UBSS Financial Statement and Investment Analysis of A2 Milk Report

This report presents a detailed financial analysis of A2 Milk Limited, covering its core business activities, major financial performance changes, and key financial ratios for 2014 and 2015. The analysis includes profitability, working capital, liquidity, and accounts receivable ratios. The report assesses the company's overall financial position, evaluates its future prospects, and provides recommendations. The conclusion emphasizes the importance of strengthening profitability and adapting to social and technological changes. References include various accounting and financial analysis sources.

Running head: FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
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1FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
Table of Contents
Executive Summary...................................................................................................................2
Introduction................................................................................................................................3
Discussion / Findings.................................................................................................................4
In Response to Question 1......................................................................................................4
In Response to Question 2......................................................................................................4
In Response to Question 3......................................................................................................5
In Response to Question 4......................................................................................................9
Conclusion..................................................................................................................................9

2FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
Executive Summary
The assignment is based on the chosen company which is A2 milk limited and
detailed financial analysis along with the prospect of the company have been done in that
case. The financial analysis of the company is performed and the interpretation regarding the
current and the future forecast of the company have been provided in a detailed manner in the
conducted study.

3FINANCIAL 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.
Discussion / Findings
In Response to Question 1
The assignment is based on the a2 milk company which was founded in New Zealand
which specializes in the production of milk. The milk which is produced by the company is
simply A1 protein free. The main objective along with the operations of the a2 milk company
is to scientifically understand the a2 protein which the people in now a days are concentrating
on the fitness and goodness of nutrition (Robinson et al. 2015).
The activities of the a2 milk is that enhancing productivity of the desi breed which
further means better farm, better breeding and feed management. There is huge for the
enterprise to take significant advantage of the native buffalo milk and cater the growing
demand of the a2 milk and the value based product of the a2 milk which is traded all over the
international market (Kaplan and Atkinson 2015).
In Response to Question 2
The major changes in the financial performance as per the review of the managing
directors of the company is that board understands the performance of the directors which is
quite essential for the success of the company (Schaltegger and Burritt 2017). The board of
A2 milk provide the assistance regarding the overall financial performance of the

4FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
organization and the accordingly significant steps are taken by the board and the individual
directors of the company. At the end of the financial year 2015, the board and the individual
directors of the company evaluates the overall financial performance make a review
statement in order to set things right to achieve the desired or the budgeted target accordingly.
The company in that case adopts a formal evaluation on the individual directors and the board
during the financial year 2016 (Lara, Osma and Penalva 2016).
The financial performance is also reviewed by the upper level management of the
organization which are the senior executives in that case. The chief executives officers of the
company also evaluates the current performance of the company which is further established
by the Nomination Committee. The stakeholders of the company plays significant role in the
future financial performance of the company. The ownership of the company is also
evaluated by the upper level management of the organization in order to understand the
current progress in terms of the financial growth of the company (Kieso, Weygandt and
Warfield 2016).
The directors of the company are also aware of any kind of insider trading policy
adopted by the employees of the organization through the process of the trading in the shares
of the company. In case of any risk management, the company develops the risk management
policy in order to tackle the financial risk associated with the business. The risk hampers the
financial performance of the business along with that the directors in that case is always
informed about the business risk. The review is also made in case of any break down of the
risk management of the company (Libby 2017).
The company in that case have further adopted the shareholders communication
policy in order to communicate with the board. The company provides timely information to
the shareholders of the company from the governance. The shareholders of the company

5FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
further attends the annual general meeting of the company. In this case the shareholders
submits questions to the board of directors and the external auditors of the company (Givoly,
Hayn and Katz 2017).
In Response to Question 3
The key financial ratios of A2 milk have been evaluated from the consolidated
financial statement for the financial year 2014 and 2015. The ratio analysis of the company
provides the better picture regarding the overall financial performance of A2 milk (Otley
2016).
Profitability Ratios
Formulas:
Returnon Equity= Net Profit / Loss
Shareholders Fund ∗100
Net Profit margin= Net Profit /Loss
Revenue ∗100
From the probability ratio of A2 milk it can be interpreted that net profit margin for
the both the year is critical due to the fact the operating expenses of the company is higher.
The return on equity of the company is negative due to the reason that the company also
failed to bring the desired return out of the potential investment in the equity of the company
(Corbet et al. 2019).

6FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
Working Capital Ratios
Formulas:
WorkingCapital Ratio= Current Assets
Current Liabilities
From the above working capital ratio of the firm for both the year is good as the
liquidation of the company is quite effective. The liquidity measures the flow in the working
capital of the company and smooth flow in the cash of the company (Hoque 2018).
Accounts Payables Ratios
Formulas:
Accountstrade Payables Ratio= Net Purchase
Average Trade Payables

7FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
From the above average trade payables ratio of the company is satisfactory due to the
fact that the organization is large and accordingly the payables are meet within the stipulated
period of time (Duska, Duska and Kury 2018).
Liquidity Ratios
Formulas:
Current Ratio= Current Assets
Current Liabilities
Quick Ratio= Current Assets−Inventories
Current Liabilities
The current ratio and quick ratio of A2 milk is above the standard which is 2:1 which
further means that the liquidity of the company is quite strong (Smith 2017).
Accounts Receivables Ratio

8FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
Formulas:
Accountstrade Receivable Ratio= Net Credit Sales
Average Trade Receivables
The accounts receivables ratios of the company of the two year is not up to the mark
as it is higher than the payables. This means that the flow of cash in the business of the
company is not very effective due to the reason than the receivables of the company for the
two years are more than the payables (Grant 2016).
Inventory Turnover Ratios
Formulas:
Inventory turnover Ratio= Cost of sales
Average Inventories
From the evaluation of the inventory turnover ratio of the company it can be said that
the turnover generated by the business in the both the year is quite satisfactory. This further
states that the inventory management system of the company is quite effective (Collier 2015).
In Response to Question 4

9FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
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 (Alexander et al. 2017).
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 (Williams and
Dobelman 2017).
Conclusion
From the above discussion it can be 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

10FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
regarding the change in the social and the technological factors of the company. Hence the
necessary decision must be implemented accordingly.
References
Alexander, L., Das, S.R., Ives, Z., Jagadish, H.V. and Monteleoni, C., 2017. Research
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Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for
decision making. John Wiley & Sons.
Corbet, S., Lucey, B., Urquhart, A. and Yarovaya, L., 2019. Cryptocurrencies as a financial
asset: A systematic analysis. International Review of Financial Analysis, 62, pp.182-199.
Duska, R.F., Duska, B.S. and Kury, K.W., 2018. Accounting ethics. Wiley-Blackwell.
Givoly, D., Hayn, C. and Katz, S., 2017. The changing relevance of accounting information
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Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley &
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11FINANCIAL STATEMENT AND INVESTMENT ANALYSIS
Lara, J.M.G., Osma, B.G. and Penalva, F., 2016. Accounting conservatism and firm
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