Financial Analysis Report: Profit and Cash Flow for Ausdrill

This report provides a comprehensive analysis of profit and cash flow data, focusing on the financial performance of Ausdrill Company. The report examines key financial metrics, including revenue, cost of goods sold, net income, earnings per share (EPS), and return on equity (ROE), to assess the company's profitability. It also delves into the cash flow statement, analyzing operating, investing, and financing activities to evaluate the company's liquidity position. The analysis highlights the significance of these financial data points in facilitating informed financial decision-making for both internal and external stakeholders. The report uses Ausdrill's financial statements to illustrate the practical application of these concepts, concluding with insights into the company's financial health and recommendations for improvement. The report emphasizes the importance of understanding financial statements for effective decision-making in business.

Report on Profit and Cash
flow data

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Profit and cash flow data relevant and objective to facilitate financial decisions..................1
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Financial statements play major role in assessing performance of company for the
financial year in effective manner. Present report deals with important and relevant data in
relation to cash flow and income statements which helps in facilitating decision-making with
much ease. Ausdrill Company which is engaged in metal mining services is taken in this aspect.
The annual report is analysed and relevant data is discussed. Thus, financials are crucial for
decision-making in effective way.
Profit and cash flow data relevant and objective to facilitate financial decisions
The profitability and liquidity aspect of company are one of the important part of
assessing financial health of company. These two aspects laid emphasis on overall financial
performance of firm in the best possible manner. Earning capacity of organisation can be
assessed by seeking income statements which highlights profitability position in effectual
manner. On the other hand, cash flow statement is required to evaluate whether sufficient cash is
available to meet the operational tasks of firm and as such, it clarifies liquidity position in
effective way (Hernandez, 2018). In relation to this, Ausdrill Company listed on Australian
Securities Exchange is engaged in drill and blast and exploration organisation. It is metal mining
service provider having varied number of subsidiaries in the mining sector.
The objective to facilitate in making financial decision is required by the external
stakeholders which have interest in overall performance of the company. The investors' assess
profitability aspect as it clarifies them whether adequate earnings are attained by funds provided
by them. Moreover, investors are able to make well-structured decision whether they should
continue to provide funds to company or not. On the other hand, creditors assess firm's solvency
position so that they may evaluate whether organisation will be able to make timely payment to
them or not and thus, financial decision is made by external parties. This is essentially required
in order to take better and effective decisions which eventually maximises their earnings in the
best possible manner (Balakrishnan, Blouin and Guay, 2018). Thus, profitability and liquidity
position of company is helpful data for evaluating financial health quite effectually.
There are numerous data that is relevant in making financial decisions in effective
manner. Among them, sales revenue is one of the crucial aspect of analysing profitability of
company. The revenue are cash inflows which are effectively generated from production and
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delivering goods to customers and as such, it is major part of operations of the firm. In simpler
words, when goods are sold in the market and money received thereof is termed as sales revenue.
After attaining sales, COGS (Cost of Goods Sold) is deducted from it to arrive at gross profit
with much ease. It can be analysed from the income statement of Ausdrill Company that revenue
from continuing operations in 2016 was 744,635 which increased to 778,719 in the financial year
2017. This clearly shows that revenue has maximised up to a high extent in recent period which
means that sales of company has increased quite effectually.
The revenue recognition is implied for outlining main activities of organisation. In the
revenue, there are various segments from where revenue is being attained (Chen, Collins, Kravet
and Mergenthaler, 2018). These are contract services in which sales are recognised of units
produced on monthly basis as per the contracts made by the company. Another one is mining
supplies and manufactured items. It is taken as sales are recognised and recorded when items are
sold to customers as per their orders. Next segment of sales is other revenue. Thus, collectively
revenue is being increased in 2017 financial year. Another important aspect of data which
facilitates decision-making is net income. It is arrived when all the operating and non-operating
expenses are deducted and as such, left over amount is net income or profit. In order to increase
net income, it is required that business should initiate control over expenditures so that overall
profitability can be increased up to a high extent.
It can be interpreted from the income statement of Ausdrill Company that net income was
58150 in 2016 which decreased to 31201 in 2017. It clearly shows that firm is not able to control
upon expenses as it profit for the year has been gone down with a huge margin. Furthermore, all
operating and non-operating expenditures are increased which should be reduced in order to gain
more profits in the best possible manner. Thus, net income help to facilitate financial decision-
making as profitability is being effectively assessed with it. On the other hand, EPS (Earnings
Per Share) is relevant data which help to ascertain how much quantum of earnings are made by
the company. Furthermore, it can be analysed whether desired dividends are being paid by
organisation or not at the end of financial year to the shareholders' on the investment made
(Abdoh and Varela, 2018). In simpler words, EPS clarifies regarding earnings of company in
effective manner.
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EPS is required to be assessed as investors can take financial decisions regarding
profitability position and as such, they can easily evaluate performance of company which is
based profit and outstanding shares of company for a particular financial year. It can be
evaluated from the annual report of Ausdrill Company that Diluted EPS attributable to equity
shareholders was 18.2 in cents in 2016 which decreased up to a high extent in 2017 year as it
came down to 9.7. It implies that EPS has reduced by half from the previous year which is not
good for the company as desired dividends are not paid to shareholders. This can result into
reduce loyalty of investors and they may withdraw further investment.
The main reason behind low EPS is that net profit was 31201 in 2017 while it was 58150
in previous year. It is required to earn well so that adequate dividends may be imparted to them
with much ease. On the other hand, ROE (Return on Equity) is again important factor to check
on profitability aspect of company in the best possible manner. It has been calculated from
financial statements that ROE was 10.03 % in 2016 while it reduced to 5.05 % in the financial
year 2017. It clearly shows that company is not effectively utilising shareholders' investment to
produce profits (Shang, Kuzmenko and Uryasev, 2018). Thus, all these data are relevant to
assess profitability position of Ausdrill Company and helps in facilitating financial decision-
making in effective manner.
The cash flow statement is another important part of financials of the company which
helps in clarifying whether company has adequate cash position or not. In relation to this, mainly
there are three activities in cash flows such as operating, investing and financing activities. These
activities help to ascertain whether company has enough cash balance at the end of year or not. It
can be said that operating activities which means that whether cash has been acquired or used in
normal operations of Ausdrill Organisation such as selling of items and accounts payable and
related activities. On the other hand, investing activities are those when is invested in capital
expenditures such as purchases and sale of land, machinery. Purchasing reduces cash and selling
of fixed assets or investments increases cash. While, financing activities are those when money is
paid or received from bank loans and related activities. When such liabilities are taken, cash
availability increases and when the same are paid, then cash decreases (Abel, 2018).
The stakeholders are required to assess cash position of company as from this, they can
attain better dividends as when adequate cash balance is left over after deducting expenditures,
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then they are paid dividends in effective manner. It is clarified from the fact that when abundant
cash is available then, higher returns may be provided to shareholders (The cash flow and its
importance in the decision-making process. 2018). It can be interpreted from the cash flow
statement of Ausdrill Organisation that cash flows from operating activities was 91006 in 2016
and it increased to 94613 in 2017 which means that inflows are obtained in both years and is
good for the company. On the other hand, there has been cash outflow from investing activities
in 2017 amounting to 101127. It means that cash is used for purchasing PPE (Property, Plant and
Equipment) which has decreased cash. While, there is again outflow from financing activities as
borrowings is increased. Thus, overall beginning balance was 181857 and ending was 166710
which means that cash is reduced as more spending are done by company in 2017 financial year.
CONCLUSION
Hereby it can be concluded that financial statements are quite effective way of assessing
financial performance of the company in the best possible manner. The profitability aspect of
organisation is required to be assess by stakeholders so that better financial decision-making may
be made with much ease. This is required so that they may easily assess profitability and
efficiency and liquidity position in effective way. Thus, it can be said that Ausdrill Organisation
needs to increase its profitability position to attain more income.
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REFERENCES
Books and Journals
Abdoh, H.A.A. and Varela, O., 2018. Product market competition, cash flow and corporate
investments. Managerial Finance. (just-accepted). pp.00-00.
Abel, A. B., 2018. The effects of q and cash flow on investment in the presence of measurement
error. Journal of Financial Economics. 128(2). pp.363-377.
Balakrishnan, K., Blouin, J. and Guay, W., 2018. Tax Aggressiveness and Corporate
Transparency. The Accounting Review.
Chen, C. W., Collins, D. W., Kravet, T. D. and Mergenthaler, R. D., 2018. Financial statement
comparability and the efficiency of acquisition decisions. Contemporary Accounting
Research. 35(1). pp.164-202.
Hernandez, L. M., 2018. Financial and Operational Measurements. In Finance Unleashed (pp.
105-108). Palgrave Macmillan, Cham.
Shang, D., Kuzmenko, V. and Uryasev, S., 2018. Cash flow matching with risks controlled by
buffered probability of exceedance and conditional value-at-risk. Annals of Operations
Research. 260(1-2). pp.501-514.
Online
The cash flow and its importance in the decision-making process. 2018 [Online] Available
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