Financial Analysis Report: a2 Milk Company Performance (2014-2015)

This report presents a financial analysis of a2 Milk, examining its performance from 2014 to 2015. The analysis focuses on key financial ratios, including profitability, liquidity, working capital, accounts payable, accounts receivable, and inventory turnover ratios. The report assesses the company's business activities, financial position, and future prospects, highlighting its growth in liquidity, receivables, and payables, while also noting areas for improvement in profitability. The conclusion emphasizes the need for strategic adaptations to environmental changes and the importance of strengthening profitability to attract shareholders. The report also provides insights into the upper-level management's effectiveness and suggests that effective marketing strategies could further enhance future financial outcomes.

FINANCIAL STATEMENT
AND INVESTMENT
ANALYSIS

INTRODUCTION
The aim of the assignment is based on the financial analysis of the chosen company
which is a2 milk. The brief description of the company along with the respective
activities and the operation conducted by the business have been depicted in this
assignment. The financial ratios are considered as the tools for analyzing the
financial performance of the business from the annual report for the year 2014 and
2015. The overall business position and the financial prospect has been depicted in
this case accordingly.

Tools used for analyzing Financial
Performance
The key financial ratios are used to analyze the financial performance of
the company which are as follows:
 Profitability Ratios
 Working Capital Ratios
 Accounts Payables Ratios
 Liquidity Ratios
 Accounts Receivables Ratios
 Inventory Turnover Ratio

Graphs of Ratios
2014 2015
-5%
-4%
-3%
-2%
-1%
0%
Profitability Ratio
Return on Equity Ratio (1/4) Net Profit Margin (1/3)*100
2014 2015
0
0.5
1
1.5
2
2.5
3
3.5
Working Capital Ratios
2014 2015
0
0.5
1
1.5
2
2.5
3
3.5
Liquidity Ratio
Current Ratio (1/2) Quick Ratio (1-3/2)

2014 2015
0
50
100
150
Accounts Payables and
Receivables Ratio
Average Trade Receivables turnover
Ratio (365/3) in days
Average Trade Payables turnover
Ratio (365/3) in days
2014 2015
0
5
10
15
20
25
Inventory Turnover Ratio
2014 2015
0
5
10
15
20
25
Inventory Turnover Ratio

Analysis of Ratio
 The overall prospect of the company is quite satisfactory due to the fact that the
company is showing tremendous growth in terms of liquidity, receivables and payable
ratios of two year which is 2014 and 2015.
 The profitability ratio of the company is not effective enough to meet the requirement
of the business. The company must concentrate on the operating expenses in order to
minimize the expenses of the company. The financial performance of the company is
moderate which will struggle to attract the potential stakeholders of the company.
 The growth prospect of the company is only possible if the company attract the
potential stakeholders and make investment in the project which will bring fruitful
return in the business in that case. The risk associated with the investment process of
the company must be minimized in order to bring the stipulated return in the business

CONCLUSION
 It is concluded that the detailed evaluation is implemented in order to understand the
financial performance of the business. Due to the change in the environmental and the
social factors, the company needs to adopt some of the stringent strategies in order to
overcome such changes in that case. The management system regarding the upper level
management of the company is quite effective. The overall financial prospect in the
future is quite good and will be far more effective if the marketing strategy of the
company is effective.
 The necessary ratios of the company is evaluated and further based on the
interpretation of the ratios it can be said that the company needs to strengthen the
profitability of the company in order to attract the potential shareholders in the market.
The upper level management or the board of directors of the company must understand
the implication regarding the change in the social and the technological factors of the
company. Hence the necessary decision must be implemented accordingly.