Comprehensive Financial Performance Analysis: Medibank Private Limited

This report provides a financial analysis of Medibank Private Limited, focusing on its performance during 2016 and 2017. It begins with an abstract summarizing the key areas covered, including liquidity and profitability ratios. The report calculates and analyzes current and quick ratios, along with cash flow from operating, investing, and financing activities. Profitability ratios such as net profit margin, gross profit margin, return on assets, return on shareholders’ equity, and earnings per share are also computed and evaluated. A trend analysis is conducted to identify changes in these ratios over the specified period. Furthermore, the report presents a basic profile of Medibank, identifies its main competitors, and offers a critical review of the company's corporate governance statement, including the roles of various committees. The report concludes with a summary of findings regarding the business operations of Medibank Private Limited.

Running head: ACCOUNTING FOR BUSINESS
Accounting for Business
Name of the Student
Name of the University
Author Note

1ACCOUNTING FOR BUSINESS
Abstract:
The Medibank Private Limited is an Australia based national private health insurance
company. This is the second largest insurance company in the health department of the
Australia. This Medibank has total 29.1% of market share in the Australia. The Medibank
insurance organization established in the year of 1975 by the health insurance commission. In
this paper the liquidity ratio and the profitability ratio of the Medibank private limited is
calculated. Following that a trend analysis is done to calculate the percentage of changes in
the calculated ratios. Then a summary of the profile of the Medibank private limited is given.
In this section the chief competitors of the company is also determined. Further, a critical
review is given on the basis of corporate governance statement of the Medibank private
limited. Finally, a conclusion is given about the business operation of the Medibank private
limited.

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Table of Contents
Introduction:...............................................................................................................................3
Ratio Value Calculation of the Medibank Private Limited:.......................................................4
Liquidity Ratio:......................................................................................................................4
Profitability Ratio:..................................................................................................................7
Trend Analysis:..........................................................................................................................7
Basic Profile of the Medibank Private Limited:........................................................................8
Corporate Governance Statement of the Medibank Private Limited:........................................9
Conclusion:..............................................................................................................................10

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Introduction:
The analysis of sales related data is very much important for each and every company
to track their sales report and for improving their sales percentage. This also help the
organization to determine the sales pattern of the organization (Ott and Longnecker 2015).
The sales pattern is able to assist the organization to set the budget of the sales for the future
case. Sales analysis also helps to strengthen the products or the service range of the
organization (Woodward 2013). The data gathered form the sales analysis can be used for
comparing the sales performance of the organization with the market of similar industries.
In this case the sales analysis will be done for the Medibank Private Limited which is
a health insurance company based in Australia. The Medibank Private Limited is the second
largest public health company in the Australia.
For doing the sales analysis of the Medibank Private Limited firstly the liquidity ratio
of the company will be calculated and this calculation will be based on the last two years
business of the company. With the liquidity ratio, the profitability ratio of the company will
be also calculated for the last two years of the business conducted by the company. Based on
the outcome of the ratio values a trend analysis will be performed which will include a
quantitative analysis. Therefore, the basic profile of the company will prepared and the chief
competitors of the Medibank Private Limited will be identified. Further, a critical review will
be given on the company’s statement on the corporate governance and the challenges faced
by the Medibank Private Limited in the case of relation to ethical behaviour will elaborated.
Finally, a conclusion will be drawn on the learning of the case study.

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Ratio Value Calculation of the Medibank Private Limited:
In this ratio value calculation the Liquidity Ratio and Profitability Ratio of the
Medibank Private Limited will be calculated. For this calculation financial year of 2016 and
the 2017 is selected for the company.
Liquidity Ratio:
To calculate the liquidity ratio of the Medibank Private Limited current ratio, quick
ratio and the cash flow will be calculated. From the website of the company following data is
retrieved for the financial year of 2016 and 2017:
Current Assets $m (2016) $m (2017)
Cash and cash equivalents 438.7 594.6
Trade and other receivables 313.1 317.0
Financial assets at fair value through profit or loss 2015.8 2038.1
Deferred acquisition costs 31.1 36.1
Other Assets 13.8 14.1
Total Current Assets 2812.5 3000.4
The above table shows that the total current assets for the financial year of the 2016
was 2812.5 million of dollars and for the year of 2017 it was 3000.4 million dollars
(Medibank 2018). The following table will show the data about the current liabilities from the
website of the company.
Current liabilities $m (2016) $m (2017)
Trade and other payables 333.9 334.8
Claims liabilities 396.3 388.4
Unearned premium liability 664.0 685.7

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Tax liability 63.8 85.5
Provisions and employee entitlements 60.5 70.3
Total current liabilities 1518.5 1564.7
The total liabilities calculated from the table is 1518.5 million dollars and 1564.7
million of dollar for the financial year of 2016 and 2017 respectively (Medibank 2018). In the
next table cash flow of the company will be determined.
Cash Flow due to Operating Activities $m (2016) $m (2017)
Premium receipts 6159.5 6278.8
Complementary Services receipts 612.7 602.1
Other receipts 6.3 6.0
Payments for claims and levies 5141.4 5175.9
Payments to suppliers and employees 1199.4 1174.7
Income taxes paid 85.4 142.9
Net Cash Flow from Operating Activities 352.3 393.4
Cash Flows From Investing Activities $m (2016) $m (2017)
Interest received 42.2 38.8
Investment expenses 3.7 4.1
Proceeds from sale of financial assets 1011.4 745.1
Purchase of financial assets 1040.1 658.0
Proceeds from sale of businesses 23.3 2.9
Proceeds from sale of land and buildings 6.5 -

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Purchase of plant and equipment 2.6 5.5
Purchase of intangible assets 75.6 43.3
Net Cash Flow from Investing Activities 38.6 75.9
Cash flows from financing activities $m (2016) $m (2017)
Purchase of shares to settle share-based payment - 3.6
Dividends paid 283.7 309.8
Net Cash Flow from Financing Activities 283.7 313.4
Form the above tables current ratio, quick ratio and the cash flow can be calculated.
Current ratio for financial year of 2016 = (Current Assets/Current Liability) =
(2812.5/1518.5) = 1.85.
Current ratio for financial year of 2017 = (Current Assets/Current Liability) =
(3000.4/1564.7) = 1.92.
Quick ratio for the financial year of 2016 = (Current assets - Financial assets – Other
Assets)/Current Liabilities = (2812.5 - 2015.8 - 13.8)/1518.5 = 0.51
Quick ratio for the financial year of 2017 = (Current assets - Financial assets – Other
Assets)/Current Liabilities = (3000.4 - 2038.1 – 14.1)/1564.7 = 0.60
Cash Flow for the financial year of 2016 = (Cash flow from operating activities –
Cash flow from investing activities – Cash flow from financing activities) = (352.3 – 38.6 –
283.7) = 30.0

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Cash Flow for the financial year of 2017 = (Cash flow from operating activities –
Cash flow from investing activities – Cash flow from financing activities) = (393.4 – 75.9 –
313.4) = 4.1
Profitability Ratio:
 Net profit margin for 2016 of the company = (Net Profit/Revenue) = (417.6/6741.8) =
0.06
Net profit margin for 2017 of the company = (Net Profit/Revenue) = (449.5/6797.0) =
0.07
 Gross profit margin for 2016 of the company = (Gross Profit/Revenue) =
(1065.9/6741.8) = 15.8%
Gross profit margin for 2017 of the company = (Gross Profit/Revenue) =
(1026.7/6797.0) = 15.1%
 Rate of return on assets of the company for the financial year of 2016 = (Net
income/Total Assets) = (417.0/3266.2) = 12.77%
Rate of return on assets of the company for the financial year of 2017 = (Net
income/Total Assets) = (452.0/3462.5) = 13.05%
 Rate of return on shareholders’ equity for the financial year of 2016 = (Net
income/Shareholder’s equity) = (417.0/1578.7) = 26.41%
Rate of return on shareholders’ equity for the financial year of 2017 = (Net
income/Shareholder’s equity) = (452.0/1719.8) = 26.28%
 Earnings per share for the financial year of 2016 = (Net income/Number of equity
share outstanding) = 74 (417000000/2754003240) = 0.15 dollars.
Earnings per share for the financial year of 2017 = (Net income/Number of equity
share outstanding) = 74 (452000000/2754003240) = 0.16 dollars.

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Trend Analysis:
Trend analysis is used for identifying the changes occurred in a company over a
certain period of time (Kossin, Olander and Knapp 2013). In this case the trend analysis will
be done for the above founded ratio values.
Calculated Ratio 2016 2017 Increase/Decrease Percent Change
Current Ratio 1.85 1.92 0.07 3.9%
Quick Ratio 0.51 0.60 0.09 17.6%
Cash Flow 30.0 4.1 25.9 86.3%
Net Profit Margin 0.06 0.07 0.01 16.7%
Gross Profit Margin 15.8 15.1 0.7 4.4%
Return of shareholders’ equity 12.77 13.05 0.28 2.2%
Earning Per Share 0.15 0.16 0.01 6.6%
From the above trend analysis table it is seen that there are some changes in the
calculated ratio of the company if compared to the previous years. From the above table it is
determined that current ratio has increased 3.9% in 2017 compared to the 2016. Quick ratio
change percentage is huge which is 17.6% compared to its previous year. The main part of
this trend analysis is that the cash flow has decreased by 86.3% in the year of 2017 compared
to the year of 2016 which is not a good indication for the company. Other things which are
the return of shareholders equity, gross profit margin, net profit margin and the earning per
share are changed by the high rate. The change in percentage is also seen in the terminology
of the gross profit margin. The change is nearly 4.4%. The change in Return of shareholders’
equity is noticed to be nearly 2.2% and this also leads to the fact that the change in the
terminology of the Earning per share has increased to 6.6%.

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Basic Profile of the Medibank Private Limited:
The Medibank is the one of the most successful company in the field of the health
insurer. The Medibank private limited has total 40 years of experience in this health
insurance field (Medibank 2018). This company holds a huge number of customers in the
Australia which is nearly 3.7 million. Also with the health insurance the Medibank private
limited provides health support, better integrated primary care and mental health support.
The main purpose of the Medibank private limited is “Better Health for Better Lives”.
The main target of the Medibank private limited is to providing world class medical support
to its customer. The main strategy of the Medibank private limited is helping the customers to
provide them a better heath to them and by this improving the health of the total wellbeing
(Medibank 2018).
The main competitors for the Medibank private limited in the health insurance field
are the Bupa, BizHealth, Amlin, Imagine Health and the BridgeHealth. The Bupa is similar
with the Medibank private limited which is a healthcare group spread over internationally.
This company has 32 million of customer over 190 country including the Australia (Turner
and Shinnick 2013). BizHealth is also a health related company in the Australia which is one
of the main competitor for the Medibank private limited. Amlin is totally same with the
Medibank private lmited in which is also a health insurer company which can create huge
market competition for the Medibank private. Other rest two company is also do the similar
type of public health related operation which creates a vast competition for the Medibank
private limited.
Corporate Governance Statement of the Medibank Private Limited:
The corporate governance of the Medibank Private Limited is divided into some
department on the behalf of the shareholders. The main divisions of the board of the

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Medibank private limited are including a risk management committee, audit committee,
nomination committee, people and remuneration committee and an investment and capital
committee (Medibank 2018). This all the departments are leaded by the CEO of the company
which is a good strategy of running the company. In this architecture or the structure of the
company the board of the Medibank private is able to provide enough strategic guidance for
running and managing the business effectively. As a review of the corporate governance
structure of the Medibank private it can be elaborated that the board of the Medibank private
limited is able to monitor the performance of the company (Medibank 2018). This type of
corporate governance statement can provide independence to the decisions of the board. The
independence can increase the flow of the communications and the updates about the
company. Also, this type of structure is useful for re-election of the directors. As per the
governance statement of the Medibank private limited the board first checks character of a
person, background and experience before appointing or including that person in the board
which helps to maintain a clean interface of the board and also increase the efficiency of the
board.
Conclusion:
Form the above discussion it can be concluded that Medibank Private Limited is a
huge organization in the aspect of medical insurance field. In this case profitability ratio and
the liquidity ratio of the company is determined and compared with two financial year. The
liquidity ratio is required in this case of businesses to determine whether the company is able
to pay the market liabilities which is required for running a business smoothly. The liquidity
ratio is totally about the daily expense and incomes. The Medibank private limited will not
able to sustain in the market if it fails to meet its market expenses. So, the calculation of the
liquidity ratio is needed. In this case three type of liquidity ratio is calculated which are the
current ratio, quick ratio and the cash flow and all of these are important for the Medibank

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private limited. On the other hand the profitability ratio is also important for the businesses.
The profitability ratio is used for determining the overall performance and the efficiency of
the organization. The profitability ratio can generate the efficiency in generating the
shareholders return. Also in this case a trend analysis is done which shows the overall growth
of the company. Though the growth of the company is overall good, still it needs to improve
some of its area such as cash flow. Cash flow is quite low compared with the previous year.
Also basic profile of the Medibank private limited is discussed in this document along with
its market rivals. Following that the corporate governance statement of the company is
reviewed critically which shows the functionality of the board of the company.