ACCT5003: Financial Analysis of Australia Post's Performance 2017-2018

This report presents a financial analysis of Australia Post, examining its performance over the years 2017 and 2018. The analysis is based on the calculation of various financial ratios, including current ratio, operating cash flow to current liabilities ratio, debt to equity ratio, interest coverage ratio, gross profit margin, and net profit margin. The study reveals insights into Australia Post's liquidity, leverage, and profitability positions. The analysis indicates an improvement in the current ratio from 2017 to 2018, but the operating cash flow to current liabilities ratio decreased. The debt to equity ratio decreased, suggesting reduced reliance on debt, while the interest coverage ratio increased. Profitability margins showed mixed results, with a decrease in gross profit margin and an increase in net profit margin. The report concludes with recommendations for Australia Post to improve its liquidity position and manage operational costs effectively. The analysis utilizes data from the company's annual reports and provides a comprehensive overview of its financial health during the specified period.

Running Head: ACCOUNTING RESEARCH PROJECT
ACCOUNTING RESEARCH PROJECT
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................3
Calculation of Ratio...............................................................................................................3
Analysis of Ratio....................................................................................................................3
Conclusions and Recommendations..........................................................................................4
Reference....................................................................................................................................6

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Introduction
Financial analysis helps in evaluating the economic trends, setting up of the financial
policy, building the long-term plans for the business activity and identifying the projects or
the companies for the investment. For this, the most common ways for analyzing the financial
data is comparing against the company’s own historical performances or against that of the
competitor’s performances data by calculating the ratios. This ratio analysis plays vital role in
determining financial strength as well as weaknesses of the company in relation to other
companies and helps in improving the financial position of the company. Hence, under this
assignment, financial analysis will be done on the Australia Post. The Australian Postal
Corporation is the corporation, which operates as the Australia Post is owned by the
government, which helps in providing the postal service’s all over Australia. Moreover, it
helps in providing reliable as well as affordable postal, travel, retail and financial services
(auspost.com.au. 2019).

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Discussion
Calculation of Ratio
Current Ratio 2018 2017
Current Assets 1,739.50 1,481.50
Current Liabilities 1,775.50 1,998.40
Result 0.98 0.74
OCFCL 2018 2017
Operating Cash Flow 219.70 440.90
Current Liabilities 1,775.50 1,998.40
Result 0.12 0.22
DE Ratio 2018 2017
Debt 3,224.20 3,419.40
Equity 2,366.70 2,117.90
Result 1.36 1.61
Interest Coverage Ratio 2018 2017
EBIT 125.70 126.10
Interst Expenses 8.50 30.70-
Result 14.79 4.11-
Gross Profit Margin 2018 2017
Gross Profit 6,877.00 6,807.20
Total Revenue 6,749.40 6,625.80
Result 102% 103%
Net Profit Margin 2018 2017
Net profit 134.20 95.40
Total Revenue 6,749.40 6,625.80
Result 2% 1%
Liquidity Ratio
Levearge Ratio
Profitability Ratio
Figure 1: Ratio Analysis of Australia Post
Analysis of Ratio
As per the ratio calculated of Australia Post, it is being analyzed that the current ratio
of the company has improved from the previous year 2017 to the year 2018, however, the
current ratio is still less. There has been 0.24 increase in current ratio, which means that the

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ability of the company for paying its short-term liabilities, which is good. The operating cash
flow to current liabilities ratio of the company shows that there has been decrease of 0.10
from 2017-2018, which means non-ability of the company for paying its short-term liabilities
from its operating cash flow that is not a good sign (Robinson et al. 2015).
The debt to equity ratio of the company shows the decrease of 0.25 from the year
2017 to 2018, which shows that company has reduced its dependence upon more use of debt
in comparison with the equity. Moreover, interest coverage ratio shows the increase of 10.68
from the year 2017-2018 that means company is able for meeting their current obligation of
interest payment (Ehiedu, 2014).
Lastly, the gross profit margin shows the decrease of margin by 1% from the year
2017 to 2018 that means the company’s profitability margin is high as high level of revenue
is left after deducting cost of goods sold. In addition, the net profit margin shows the increase
of 1% from the year 2017-2018 that means, even after earning good revenue; the company is
not able to control its costs of operations (Williams & Dobelman, 2017).
Conclusions and Recommendations
Hence, it can be calculated from the analysis that the liquidity, leverage and
profitability ratio of the company shows the financial position of the company for the year
2017- 2018. It has been analyzed that the liquidity position of the company is not good for
meeting its short-term liabilities. Moreover, the leverage ratio shows that the company has
reduced its reliance to debt in comparison to the equity, which is good and it has the ability
for meeting its interest payment obligation. Lastly, the profitability ratio shows that the
company needs to control its costs of operations.

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Therefore, the recommendation that should be given to the company is the fact that
the company has to improve its liquidity position as well as they have to control the cost of
operations for earning good income.

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Reference
auspost.com.au (2019). Retrieved from
https://auspost.com.au/content/dam/auspost_corp/media/documents/annual-report-
2018.pdf
Ehiedu, V. C. (2014). The impact of liquidity on profitability of some selected companies:
The financial statement analysis (FSA) approach. Research Journal of Finance and
Accounting, 5(5), 81-90.
Robinson, T. R., Henry, E., Pirie, W. L., & Broihahn, M. A. (2015). International financial
statement analysis. John Wiley & Sons.
Williams, E. E., & Dobelman, J. A. (2017). Financial statement analysis. World Scientific
Book Chapters, 109-169.