making decisions regarding how well
organisations use the resources in order to generate wealth. Certain limitations include higher
dependence on the historical costs as the transaction is recorded at costs. Moreover,
reviewing balance sheet as the value of liabilities and assets keep changing overtime, use of
estimates, and omission of the valuation of non-monetary assets (Rossi, Cohen, Caperchione,
& Brusca, 2016).
In case of both the given organisations, decisions depend on diverse range of issues where
decision is not based on monetary. The accounting data might avail clarity on monetary

issues but it does not avail definite insight in the strategic future as it holds changes in
technology, political scenario, and economic situation (Rossi, Cohen, Caperchione, & Brusca,
2016). The data is unreliable because of historical assumptions created as per the
measurability criteria. The company is unable to reflect true value of the strategic
management such as goodwill affect the operations as they are difficult to measure leading to
unavoidable from the annual reports. Improper measurement of volatile external factors
(Christensen, Nikolaev, & Moerman, 2016). Financial accounting data does not undertake
and consider the volatility of increasing fluctuation in environment. Both the organisations
have not been marked as overstated financial statements as their assets are valued at historical
costs and straight-line method (Rossi, Cohen, Caperchione, & Brusca, 2016). In order to take
decisions in regards to the accounting information, as the demand of the transaction is
recorded as the original costs when they are being incurred where the asset is recorded at
amount of cash and cash equivalents with fair value of consideration as given to them
(Electro optic systems Holdings Limited, 2019). With the assistance of accounting
information, it can become easier for the management to plan for the future activities, make
appropriate budgets, and finally coordinate several activities in varied departments
(Christensen, Nikolaev, & Moerman, 2016). While learning accounting information system,
which is difficult and time consuming. Individuals should be trained system and this causes
disadvantage to the companies in terms of labour and time. Accounting information system is
created of several different components with almost system that are computerised. Due to
their complexity, several people will find them hard to use. Accounting information system
are computerised as there is a high risk of losing data with the power system crashes and
outages. There is a change in losing of the system (Electro optic systems Holdings Limited,
2019).

References
Bril, A. R., Kalinina, O. V., Ilin, I. V., Dubgorn, A. S., & Iliashenko, O. Y. (2017, May).
Forecasting the turnover growth in the risk management system as management
decisions support. In 2017 XX IEEE International Conference on Soft Computing and
Measurements (SCM) (pp. 692-693). IEEE.
Christensen, H. B., Nikolaev, V. V., & Wittenberg‐Moerman, R. (2016). Accounting
information in financial contracting: The incomplete contract theory
perspective. Journal of Accounting Research, 54(2), 397-435.
Electro optic systems Holdings Limited, (2017). Electro optic systems: company overview.
Retrieved from: https://www.asx.com.au/asxpdf/20170522/pdf/43jfbzsnly0qv1.pdf
Electro optic systems Holdings Limited, (2019). Annual report. Retrieved from:
https://www.eos-aus.com/wp-content/uploads/2018/08/EOS-Annual-Report-2017.pdf
Garcia, S., Cintra, Y., Rita de Cássia, S. R., & Lima, F. G. (2016). Corporate sustainability
management: a proposed multi-criteria model to support balanced decision-
making. Journal of Cleaner Production, 136, 181-196.
PBT holding limited. (2016). Annual report. Retrieved from:
http://www.pacificturbine.com.au/wp-content/uploads/2016/07/PTBGroupAnnualRep
ort2007-1.pdf
Rossi, F. M., Cohen, S., Caperchione, E., & Brusca, I. (2016). Harmonizing public sector
accounting in Europe: thinking out of the box. Public Money & Management, 36(3),
189-196.
Warrad, L., & Al Omari, R. (2015). The impact of turnover ratios on Jordanian services
sectors’ performance. Journal of modern accounting and auditing, 11(2), 77-85.