Company Performance Analysis: AMP Limited Financial Analysis Report

This report presents a financial analysis of AMP Limited, evaluating its performance through liquidity and capital structure ratios, and non-current asset analysis over three years. The analysis reveals trends in current and quick ratios, highlighting the company's investment in fixed assets. Capital structure ratios, including debt-to-equity, are examined to assess the company's ability to manage liabilities. Non-current asset analysis reveals changes in fixed asset investments and the depreciation method used. A scenario analysis, including regular, worst, and best-case scenarios, evaluates the company's profitability using net present value calculations. The report concludes with insights into the company's financial position and provides recommendations for improvement. The report is designed to provide a comprehensive overview of AMP Limited's financial performance, considering various aspects of its financial statements and offering insights into its financial health and future prospects.

Financial Analysis

FINANCE 1
Abstract
The main aim of this report is to analyze the financial statement of the company. In this report,
the work has been done on the AMP Limited. In this report, the liquidity and capital structure
ratio has been evaluated to determine the efficiency of the company. As per the liquidity and
capital structure ratio, it is observed that the company operates the business effectively as the
liquidity position is strong. As per the non-current analysis, it is observed that the non-current
asset is increasing at the initial level but suddenly it is decreasing in the year 2018. According to
the analysis, it depicts that the company invests less in fixed assets which is beneficial for the
company. In the sensitive analysis, three cases have been analyzed regular, worst and best to
determine the profitability of the company. The PE Ratio reflects the good position of the
company in the market. At the end, it is recommending that the company has to more focus on its
liabilities in order to improve effectiveness.

FINANCE 2
Introduction
Financial Analysis is the process of evaluating business, budgets, projects, and the other finance
related entities to examine the performance and suitability. Financial analysis is used to evaluate
the financial position of the company. There are many techniques or methods are used by the
companies to evaluate the position of the organization in the financial terms. It is required to
evaluate the financial position of the company in the market before expanding the business or
developing the strategies to grab the market share (Robinson, Henry, Pirie, and Broihahn, 2015).
In the process of financial analysis, all the financial information is gathered to measure the
financial performance of the company. The financial information helps the company to provide
the information to the investors while investing. The main purpose of this report is to understand
the concept of financial analysis. In this report, AMP Limited has been taken into consideration
to analyze the financial performance of the company.
In the beginning of this report, the financial analysis will be done by evaluating the financial
ratio of the company of three years. Further, the non-current analysis will be done by comparing
the value of assets from the last three years. After that, the scenario analysis, PE ratio, shares and
bond will be evaluated. At the end, recommendation will be given in order to improve the
business.
Financial Analysis
Description
AMP Limited is a financial services company which operates in two countries such as Australia
and New Zealand. The company was established in the year 1849 as a non-profit life insurance

FINANCE 3
company and mutual society. It provides the superannuation, investment products, financial
advice, insurance, and banking services contains home loans and saving accounts services to
consumers. AMP shares are included in Australian Securities Exchange which headquarters are
in Sydney, Australia. The company operates under the finance industry as it provides the
financial services to the consumers. The financial services or banking services helps to maintain
the comparative advantage in the market (AMP Limited, 2018).
Ratio Analysis
Ratio 2016 2017 2018
Liquidity Ratio
Current Ratio Current assets
116,735,00
0
121,260,00
0
119,710,00
0
Current
liabilities
15,335,000 16,861,000 18,607,000
7.61 7.19 6.43
Quick Ratio Quick assets 3476000 3602000 3932000
Current
liabilities
15,335,000 16,861,000 18,607,000
0.23 0.21 0.21
Capital Structure
Ratio
Debt to Equity Ratio Total Debt 5,241,000 7,654,000 7,627,000
Total Equity 7462000 7202000 6685000

FINANCE 4
0.70 1.06 1.14
Debt Ratio Total Debt 5,241,000 7,654,000 7,627,000
Total assets
140,060,00
0
148,239,00
0
145,278,00
0
0.04 0.05 0.05
Liquidity Ratio
Liquidity Ratio defines the capability or ability of the pay the short term obligations by using the
current assets. As per the evaluation of liquidity ratio of AMP Limited, it is observed that the
current ratio of the company is decreasing from three years such as 2016, 2017 and 2018
respectively (Schroeder, Clark, and Cathey, 2019). The current ratio of the company is
decreasing such as 6.43, 7.19 and 7.61 in the year 2016, 2017 and 2018 respectively. The reason
of decreasing the current ratio is the decreasing the amount of current asset. It has been seen that
the company invests in fixed assets instead of current assets due to which the liquidity position is
reduces. Quick ratio of the company is also decreasing from three years 2016, 2017 and 2018
such as 0.21, 0.21 and 0.23 respectively (AMP Limited, 2016).
Capital Structure Ratio
Capital Structure Ratio defines the capacity of the organization to pay its all short or long term
liabilities. The ratio contains the debt ratio, debt to equity ratio and the others to evaluate the
capability to pay the liabilities (Belo, Collin‐Dufresne, and Goldstein, 2015). According to
evaluation of debt to equity ratio, it has been evaluated that the liabilities of the company is
increasing from the year 2016 to 2017 as 5,241,000 to 7,654,000 and the total equity is

FINANCE 5
decreasing from 7462000 to 7202000 in the year 2016 and 2017 respectively (AMP Limited,
2017). As decreasing total equity and increasing liabilities affects the financial situation of the
company. It reflects the capacity of the company which is decreasing to pay all short term
obligations as the total equity is reduces and long term liabilities is increasing. But after the year
2017, the company starts focusing on paying its liabilities due to which the amount of liabilities
is decreasing (Fundamentals of Accounting, 2017). As per the evaluation of debt ratio, it has
been measured that the amount of debt is increasing with the increasing total asset. It is effective
for the company to increase the total asset but increasing the liabilities reflects that the
organization can pay its liability by utilizing the assets (Chiaramonte, and Casu, 2017). The
amount of total asset is increasing from the year 2016 to 2017 but in the year 2018, the value of
total asset is decreasing 148,239,000 to 145, 278,000. The reason behind the increasing total
liability is that the company borrows the money as liability but does not take the money on
equity due to which the ability of the organization is reduces to pay all short or long term liability
(Arkan, 2016).
Non-current Analysis
The amount of non-current asset defines thee long-term liability of the company. Non-current
asset of AMP Limited of three years such as 2016, 2017 and 2018 is represented below:
2016 2017 2018
Non-Current
Asset 23981000 27665000 26444000

FINANCE 6
As per the evaluation of non-current asset of three years, it has been seen that the amount of non-
current assets is increasing from the year 2016 to 2017. In the year 2016, the amount of non-
current asset is 23981000 which is increasing in the year 2017 with amount 27665000. The
increasing amount of non-current asset reflects that the company invests in fixed assets instead of
current assets due to which the liquidity position is affected. But in the year 2018, the amount of
non-current asset is reduces from the year 2017 such as 26444000 which affects the capability of
the organization to pay the liabilities. As per the evaluation, it has been found that the company
follows the written down value method of depreciation. As per the analysis of annual report of
AMP Limited, it has been seen that the company follows the accumulated depreciation. The
company deducts the depreciation amount from the fair value of the asset (Liapis, and Kantianis,
2015).
For example- Plant and equipment is recorded at the initially at the cost including the transaction
costs. The amount of plant and equipment is measured at cost less any subsequent accumulated
depreciation. The amount of depreciation is charged on the written down value method as the
amount of fixed assets is reduces. Written down value method is a technique of depreciation that
applies a constant rate of depreciation to the net book value of assets each year. The formula for
the computation of written down value:
Written Down Value Method=(Cost of Asset – Salvage Value of the Asset) * Rate of
Depreciation (in %).
The amount of depreciation is deducted at the initial stage while the assets is involve in the
project by considering the depreciation expenses. After that the amount of depreciation charges
is added as it is not the cash expenses. This treatment of depreciation of the company helps to

FINANCE 7
identify the operating cash flow of a project involving buying a long term assets (Del Giudice,
Manganelli, and De Paola, 2016).
Scenario Analysis
The scenario analysis is undertaken in order in order to analyze the three cases such as regular
case, worst case and best case. The scenario analysis is undertaken in order to deal with the net
present value that has been encountered in all the three cases. The three cases are presented
below along with the calculation of the net present value. The net present value of the company
in the regular case is $ 9,945,197.39, whereas if the worst case scenario is analyzed than the net
present value of the company turns out to be negative at $3159216. In case of the best case
scenario the company has a lot more potential opportunities and this scenario the net present
value comes at $19870302. So all in all the overall analysis is undertaken to understand each
corner and the possible options (Laitinen, 2018).
0 1 2 3 4
Scenario
Analysis
Particulars
Particulars
Selling units 450000 450000 450000 450000
Selling price
$
25.00
$
25.00
$
25.00
$
25.00

FINANCE 8
Total value
$
11,250,000.0
0
$
11,250,000.0
0
$
11,250,000
.00
$
11,250,000
.00
Variable costs
$
5,400,000.00
$
5,400,000.00
$
5,400,000.
00
$
5,400,000.
00
Gross Profit
$
5,850,000.00
$
5,850,000.00
$
5,850,000.
00
$
5,850,000.
00
Depreciation
$
500,000.00
$
500,000.00
$
500,000.00
$
500,000.00
Fixed costs
$
450,000.00
$
450,000.00
$
450,000.00
$
450,000.00
EBIT
$
4,900,000.00
$
4,900,000.00
$
4,900,000.
00
$
4,900,000.
00
Less: tax rates
@ 30%
$
1,470,000.00
$
1,470,000.00
$
1,470,000.
00
$
1,470,000.
00
EBT
$
3,430,000.00
$
3,430,000.00
$
3,430,000.
00
$
3,430,000.
00
Add: $ $ $ $

FINANCE 9
depreciation
3,930,000.00 3,930,000.00
3,930,000.
00
3,930,000.
00
Add: Working
capital
$
800,000.00
Annual cash
flows
$ -
2,500,000.00
$
3,930,000.00
$
3,930,000.00
$
3,930,000.
00
$
4,730,000.
00
Discounting
Factor
1.000 0.893 0.797 0.712 0.636
Present case
flows
$ -
2,500,000.00
$
3,508,928.57
$
3,132,971.94
$
2,797,296.
37
$
3,006,000.
51
Net present
value
$
9,945,197.39
WORST
CASE 0 1 2 3 4
Scenario
Analysis
Particulars
Particulars
Selling units 450000 360000 288000 230400

FINANCE 10
Selling price
$
20.00
$
20.00
$
20.00
$
20.00
Total value
$
9,000,000.00
$
7,200,000.00
$
5,760,000.
00
$
4,608,000.
00
Variable costs
$
5,400,000.00
$
6,480,000.00
$
7,776,000.
00
$
9,331,200.
00
Gross Profit
$
3,600,000.00
$
720,000.00
$ -
2,016,000.
00
$ -
4,723,200.
00
Depreciation
$
500,000.00
$
500,000.00
$
500,000.00
$
500,000.00
Fixed costs
$
550,000.00
$
550,000.00
$
550,000.00
$
550,000.00
EBIT
$
2,550,000.00
$ -
330,000.00
$ -
3,066,000.
00
$ -
5,773,200.
00
Less: tax rates
@ 30%
$
765,000.00
$ -
99,000.00
$ -
919,800.00
$ -
1,731,960.
00
EBT $
1,785,000.00
$ -
231,000.00
$ -
2,146,200.
$ -
4,041,240.

FINANCE 11
00 00
Add:
depreciation
$
2,285,000.00
$
269,000.00
$ -
1,646,200.
00
$ -
3,541,240.
00
Add: Working
capital
$
800,000.00
Annual cash
flows
$ -
2,500,000.00
$
2,285,000.00
$
269,000.00
$ -
1,646,200.
00
$ -
2,741,240.
00
Discounting
Factor
1.000 0.893 0.797 0.712 0.636
Present cass
flows
$ -
2,500,000.00
$
2,040,178.57
$
214,445.15
$ -
1,171,732.
64
$ -
1,742,107.
58
Net present
value
$ -
3,159,216.50
BEST CASE 0 1 2 3 4
Scenario
Analysis
Particulars
Regular case
Regular
case Regular case
Regular
case
Regular
case