Business Valuation and Financial Analysis of Cleanaway Limited

This report provides a comprehensive financial and business valuation analysis of Cleanaway Waste Management Limited. It begins with an introduction highlighting the company's operations in the waste management industry within Australia. The report then delves into macroeconomic analysis, examining the economic environment and factors such as GDP, unemployment, inflation, and interest rates that influence Cleanaway's performance. An industry analysis follows, utilizing Porter's Five Forces model to assess the competitive landscape, including rivalry, new entrants, substitutes, and the bargaining power of suppliers and customers. The report also includes a business strategy analysis, and an accounting analysis that scrutinizes the company's financial reporting practices, accounting policies, potential red flags, and accounting distortions. The analysis concludes with a summary of findings and a reference list.

Running head: BUSINESS VALUATION AND FINANCIAL ANALYSIS
Business Valuation and Financial Analysis
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2BUSINESS VALUATION AND FINANCIAL ANALYSIS
Table of Contents
Introduction......................................................................................................................................4
Macroeconomic Analysis................................................................................................................5
Economic environment of Cleanaway Waste Management Limited..........................................5
Macroeconomic factors that influence the performance of Cleanaway Waste Management
Limited.........................................................................................................................................6
Global Economy that has an influence on the company over the last 5 years.............................8
Future Prediction.........................................................................................................................8
Industry Analysis.............................................................................................................................8
Examining the level of competition that takes place in industry (Waste management and
recycling) by use of Porter’s five forces model...............................................................................8
Rivalry from existing competitors.............................................................................................10
Threat from new entrants...........................................................................................................10
Threat from substitute products.................................................................................................11
Bargaining power of suppliers...................................................................................................12
Bargaining power of customers.................................................................................................13
Business strategy Analysis............................................................................................................13
Accounting analysis.......................................................................................................................18
Tracking the primary accounting policies:................................................................................18
Analysing the overall accounting flexibility:............................................................................19

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Analysing the overall accounting strategy:................................................................................19
Analysing the overall quality of disclosure:..............................................................................20
Locating the potential red flags (information distortion):.........................................................20
Correcting the accounting distortions:.......................................................................................21
Conclusion.....................................................................................................................................21
Reference List................................................................................................................................23

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Introduction
With the advent of science and technology in the present global environment, all the
companies that are performing in the global market analyses their own functions in accordance to
the industrial benchmark to the region where the organizations perform. This paper has been
constructed in order to evaluate the financial and the annual reports of Cleanaway Waste
Management Limited with the help of several authentic sources like the financial statement of
the organization and various other journals and internet sources. The annual report of the firm
along with the Australian annual report has been useful for attaining best possible data that
would be useful for the completion of the paper (Ghose, Pizzol and McLaren 2017). Cleanaway
Waste Management Limited is an Australian Stock Exchange listed company and is associated
with in the clean and waste industry. The concerned company is one of the renowned companies
that is associated with the waste management industry and looks to make the country and the
region free from wastes. The company has the aim of creating a waste free environment and
making the world and the country a better place.
For the last few years, the company has been progressing in an effective manner as the
company has been gaining profits. The need for initiating this analysis has mainly been due to
the rise in the level of competition and the increase in the level of waste in the country. Recently,
there has been a rise in awareness among the consumers with respect to the environment (Betz et
al. 2015). The annual report of the firm helps in obtaining useful data for the operations of the
business. The utilisation of several assessment techniques like the macroeconomic analysis,
industry analysis, business strategy analysis and the accounting evaluation would aid in
understanding the financial position and the business valuation of the organization.

5BUSINESS VALUATION AND FINANCIAL ANALYSIS
Macroeconomic Analysis
Economic environment of Cleanaway Waste Management Limited
The word economic environment comprises of the extrinsic variables that are associated
in the business economy and in the vaster global economy that has an effect on the operations of
the business. The economic aim of the Cleanaway Waste Management Limited has been to
contribute in a positive manner to the concerned industry within which the firm performs and
look to provide a waste management process that is hassle free and free from economic threats
and risks. Zhang et al. (2014) has explained that economic environment can be segmented into
two divisions namely micro and macro environment. The two mentioned types of the economic
environment have a significant role to play in evaluating the success rate of the organization. The
performance with respect to the economy of the community where the company is associated
with the help of their business is important for Cleanaway Waste Management Limited.
The organization concentrates on the crucial precedence that aids them in gaining the
information with respect to the economic liability for the concerned stakeholders and undertakes
construct various reports and articles that would be beneficial in creating awareness among the
customers. The organization even undertakes a review and scrutiny of the waste management
services that intends in recognising the factors that would be unfavourable and the factors that
would be useful on the economic extent.

6BUSINESS VALUATION AND FINANCIAL ANALYSIS
Macroeconomic factors that influence the performance of Cleanaway Waste Management
Limited
The macroeconomic factors have been discovered to be a vast range of economic
variables that can have an impact on the financial growth and performance of the firm. The
macroeconomic factors are inclusive of growth in the population, Gross Domestic Product
(GDP), rate of interest, prices of oil, unemployment etc. GDP has been known to be the final
services and goods that are manufactured within the geographical boundary of a country, which
in this report is Australia as the paper concentrates on the business and financial analysis of
Cleanaway Waste Management Limited. The indicators that are macroeconomic in nature are
exploited in order to understand and compute the level of economic activity within Australia.
The rate of growth in the GDP is a country is directly associated with the financial position and
performance of the company (Luthra et al. 2014). The GDP of Australia has shown a rise of
2.8% on the year 2015-2016 and the country has a low rate of unemployment with a percentage
value of 5.6%.
Even though the rate of unemployment has come down, it has been observed that there
has been a rise in the level of part time and underemployment in the country at a significant
level. The rise in the level of part time and underemployment has mainly been due to the
availability of an increasing number of labour forces in the market. The main factor for the
increase in the labour market has been migration of foreign as well as domestic population in
search of jobs and other factors (Yeheyis et al. 2013). The rise in the level of part tine and
underemployment has motivated Cleanaway Waste Management Limited to increase their labour
force so that they can undertake various plans of actions to improve their operations and expand
their business to the next level. Another one of the economic factor has been the rise in the value

7BUSINESS VALUATION AND FINANCIAL ANALYSIS
of export in Australia. The rise in the value has suggested that that international business
transaction has been undergoing in an effective manner thereby reducing the burden from the
domestic industries. The rise in the value of export lowers the degree of risk of stock pile that
would reduce waste and in a way decrease the level of waste in the country. In the current
scenario, Australia does not have a significant amount of inflation in the country as the current
rate of inflation is 2% and is expect to rise to 2.10% within the next twelve months.
The rate of inflation being so low is good for Cleanaway Waste Management Limited as
they can purchase and bring in new and improved waste management equipments and serve them
at a lower cost. The use of these techniques would increase their level of work and they can even
expand their operational region thereby increasing their level of earnings. The interest rate aids
in calculating the rate of return anticipated by the lender for providing loan (Rostamzadeh et al.
2015). The rate of interest being higher lowers the level of investment in the business and
directly has an impact on the revenue level of the firms. This is due to the fact that the rise in the
rate of interest lowers optimistic Net Profit Value investments in the business. However, interest
rate being lower motivates the organizations to borrow money and make various changes in their
business so that they can increase their level of profit. The present rate of interest of Australia is
1.5%, which is very low and thus motivates Cleanaway Waste Management Limited to
undertake various expenditures related to the business so that they can increase their profitability
and reach their business objectives. It is seen that lower rate of interest decreases the level of
financial risk and improves the level business growth.

8BUSINESS VALUATION AND FINANCIAL ANALYSIS
Global Economy that has an influence on the company over the last 5 years
During the last five years, the company has been performing in an ineffective manner
even though due to the economic slowdown there has been an impact on the operations of the
firm for a few years (Jayant et al. 2014). The uncertainty in the market worldwide had led to the
postponement of the expansion of Cleanaway Waste Management Limited. The restriction of
Cleanaway Waste Management Limited has even been due to economic depression during the
year 2008 to 2009. However, the transformation in the economy for the last few years has been
fundamental for the firm to stand around and perform efficiently.
Future Prediction
The GDP of Australian economy has been expanding sustainably year by year and it has
been anticipated that Cleanaway Waste Management Limited will look to diversify their
business. Additionally, the policies implemented by Reserve Bank of Australia have decreased
the level of inflation and thereby gain the objectives of the firm (Allesch and Brunner 2014).
Therefore, the financial performance of Cleanaway Waste Management Limited would improve
thereby helps the firm to reach out globally.
Industry Analysis
Examining the level of competition that takes place in industry (Waste management and
recycling) by use of Porter’s five forces model
In this particular section, emphasis has been given on understanding the waste
management and recycling industry on how it operates in Australia and the company that belong
to this industry is named as Cleanaway Waste Management Limited. Porter’s five forces model

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is one of the effective tool that is preferably used as it brings out the external environmental
factor that govern a particular industry and country as a whole. Every industry faces some forces
that they need to face and try hard for mitigating it as far as possible. There are five external
environmental forces that are elaborated in the diagram of the model that comprises of, threat
from new entrants, threat from substitute products, competitive rivalry, bargaining power of
suppliers and bargaining power of customers (Carroll and Buchholtz 2014).
Figure: Porter’s Five Forces Model of Cleanaway Waste Management
(Source: Dahlbo et al. 2015)
Cmpetitive
Rivalry
Bargainin
g power
of
customers
Bargainin
g power
of
suppliers
Threat of
new
entrants
Threat of
substitute
products

10BUSINESS VALUATION AND FINANCIAL ANALYSIS
Rivalry from existing competitors
Cleanaway Waste Management Limited operates in Waste management and recycling
industry where it is important to know fact the fact on how far the company face competition
from the rivalry firms. Here, it is easy to find out from the below underlying reasons that the
company faces low threat from its competitors (Ferrão et al. 2014).
Low level of competition among the rivalry firms- The waste management and
recycling industry faces low level of competition from its rival firms in Australia. This
attribute or forces is highly beneficial for Cleanaway Waste Management Limited as the
company operates in the industry where the competition is low and they have a chance to
generate more revenue in their business (Shamsuzzoha, Helo and Sandhu 2016).
Higher strategies stakes or approaches- The management of Cleanaway Waste
Management Limited are capable of taking strategic decisions for their firm as the level
of competition is lower than any other industry under study.
Waste collection industry The waste management and recycling industry put more
emphasis upon factors where analysts give more importance to their existence in the
industry as they face less competition from any of the rival firms (García et al. 2014).
Threat from new entrants
Cleanaway Waste Management Limited operates in Waste management and recycling
industry where it is important to know fact the fact on how far the company face threat from the
new entrants. Here, it is easy to find out from the below underlying reasons that the company
faces low threat from the new entrants (Ylä-Mella et al. 2014).

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High investment cost- For any new entrant who is willing to enter in the waste
management and recycling industry, it is quite difficult for them as the establishment of
this type of company need huge cost of investment. It is for this reason Cleanaway Waste
Management Limited face low threat for any new entrants who start operating in the
industry (Garlapati 2016).
Higher barrier to exit- For any new entrants who is willing to enter in the waste
management and recycling industry, they will face difficulty as exit to barrier are higher
and new entrants cannot afford in. This force act as a positive influence for Cleanaway
Waste Management Limited who already occupies the position in the industry for few
years (Govindan et al. 2015).
Strict and rigid laws and regulations- For any new entrants who are interested in
operating in the industry need to face or tackle strict regulations and time taking process
at the same time. This force act as a positive influence for Cleanaway Waste
Management Limited who is already listed in the Australian Stock Exchange (Zaman
2015).
Huge investment- For any new entrants who are interested in operating in the industry
need to invest huge money in the industry that is not possible for any of the new
companies. This force act as a positive influence for Cleanaway Waste Management
Limited who is already well-established company operating in Australia.
Threat from substitute products
Cleanaway Waste Management Limited operates in Waste management and recycling
industry where it is important to know fact the fact on how far the company face threat from the

12BUSINESS VALUATION AND FINANCIAL ANALYSIS
substitute products. Here, it is easy to find out from the below underlying reasons that the
company faces low threat from its substitute products.
Few to zero substitutes for waste management- On analysis, it is noted that there is
only few substitutes to this industry and this is the positive forces for Cleanaway Waste
Management Limited that can help them in attainment of future goals and objectives.
High exit barriers in the waste management industry- There is high exit barrier for the
new entrants. It is for this reason why Cleanaway waste management limited has no close
substitute to what they offer for given period of time (Milutinović et al. 2014).
Bargaining power of suppliers
Cleanaway Waste Management Limited operates in Waste management and recycling
industry where it is important to know fact the fact on how far the company faces bargaining
power from the suppliers. Here, it is easy to find out from the below underlying reasons that the
company faces high bargaining power from the suppliers. The suppliers in the industry have
high bargaining power (Parkes, Lettieri and Bogle 2015).
Paying premium for licenses and rights- On analysis, it is noted that the industry
(waste management and recycling) in actual faces high bargaining power from the
suppliers. It is because of the fact that suppliers that belong to this industry pay premium
prices for getting the access where they can use licenses and rights that is otherwise not
possible. It is therefore to note the fact that Cleanaway Waste Management Limited
should be keeping their cost higher so that they will be able to pay to the suppliers.
Strong big supplier- On analysis, it is understood that the industry (waste management
and recycling) in actual faces high bargaining from the suppliers. The suppliers in this