Financial Analysis and Business Valuation Report: Cleanaway Management

This report provides a comprehensive business valuation and financial analysis of Cleanaway Waste Management Limited. It begins with an introduction to the company and its operations within the Australian waste management industry. The report then delves into a macroeconomic analysis, assessing the economic environment and relevant factors such as GDP, unemployment, inflation, and interest rates, and their impact on Cleanaway's performance. An industry analysis follows, utilizing Porter's Five Forces model to evaluate the competitive landscape, including rivalry, threats from new entrants and substitutes, and the bargaining power of suppliers and customers. The report also includes a business strategy analysis, evaluating Cleanaway's strategic positioning and the sustainability of its approach. Finally, an accounting analysis is conducted to identify key accounting policies, assess accounting flexibility, strategy, and disclosure quality, and detect potential distortions in financial information. The report concludes with a summary of findings and recommendations based on the analyses.

Running head: BUSINESS VALUATION AND FINANCIAL ANALYSIS
Business Valuation and Financial Analysis
Name of the Student:
Name of the Student:
Author Note:

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
Table of Contents
Introduction......................................................................................................................................3
Macroeconomic Analysis................................................................................................................4
Economic Environment related to Cleanaway Waste Management Limited..............................4
Macroeconomic factors that have an effect on the performance of Cleanaway Waste
Management Limited...................................................................................................................5
Influence of Global Economy on the company over the last 5 years..........................................7
Future Anticipation......................................................................................................................7
Industry Analysis.............................................................................................................................8
Evaluating the level of competition in the industry where Cleanaway Waste management
operates in and uses Porter’s five forces model...........................................................................8
Rivalry from existing competitors...............................................................................................9
Threat from new entrants.............................................................................................................9
Threat from substitute products.................................................................................................11
Bargaining power of suppliers...................................................................................................11
Bargaining power of customers.................................................................................................12
Business strategy analysis..............................................................................................................12
Strategy demonstrate of the chosen firm...................................................................................12
Evaluation of the company’s strategy........................................................................................14
Evaluation of the sustainability of the company’s strategy...........................................................18
Accounting analysis:......................................................................................................................19

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
Identifying the major accounting policies:................................................................................19
Dissecting the flexibility in accounting:....................................................................................20
Assessing the strategy of accounting:........................................................................................21
Dissecting the overall disclosure quality:..................................................................................21
Detecting the potential red flags (distortion of information):....................................................22
Rectifying the distortions in accounting:...................................................................................22
Conclusion.....................................................................................................................................23
Reference List................................................................................................................................24

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
Introduction
The improvement and the innovation in the science and technology in the current global
economy in which the organizations perform compare their business activities with respect to the
highlighted industrial benchmark (Rathi, Khanduja and Sharma 2015). Therefore, this report is
being prepared in order to understand the financial position and the business valuation of
Cleanaway Waste Management Limited. The analysis of the discussed traits is only possible by
taking help of the data that is available with respect to the company in their annual reports and
even from various other journals and internet sources. The use of the Australian Annual report
has even been influential for gaining statistics and figures about the waste and management
technology. Cleanaway Waste Management Limited is an organization which is enlisted in the
Australian Stock Exchange and performs under the waste and clean industrial sector. Cleanaway
Waste Management Limited is one of the oldest and well known waste management
organizations concentrating on keeping the Australian environment free from pollution and
maintaining a green and waste free ecosystem.
Cleanaway Waste Management Limited is a developing organization and the company
has been steadily maintaining their profit at a significant margin in order to survive in the market
in an effective manner. The increase in the degree of competition with the advent of new waste
management industries has compelled Cleanaway Waste Management Limited to undertake
several analyses in order to understand their current operational position in the economy. The
company has therefore made use of analytical mechanisms like the evaluation of the business
strategy, analysis of the macroeconomic factors and evacuation of the industry and the
accounting assessment (Karim and Arif-Uz-Zaman 2013). The use of these techniques would be

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
influential for the better understanding of the business valuation and the financial situation of
Cleanaway Waste Management Limited.
Macroeconomic Analysis
Economic Environment related to Cleanaway Waste Management Limited
Economic environment comprises of the external factors that are related to the economy
of business and in a wider worldwide economy that affects the activities of the business. The
financial viewpoint of the Cleanaway Waste Management Limited has been to throw in a
optimistic way towards the concerned industry inside which the firm operates and hope to
provide a waste management system that is simple and free from financial threats and
challenges. Quezada, Walton and Sharma (2016) has clarified that environment of economy can
be divided into two sections, to be specific macro and micro environment. The two specified
sorts of the economic environment have a noteworthy part to play in assessing the accomplish
rate of the company. The functions and the roles in accordance to the communal economy are
undertaken by the company is undertaken in order to bring out effective operational results for
Cleanaway Waste Management Limited.
The firm focuses on the vital priority that guides them in picking up the data as for the
financial obligation for the stakeholders under consideration and embraces development of
different articles and reports that would be advantageous in creating mindfulness among the
customers. The firm even attempts a survey and investigation of the waste management services
that expects in perceiving the components that would be negative and the variables that would be
beneficial for the economic level.

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
Macroeconomic factors that have an effect on the performance of Cleanaway Waste
Management Limited
The macroeconomic elements have been found to be an immense scope of economic
factors that can affect the finance related development and operations of the firm. The
macroeconomic components are comprehensive of the rise in population, Gross Domestic
Product (GDP), prices of oil, interest rate, unemployment and so on. Gross domestic product is
described to be the final goods and services that are produced within the geological limit of a
country, and the country under consideration in this paper is Australia as the paper focuses on the
business and financial assessment of Cleanaway Waste Management Limited. The parameters
that are macroeconomic in nature are utilised by keeping in mind the end goal to comprehend
and construct the extent of economic operations inside Australia. The rate of development in the
GDP in a country is specifically connected with the financial condition and operations of the
organization (Zaman 2014). The GDP of Australia has demonstrated an ascent of 2.8% during
the year 2015-2016 and the country has a lower extent of unemployment with a percentage
amount of 5.6%.
Despite the fact that the unemployment has descended, it has been watched that there has
been an ascent in the level of part time employment and underemployment in the nation at a
noteworthy level. The ascent in the level of part time employment and underemployment has
mostly been because of the accessibility of a large number of manpower in the market. The
principle factor for the expansion in the labour market has been migration of people from rural
and foreign population who are looking for employment and jobs (Sohal 2013). The ascent in the
level of underemployment and part time employment has inspired Cleanaway Waste
Management Limited to build their strategies and plans with the goal that they can embrace

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
different plans of activities to enhance their operations and grow their business to the next level.
Another economic variable has been the ascent in the export value in Australia. The ascent in the
value has proposed that international business exchange has been developing in an efficient way
subsequently diminishing the weight from the domestic organizations (García et al. 2014). The
ascent in the export value brings down the risk level of storing that would lessen squander and in
a way diminish the level of waste in the country. In the present situation, Australia does not an
increased level of inflation as the present rate of inflation has been 2% and is anticipated to rise
to 2.10% within the next two months.
The rate of inflation being so low is useful for Cleanaway Waste Management Limited as
they can purchase and acquire innovative and new waste management tools and serve the
country at a lesser cost. The utilization of these systems would build their working level and they
can even extend their operational boundary and in this manner expand their level of profit. The
rate of interest helps in computing the rate of earnings that has been predicted by the bank to lend
loans (Mohanty and Prakash 2014). The interest rate being higher brings down the degree of
investment in the business and specifically has an impact on the income level of the
organizations. This is because of the fact that the ascent in the interest rate brings down positive
Net Profit Value investments within a company. Nonetheless, lower interest rate rouses the
companies to borrow cash and roll out different developments in their business with the goal that
they can raise their level of earnings. The present interest rate of Australia is 1.5%, which is low
and with this respect Cleanaway Waste Management Limited to make use of several expenses
linked to the business so they can build their profitability and achieve their business goals. It is
seen that lower rate of interest diminishes the level of risk associated with the business and
enhances the degree of organizational goal (Wen and Meng 2015).

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
Influence of Global Economy on the company over the last 5 years
With respect to the previous five years, the organization has been performing in an
inefficient way despite the fact that because of the slowdown of the economy there has been an
effect on the operations of the firm for a couple of years (Bakker 2014). The vulnerability in the
worldwide economy had prompted the deferment of the developments of Cleanaway Waste
Management Limited. The limitation of Cleanaway Waste Management Limited has even been
because of economic recession during the year 2008 to 2009. Conversely, the change in the
economy during the previous couple of years has been elemental for the firm to stand up and
perform effectively.
Future Anticipation
The GDP of the economy of Australian has been extending reasonably step by step and it
has been foreseen that Cleanaway Waste Management Limited will hope to differentiate their
business. Moreover, the rules and the policies constructed by Reserve Bank of Australia have
diminished the inflation level and in this manner helped in the company to attain their goals and
objectives (Sadgrove 2016). Thus, the performance financially by Cleanaway Waste
Management Limited would develop and in this manner assist the company to reach the global
market.
Industry Analysis
Evaluating the level of competition in the industry where Cleanaway Waste management
operates in and uses Porter’s five forces model
The level of competition in Waste management and recycling industry is evaluated for
the company named as Cleanaway waste management by using Porter five forces model (Simon,

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
Fischbach and Schoder 2014). This sector market had been analyzed by conducting external
environmental analysis. There is various market forces present in the model such as bargaining
power of customers, bargaining power of suppliers, threats from new entrants, threat from
substitute products and rivalry from existing firms.
Figure: Porter Five Forces Model of Cleanaway Waste Management
(Source: Sakas, Vlachos and Nasiopoulos 2014)
Rivalry from existing competitors
The waste management and recycling industry in Australia faces low threat from
competitors due to various factors or reasons that had been justified as under:
 Waste Collection Industry- On analysis, it is noted that waste management industry in
real has a significant impact where the analysts puts more Weightage to its existence. It is
Cmpetitive
Rivalry
Bargainin
g power
of
customers
Bargainin
g power
of
suppliers
Threat of
new
entrants
Threat of
substitute
products

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
the waste management and recycling industry in Australia that have long-term positive
impact on the current business entity that adds value to it (Nerur, Rasheed and Pandey
2016). Therefore, the qualitative factors will definitely lead to increase in the level of
costs.
 Low Competition- On analysis, it is analyzed that waste management industry faces
minimum level of competition from any of the rival firms who operates in waste
management and recycling industry in Australia (Simon, Fischbach and Schoder 2014).
 High strategic stakes- It is important to note the fact that high strategic stakes has a
significant impact where the analyst put more emphasis on providing strategic decisions
by keeping in mind about the services rendered by Cleanaway Waste Management
Limited.
Threat from new entrants
The waste management and recycling industry in Australia faces low threat from new
entrants due to various factors or reasons that had been justified as under:
 High cost investment- For a new entrant, it is difficult to invest huge money in starting a
waste management and recycling industry. It is not preferred by everyone to enter this
industry due to high cost investment. Therefore, Cleanaway Waste Management Limited
has low threat from any of the new entrants who are willing to invest in the industry
(Simon, Fischbach and Schoder 2014).
 High exit barriers- Any new entrant in the industry (waste management and recycling in
this case) will always think of exit barrier or cost to exit if they want. In this particular
industry, there is a high exit barrier that is not preferable for most of entrants who shows
interest in starting a business in this industry (Jenkins and Williamson 2015). Therefore,

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
Cleanaway Waste Management Limited can enjoy their market share as they have low
threat from the new entrants.
 Strict regulations- There are strict regulations and government intervention in this
industry that makes it quite difficult for the new entrants to think of an option to start up
something in the given industry (Aguinis, Edwards and Bradley 2016). Strict regulations
have positive impact for Cleanaway Waste Management Limited as they already are an
established company with its listings in Australian Stock Exchange.
 High Investment- High investment in waste management and recycling is one of the
vital factor that restrict new entrants as they have to spend a lot of money to start or enter
the industry. High investment will be a positive aspect for Cleanaway Waste
Management Limited as they are well-reputed company in Australia (Simon, Fischbach
and Schoder 2014).

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
Threat from substitute products
The waste management and recycling industry in Australia faces low threat from substitute
products due to various factors or reasons that had been justified as under:
 Waste management High exit barriers- It is already discussed in the new entrant’s part
of the study that there is high exist barriers that restrict emergence of other substitute in
the present industry. Therefore, Cleanaway Waste Management Limited has low threat
from substitute products.
 Few to zero substitutes for waste management- There is few substitute present in
waste management and recycling industry that will be managed by the company if they
start implementing new strategies in their operations (Jenkins, Ambrosini and Collier
2016).
Bargaining power of suppliers
The waste management and recycling industry in Australia faces high bargaining power
from suppliers due to various factors or reasons that had been justified as under:
 Paying premium for licenses and rights- It is important to note the fact that waste
management and recycling industry faces high bargaining power from the supplier where
the company belonging to the industry need to pay premium prices for getting access to
licenses and rights. Therefore, Cleanaway Waste Management Limited needs to keep
their cost higher in their company as they have practically no say in front of their
suppliers (Harrison and John 2013).
 Strong big supplier- It is essential to consider the fact that the waste management and
recycling industry had to face strong big supplier to get their services on time. There is

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
literally no say for the company as suppliers can bargain their own price and the company
have to agree with it without any other option (Simon, Fischbach and Schoder 2014).
Bargaining power of customers
The waste management and recycling industry in Australia faces less bargaining power
from customers due to various factors or reasons that had been justified as under:
 Commercial and business customers to make own choices- It is important to take into
account the fact where commercial and business customers make their own choices in the
waste management and recycling industry. This is one of the easily defendable qualitative
factors where most of the competing institutions will face difficult to overcome the
problems as far as possible. It is for this reason why commercial and business customers
will have to make their own choices for overcoming the issue so they do not have to
spend more time or money to mitigate the issue (Greco, Cricelli and Grimaldi 2013).
Business strategy analysis
Strategy demonstrate of the chosen firm
Based on the depictions made from the study does an observed that Cleanaway Waste
management’s business strategy is based on a cost leadership strategy. This is regarded as the
clearest way to achieve the competitive advantages. In particular relevance to the service
industry there has been several parameters on which cost leadership has been achieved. Some of
the main strategies under this have been evident in form of maintaining a tight control system,
lowering down of the cost of distribution, lowering of input costs, greater economies of scale and
maintaining an efficient production (Beswick, Gibb and Travis 2014). The cost leadership
strategy is further about the focus on reducing the overhead costs and taking calculated risks in

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
order to carry out research and development process. The avoidance of service provided to the
marginal customers has been observed as another criteria followed under the cost leadership
strategy (Lu et al. 2016).
The main strategies taken with the cost leadership by the company has been seen in terms
of lowering the input costs and ensuring larger economies of scale. The company has further
aimed towards efficient production and lowering the cost of capital expenditure. Some of this
includes matching the valuation of the company with reducing level of agency cost, labor cost
and margin of the regional branches for providing an improved customer service from financial
year 2017. The company has worked upon reducing its capital expenditure by reducing the
capital intensity Capex and being the same in line with D&A activities (Lloret 2016). The
forecast of the annual spending for the five years has been further reduced to $ 45.1 million from
$ 59 million which was requested previously. The initiatives taken for landfill remediation that
difficult and spending has been further reduced down to $ 45 million per annum to 40 million per
annum. The discipline focus on cost implementation has been seen with the declining spending
rate per annum from financial year 2021 onwards. It has been further observed that there has
been no impact on the total remediation and rectification for the provision. Some of the major
achievements have been further based on developing the safety performance and litigation of
organizational structure. And the main priorities under the cost leadership approach have been
evident with improving the revenue Management, sales productivity and following and discipline
pricing strategy. The strategy of the company has been further seen towards fostering a culture
for providing premium customer service quality. The various types of rollout related to strategic
initiatives have shown a greater alignment of solids, liquids and industrial services. It has been
further based on the strategy for making greater alignment with the upper level customers so it

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
will be able to compensate with the cost leadership strategies (Guerrero, Maas and Hogland
2013).
Evaluation of the company’s strategy
Cleanaway Waste management is seen to be having the key financial overview for
maintaining the cost leadership approach. The company is seen to be reducing the capital
expenditure from $ (175.9) million to $ (153.5) million. The payments for purchase of businesses
has been reduced down from $ (163.7) million to $ (16.1) million. It has been further identified
that the company cash from investing activities has also reduced from $ (322.6) million to $
(162.8) million. Due to the reduction of cost for various types of operating activities, the
company has been able to considerably increase its net cash and cash equivalents from $ (153.1)
million in 2015 to $ 11.3 million. The key financial measures and the cost-cutting approach with
the investing activities have been depicted with the cash flow statement.

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
Figure: Reduction in cash from investing activities
(Source: Cleanaway.com.au. 2017)
The new branding strategy has been launched by the company on 1st February 2016 this
has been another approach to the competitive strategy which has supported the simplification of
operating structure and organizational realignment of the cost base. The reduction in the capital
expenditure spending has been evident with $ 144.5 million in financial year 2014 which had
increased to $ 175.9 in the financial year 2015 and further reduced to only $ 153.5 in financial

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
year 2016. Henceforth the transition of reduction in the capital expenditure is evident with from
108% to 131% and further reducing down to 97%.
Figure: Reduction in the capital expenditure spending
(Source: Cleanaway.com.au. 2017)
The disciplined focus of the cost of recommendation has been able to reduce the overall
spending rate from financial year 2021 onwards. It has been further seen that there has been no
impact on the total remediation for the rectification provisions.
The important focus on the customer needs is seen in terms of providing improved
customer service to operational enhancements which has been identified as the key to the future
growth. Based on the key financial measures it has been seen that the receipts from customer has
increased from $ 1518.6 in financial year 2015 to 1602.2 in financial year 2016. The main
priority for financial aid: 70,000 further seen on giving a culture of premium customer service
based on continuous improvement (Papargyropoulou et al. 2015).
The main distinguishing factors of customer value proposition from the alternative
propositions has been identified in form of providing largest network of collection vehicles

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
which has been operating in more than hundred depots across Australia. It has been further
identified in terms of servicing in more than 90 municipal councils across the country. The newly
initiative taken by company has been seen in terms of opening a 75,000 tonnes per annum
resource recovery Centre at Brisbane. Based on the competitive strategies are company has been
able to improve its profit margin. The volume of growth is seen to be higher in terms of previous
year. The various types of growth initiatives have also increased and there has been an only sign
of improvement in the customer churn rate, sales productivity along with operational
improvements which has been the key for future growth of the company. The newest initiatives
taken by the companies for further increasing its productivity has been seen by opening of new
facilities and is at Brisbane and another recovery facility at Perth (Lohri Camenzind and
Zurbrügg 2014).
Figure: Key capabilities to deliver the value proposition
(Source: Cleanaway.com.au. 2017)

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
Evaluation of the sustainability of the company’s strategy
Sustainability has been identified as the company’s stock in trade. Various types of
business principles has been built around to reduce, recycle and reuse along with creating a long-
term economic value for the environment, community and people. As the company seem to be
spending and improving on the stability of the owners it has come to know that the stability is
more than providing better waste management. The various types of initiatives taken by the
company have been able to aspire the sustainability approach taken by the business workers and
the local community at large. The main mission for the sustainability with the strategic
sustainable future is seen by making sustainable solution to minimize the impact and maximize
the value with effective waste management. The company will be further able to closely monitor
the sustainable approach from work, home and to the neighborhood (Panwar et al. 2016).
Since the acquisition of Melbourne regional landfill (MRL) in February 2015, the
company has been able to implement major transformation of capping and rehabilitation. Not
only the site has been able to manage considering the fresh approach to the relationship the local
community but it has been able to deliver a program with improvements in the structural changes
and extensive management system. The main forms of risk involved were seen in tracking dirt
from sites nearby streets and reducing the size of the active tip face. The company has made
major enhancement in leachate treatment capacity to minimize the impact of risk of tracking dirt
from these sites. And other risks have been identified in terms of addressing potential
environmental risk by demonstrating compliance with relevant license and approvals. The
environmental management is identified as the responsibility of every employee to comply with
the regular audit and review program. The company understands that managing of landfill
involves great operational risk and this has been overcome by continuous monitoring of the

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
activities. Several types of other initiatives taken by the company have been able to increase the
perimeter of the guest network for assessing the landfill gas migration and enable early action
(Jambeck et al. 2015).
The primary example of the sustainable in the commercial initiatives taken by the
company has been seen with the commercial use of landfill gas in Erskine Park landfill in
Western Sydney. This site is being used for producing power and generating more than one 130
million bricks every year which is enough to build around 145000 homes for the Australian
families. The transpacific is seen to provide service management in more than 150 Petbarn to
ensure that the company is able to sustain its store activities in Australia. The first priority
transpacific is seen to be given to the people and resources in with reducing the total recordable
injuries frequency rate (TRIFR) by more than 24%. In financial year 2012 this rate was as high
as 26.6% while with effective sustainability approach the company has been able to bring it
down to 9.6% (Cleanaway.com.au. 2017).
Accounting analysis:
Six phases are involved in the framework of accounting analysis framework and these are
briefly dissected in relation to Cleanaway Waste Management as follows:
Identifying the major accounting policies:
Based on the annual report of Cleanaway Waste Management, the financial statements
have been developed to comply with the “Australian Accounting Standards and Interpretations”,
which the “Australian Accounting Standards Board” and the “Corporations Act 2001” have
issued. It has been found that the company has initiated AASB 9 from the financial year 2016 in
order to help hedge accounting for its business operations (Cleanaway.com.au 2017). Moreover,

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
the organisation has adopted a new model pertaining to impairment for the financial assets with a
three-phase approach. This approach takes into account one year expected credit losses (ECL),
lifetime ECL and lifetime impaired ECL.
The organisation uses to follow the historical cost concept, as changed through
revaluation of the financial assets, derivative financial instruments and contingent considerations.
In addition, it is engaged in rounding the amounts off to the nearest dollar in thousands by
complying with the “Australian Securities and Investments Commission’s Instrument 2016/191”.
Dissecting the flexibility in accounting:
The flexibility in accounting could be evaluated through the resulting content of
information. If the managers have restricted flexibility to select the accounting estimates and
policies related to the key factors of success, the data related to accounting are likely to contain
less information to obtain an insight of the overall economics of the organisation (Bridji 2013).
However, these are the selection qualities, which the firm could have chosen from the list of
alternatives available to it. In the case of Cleanaway Waste Management, it has been found that
the firm has laid emphasis on following strict policies of accounting in compliance with the
accounting standards of IFRS and AASB. The managers of the firm do not have the permission
of exercising pliability to select the policies pertaining to estimates and accounting. The higher-
level management of the firm has developed the policies of accounting and associated
projections, which necessitates the need for the accounting managers to follow the company
guidelines and norms. Hence, it could be remarked that the accounting information of the firm
greatly contains information, in which the readers have an overview of the company economics
(Li 2015).

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
Assessing the strategy of accounting:
In the words of Liapis and Spanos (2015), at the time there is accounting flexibility for
the managers, the same could be used for communicating the economic situation of the
organisation or to restrict the real performance. One of the primary requirements to evaluate the
strategy of accounting related to the organisation is its capability in dealing with the industry
regulations. For instance, the organisation has prepared its accounting policies and estimates in
such a manner that it complies effectively with the Trade Practices Act 1974. In addition, all the
financial incomes made have been reported in the financial statements of the firm. Furthermore,
no adequate amount of incentives has been provided to the management for manipulating the
accounting figures along with no modifications in the accounting estimates and policies in the
financial year 2016.
Dissecting the overall disclosure quality:
The overall disclosure quality of an organisation could be assessed by the disclosure
amounts, initial note of the accounting policies along with the current performance (Loughran
and McDonald 2016). The initial note, as per the annual report of the organisation, concentrates
on the method of preparing the financial statements according to IFRS and AASB. The
organisation has made the disclosures in relation to financial assets associated with impairment
and the entire consolidation principles. Such principles often take into account the detailed
explanation of joint agreement, modifications in ownership interest, subsidiaries, foreign
currency translation and share trusts. In addition, the income statement, statement, statement of
changes in equity, balance sheet statement and cash flow statement have been developed in such
a manner that enabled in representing the existing financial position and performance of the
organisation in the market of Australia.

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
Detecting the potential red flags (distortion of information):
In this step, it is necessary for an assessor to examine the different items in a close way or
accumulate excess information on them. Therefore, this step requires the assessor to obtain the
unqualified reports of audit, unexpected big write-offs and unexplained changes in accounting
(M Ancini, Vaassen and D Ameri 2014). Based on the auditor report of the organisation that is
Ernst & Young, it has carried out write-offs associated with its business operations failing to
meet the anticipated expectations. However, the audit report also states that there is absence of
any particular change in accounting made in the year 2016 and the projections have complied
with the current legislations and norms prevailing in the nation. Moreover, there is absence of
any related-party transaction in the annual report of the firm, which represents that there is no
strong potential red flag in the current scenario that could cause serious difficulties for
Cleanaway Waste Management to conduct its operations in the market of Australia.
Rectifying the distortions in accounting:
In the words of Rus, Belenesi and Gherai (2016), if any issue us found in the above-
mentioned step; the company needs to rectify the same. However, after critical assessment of the
depicted step, the auditor report has not mentioned any major distortion in accounting. The only
issue identified is the write-down related to the business operations of the organisation, as it has
not been able to achieve the desired goals. Two probable ways are left to the organisation to
rectify this accounting distortion. The first option is to make journal entries, while the second
option is to modify the financial ratios depending on the accumulated data from the financial
statements of the firm. However, it is noteworthy to mention that recording journal entries is not
an option when there is impairment. This is because it would have direct influence on the ratios.

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
In this particular case, the organisation could make use of both the options through the cash flow
statement or its financial statement footnotes (Shevchuk 2013).
Conclusion
The various types of macroeconomic environment has depicted on the five-year analysis
of GDP, interest rate and inflation. The macroeconomic considerations have shown the
improvement of the company in terms of struggling inflation rates and interest rates. The various
types of industry analysis has been analyzed with the use of Porter’s five forces model and
considered in terms of moderate competition from the external threats. The key aspects of the
accounting approach have shown that the financial statements have been developed to comply
with the “Australian Accounting Standards and Interpretations”, which the “Australian
Accounting Standards Board” and the “Corporations Act 2001” have issued. It has been found
that the company has initiated AASB 9 from the financial year 2016 in order to help hedge
accounting for its business operations. Various types of depictions made in the strategy analysis
have shown that Cleanaway Waste management is seen to be having the key financial overview
for maintaining the cost leadership approach. Due to the reduction of cost for various types of
operating activities, the company has been able to considerably increase its net cash and cash
equivalents from $ (153.1) million in 2015 to $ 11.3 million. The main strategies taken with the
cost leadership by the company has been seen in terms of lowering the input costs and ensuring
larger economies of scale.

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BUSINESS VALUATION AND FINANCIAL ANALYSIS
Reference List
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