Boral Ltd.'s Financial Health: A Comprehensive Report

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Accounting for business
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Table of Contents
Introduction....................................................................................................................................3
Company overview........................................................................................................................4
Vertical analysis.............................................................................................................................5
Ratio analysis.................................................................................................................................6
References.......................................................................................................................................7
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Introduction
The given report discusses the financial performance of a listed entity. Such analysis is very
important for every type of stakeholders whose interest get influenced by the business activities
of the concerned business entity. Some major and widely used tools and techniques of financial
analysis has been done in this report. Ratio analysis is the traditional form of analysis that is
generally done by the prospective investors so as to decide whether to decide in the proposed
company or not. Despite the fact that it is one of the traditional approach or manner of analysis, it
is regarded as a key performance indicators in the modern scenario or dynamic environment.
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Company overview
Although Boral Ltd. is a multinational company but its head office is located in the Australia.
Apart from that its shares are listed on the Australian stock exchange making it a public
company. The company is engaged in the materials used for manufacturing or constructing. The
area of operations covered by Boral Ltd. includes production and supply thereof. There are more
than 15000 employees who are directly or indirectly associated with Boral Ltd. making it a large
business entity. The major area of operations of Boral Ltd. is Asia along with United States.
There are almost 700 working sites in all these regions thereby serving to a large number of
customers. There are various subsidiaries of Boral Ltd. of whose ownership is reserved by Boral
Ltd in different proportion. The major subsidiaries are Boral Finance Pty Ltd., Boral Industries
Inc., Boral Transport Ltd along with others (Cavan, et. al., 2017). Thus, Boral Ltd. is a group
comprising of various entities. All the subsidiaries are not public companies. Some of them are
also private limited. Apart from that all these subsidiaries are engaged in different types of
activities that are essential to provide the concerned materials to the intended users.
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Vertical analysis
Vertical analysis and horizontal analysis are two types of analysis that are generally done to
decide on the financial performance of any business entity. It can be said that under these two
types of analysis, two different perspectives or approaches are done so that business activities
can be done from each and every respect and accordingly complete information can be obtained
regarding the business activities or financial performance of the concerned entity (Hayashi, et.
al., 2015).
Under vertical analysis, one primary variable is taken as the base and all the variables are
expressed in terms of that primary variable. This will help to assist in relating all the dependent
variables to the independent variable or vice versa. Vertical analysis can be done for the items of
financial statements covering statement of profit and loss and statement of financial position.
Particulars 2017 2017 (%) 2016 2016 (%)
Sales revenue 4128 100.00% 3945 100.00%
Cost of sales 2761 66.88% 2673 67.76%
Gross profit 1367 33.12% 1273 32.27%
Interest expense 73 1.77% 68 1.72%
Unusual expense 95 2.30% 51 1.29%
SG&A Expense 1040 25.19% 1002 25.40%
The above table explains the vertical analysis of Boral Ltd. which has been done taking the sales
revenue as the basis. Accordingly, all the other variables (covering both expense and profit) has
been expressed in terms of sales revenue. For a better comparison, the analysis has been done of
2 consecutive years, i.e., 2016 and 2017. Three major categories have been taken to make it more
relevant for the decision making (Albright, et. al., 2010).
On a careful analysis, it can be observed that there has been minor change or fluctuation in all
the variables. There has been a insignificant increase in interest expenses and unusual expenses.
On the other hand, SG &A expense has witnessed a minor decline which can be considered as a
positive sign for the management of the company. Interest expense has increased from 1.72% to
1.77% in relation to 2016. In the same manner, unusual expenses have rose to 2.30 from 1.29%.
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Ratio analysis
Computed ratios can be compared with the industry standards and accordingly it can be decided
as to whether the performance of the concerned company is above the industry standard or below
the industry average or in accordance with the industry. Apart from that ratio analysis can be
done between the two business entities belonging to the same industry thereby deciding which
business concern or entity is performing better. Three major ratios, belonging to different
categories, have been computed so as to determine the financial stability.
Particulars 2017 2016
Return on equity 7.28% 6.64%
Asset turnover 0.68 times 0.56 times
Quick ratio 0.95 times 0.79 times
Debt to equity
ratio 65.43% 71.19%
It can be clearly observed that there has been a satisfactory increase in return on equity which
indicating a positive sign for all the concerned stakeholders. Accordingly, all the equity holders
will get more return in the year 2017 when compared to the previous year 2016 (Anderson, et.
al., 2015).
On the other hand, there has been major decrease in the debt to equity ratio. It can be inferred
that proportion to debt has increased in relation to the equity component. This can also be treated
as a favorable factor for the top level management as relying more on debt will require a fixed
amount of interest. On the other hand, there is no need to make fixed amount of payment to the
equity holders. For a large business entity, such as Boral Ltd. equity is considered as a safe mode
of source of finance.
Quick ratio depends on the concerned industry and thus it varies from entities to entities.
However, ratio of 1:1 is considered to be a standard one. It is more informative than the current
ratio in the sense that it considers only those assets that are readily converted into cash. In the
case of Boral Ltd., quick ratio has increased from 0.79 to 0.95 in relation to the previous year,
i.e., 2016. This can be construed as a positive sign for the overall Boral Ltd. group as in indicates
that the current assets have increased. It can also be inferred that to pay off the current liabilities
Boral Ltd. has sufficient current assets.
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Recommendations
Considering the ratio analysis, it can be said that there are various steps that will help in the
better performance of the concerned business entity. Boral Ltd. should focus on core activities so
that its overall revenue can increase and consequently the net profit ratio along with other
profitability ratios can increase. Another recommendation is related or associated with
expansion. In other words, the expansion strategy is appropriate for Boral Ltd. as it will help to
explore more and more opportunities. Selecting these two options will help the Boral Ltd. to
compete for a longer duration.
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References
 Cavan, V., Romero Naranjo, F.J. and Bagolin, M., 2017. The efficacy of BAPNE Method in
dementia treatment: a research proposal in Friuli Venezia Giulia, Italy.
 Hayashi, Y., Ishida, Y., Okahara, K. and Mitsuyama, Y., 2015. An Open-Label Trial of
Yokukansan on Sleep Disturbance in Alzheimer's Disease and Other Dementia. The journal of
prevention of Alzheimer's disease, 2(3), pp.172-177.
 Albright, S.C., Winston, W. and Zappe, C., 2010. Data analysis and decision making. Cengage
Learning.
 Anderson, D.R., Sweeney, D.J., Williams, T.A., Camm, J.D., and Cochran, J.J., 2015. An
introduction to management science: quantitative approaches to decision making.
CengageLearning.
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