Financial Analysis, Corporate Governance, and Company Performance

This report provides a detailed financial analysis of Cochlear and CSL Ltd, evaluating their financial status, corporate governance practices, and the relationship between these factors and company performance. The report examines key financial metrics such as average return and beta values to assess the investment potential of each company. It also analyzes the corporate governance practices of both companies, referencing the ASX corporate governance principles and recommendations. The analysis reveals that CSL Ltd demonstrates a stronger financial position and better corporate governance practices compared to Cochlear Ltd, making it a more attractive investment option. The report concludes that effective corporate governance is closely linked to improved financial performance and that both companies have largely met the required standards. The report also highlights the importance of considering various financial indicators, such as beta and average return, when making investment decisions.

Unit project Part C

ABSTRACT
Financial evaluation provides deeper insight about the trend or movement of securities
and thereby gives input the stakeholders such as investors for decision making. The present
report is based on Cochlear and CSL Ltd which presents the extent to which securities of
particular company is risky. From assessment, it has found that CSL Ltd is good because it is
offering higher return to the investors. Further, It can be depicted that both the companies have
fulfilled the corporate governance requirements, practices and recommendations to the
significant level.

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................2
PART A...........................................................................................................................................2
Discussing the financial status of Cochlear and CSL Ltd...........................................................2
PART B...........................................................................................................................................3
Analyzing the corporate governance practices of Cochlear and CSL Ltd...................................3
PART C...........................................................................................................................................4
Observing the relationship which takes place between the company’s performance and
corporate governance practices....................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
In the present era, with the motive to make suitable investment decisions investors lay
high level of emphasis on making assessment of company’s financial status. Hence, financial
evaluation and its outcome is highly significant which in turn helps investors in getting
information about the extent to which stock of the company will offer higher returns. The
rationale behind this, financial analysis helps in identifying the risk level associated with specific
security. For this project report, two companies have been selected such as Cochlear and CSL
Ltd. From assessment, it has been identified that Cochlear is a medical device company which
designs, manufactures and supplies Nucleus implant to the customers.
Further, CSL is one of leading biotechnological company of Australia which involves in
research, development, marketing and manufacturing activity of products that helps in
preventing medical issues. Products which are offered by CSL ltd to the customers vaccines,
antivenom, blood plasma derivatives etc (CSL Ltd, 2017). Hence, product portfolio of the both
the companies are highly sound and contribute in the organizational success to a great extent. In
this, the present report will provide deeper insight about the financial status or position of
Cochlear and CSL Ltd. Report will also shed light on the corporate governance practices of both
the companies and its relationship with the performance.
PART A
Discussing the financial status of Cochlear and CSL Ltd
Particulars Cochlear Ltd CSL Ltd
Average return 67.86 75.46
Changes in annualized return as
per market index
0.48 0.23

From assessment, it has been identified that when change s take place in market index
with 13% the annualized return associated with the stock of Cochlear Ltd accounts for 48%. On
the other side, annualized return of CSL Ltd implies for 23% respectively. By considering this, it
can be stated that Cochlear Ltd is highly worthwhile from the perspective of investment.
However, on the other side, from evaluation it has found that average return in the case of
Cochlear and CSL ltd accounts for 67.86 and 75.46%. Hence, on the basis of average return
CSL’s stock will prove to be beneficial for investors. Moreover, fluctuations which will take
place in the stock’s price and return cannot be predicted by the investors in right direction (Evans
and Hnatkovska, 2014). Thus, investors should consider average return as a base while making
selection of stock. On the basis of such aspect, it can be stated that CSL Ltd is good because it is
offering higher return to the investors.
Companies Beta value
Cochlear Ltd 0.12
CSL Ltd 0.05
Along with this, standard deviation of returns pertaining to the securities of Cochlear and
CSL Ltd account for 882.13 and 981.04 respectively. In accordance with such aspect there is a
chance that in the near future returns of CSL Ltd will move with higher rate either in positive or
negative direction (Bodie, 2013). Further, from beta valuation it has been discovered that lower
level of risk is associated with securities of Cochlear and CSL Ltd. Moreover, results of
financial evaluation presents that beta value of Cochlear and CSL ltd accounts for .12 and .05
respectively. By considering this, it can be presented that CSL is less risky or volatile as
compared to Cochlear Ltd. Thus, on the basis of the outcome of overall evaluation it can be said
that CSL’s investment is highly fruitful over others.

PART B
Analyzing the corporate governance practices of Cochlear and CSL Ltd
Corporate governance may be served as a framework that contains rules, relationship and
process which is undertaken by the authority to exercise control. Activities of corporate
governance are highly significant which in turn helps in building and boosting up the confidence
of investors. Moreover, corporate governance structures and practices provide high level of
assistance in determining and evaluating the cost of capital in the context of global capital
market. Hence, practices of corporate governance helps business units in maintaining as well as
promoting investors’ confidence in both Australian and overseas market to a great extent. In the
year of 2002, ASX corporate governance council has been developed which is involved in the
activities like giving recommendation for good international practice.
For practicing good corporate governance firms, which are listed on ASX, need to follow
specific principle and recommendations. Hence, in accordance with the principle 2 listed
business entities must have board with appropriate size, composition and skill commitment. On
the basis of such aspect, board should have ability to discharge its roles and responsibilities in a
prominent way (Corporate Governance Principles and Recommendations with 2010
Amendments, 2017). Thus, all the directors must have proper understanding and competence in
relation to dealing with current as well as emerging issues of business. Further, it is
recommended to the companies that majority of Board directors should be independent and have
ability to review and challenge the aspect of performance management (Corporate Governance
Principles and Recommendations, 2017). Besides this, principle 2 entails that business units
should lay emphasis on disclosing the process that is undertaken for evaluating the performance
of board, committees and individual directors. Thus, companies which are listed on the
recognized stock exchange of Australia require following the principle and recommendation of
corporate governance.
By evaluating the annual report of CSL Ltd pertaining to the year 2015, it has found that
company has complied with the principle 2 of corporate governance to a great extent. According
to the principle 2, CSL Ltd has appointed several directors who are completely independent from
the management. Besides this, financial report of CSL Ltd presents that directors or board
members of corporate governance are free of any interest position. Further, annual report of CSL

depicts that directors of CSL Ltd exercised independent judgment (Annual report of CSL Ltd
(2015), 2017). In addition to this, Board has adopted a conservative approach and materially
consistent with Australian standards. Hence, all the above depicted aspects clearly present that
governance structure as well as practices of CSL Ltd is highly consistent with the principles of
corporate governance.
Annual report of Cochlear Ltd entails that Cochlear Ltd has followed or met all the
requirements introduced by ASX corporate governance council. Further, company has
developed, maintained and monitored talent management programs including succession
planning, recruitment etc. Along with this, corporate governance team of Cochlear Ltd comprises
solely non-independent directors (Annual report of Cochlear Ltd (2015), 2017). Along with this,
annual report of CSL Ltd furnishes information regarding the nomination and appointment of
directors. Board has also placed emphasis on maintaining the appropriate mix of skills and
diversity. By taking into account such aspect individuals who have background, skills,
experience and knowledge pertaining to pharmaceutical sector, international business, finance
and accounting management. It shows that Cochlear Ltd has followed the guidelines and
recommendation in relation to corporate governance to the significant level.
PART C
Observing the relationship which takes place between the company’s performance and corporate
governance practices
From assessment, it has been asserted that significant relationship takes place between
the company’s performance and governance practices undertaken by it. Analysis depicted above
clearly shows that beta of the companies considered for evaluation entails that stocks are not
riskier. This aspect presents that both the companies such as Cochlear and CSL Ltd have
managed their portfolios in an effectual way. Further, evaluation presented in part b depicts that
both the organizations considered for the study has met the practices and recommendations
related to the corporate governance to the full extent. Directors of both the companies have
evaluated policies, strategies and overall performance fairly without any prejudice or biasness.

Along with this, part A assessment presents that both the companies are offering suitable
returns to the investors. Further, financial report of Cochlear Ltd entails that such unit has
complied with the all the legislative and disclosure requirement to a great extent. In addition to
this, CSL Ltd has also complied with the practices of corporate governance and made focus on
evaluating the strategic, financial, operational as well as risk management aspect. Further,
directors of both the companies have evaluated the value and culture to a great extent. In addition
to this, CSL and Cochlear Ltd have maintained high level of diversity within the board. This in
turn has made vital contribution in the development of strategic framework. On the basis of
overall evaluation of CSL and Cochlear Ltd corporate governance it can be presented that
performance of both the companies were in line with principle 2.
CONCLUSION
From the above report, it has been concluded that financial status of CSL is highly good
as compared to Cochlear ltd. Moreover, security with lower beta considered as safe investment
over others. Hence, it can be summarized from the report that stock price and returns of CSL Ltd
are less sensitive as compared to changes in market trend. Besides this, it can be inferred that
both corporate governance practices and financial status of the firms are highly related to each
other. Further, it can be stated that non-executive directors of both the companies have controlled
the financial performance through the means of monitoring as per the set rules and standards.

REFERENCES
Books and Journals
Bodie, Z., (2013). Investments. McGraw-Hill.
Caporale, T., (2012). Time varying CAPM betas and banking sector risk.Economics
Letters. 115(2). pp.293-295.
Online
Annual report of Cochlear Ltd (2015). 2017. [pdf]. Available through:
<http://www.annualreports.com/HostedData/AnnualReportArchive/C/ASX_COH_2015.pdf
>. [Accessed on 7th October 2017].
Annual report of CSL Ltd (2015). 2017. [pdf]. Available through:
<http://www.csl.com.au/docs/99/1023/CSL_AR_2015_sec,1.pdf >. [Accessed on 7th October
2017].
Corporate Governance Principles and Recommendations with 2010 Amendments. 2017. [pdf].
Available through:
<http://www.asx.com.au/documents/asx-compliance/cg_principles_recommendations_with_
2010_amendments.pdf>. [Accessed on 7th October 2017].
Corporate Governance Principles and Recommendations. 2017. [pdf]. Available through:
<http://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-
3rd-edn.pdf>. [Accessed on 7th October 2017].
CSL Ltd. 2017. [Online]. Available through: <http://www.csl.com.au/>. [Accessed on 7th October
2017].