Financial Performance Analysis of PWR Holding: An Accounting Report

This report provides a comprehensive financial analysis of PWR Holding, examining its operating, financing, and investing performance through various accounting ratios. The analysis includes a comparison of key ratios such as current ratio, quick ratio, receivable turnover, return on equity, return on assets, debt-to-equity ratio, earnings before interest and tax, price-earnings ratio, and earnings per share for the years 2019 and 2020. The report interprets the trends and implications of these ratios, highlighting changes in liquidity, profitability, solvency, and efficiency. It discusses the declining trends in liquidity and profitability ratios, and the increasing debt-to-equity ratio, offering insights into the company's financial health and operational effectiveness. The report also includes a list of references to support its findings.

INTRODUCTORY
ACCOUNTING

Table of Contents
ANALYSIS OF PWR HOLDING OPERATING, FINANCING AND INVESTING
PERFORMANCE............................................................................................................................3
REFERENCES................................................................................................................................1

ANALYSIS OF PWR HOLDING OPERATING, FINANCING AND
INVESTING PERFORMANCE
RATIO FORMULA 2020 2019
Current ratio Current assets/Current
liabilities
=37177/10929
= 3.40
=33669/8270
=4.07
Quick ratio Current asset-
inventories/Current
liabilities
=37177-6528/10929
=2.80
=33669-7194/8270
=3.20
Receivable
turnover
Net credit sales/
Average receivables
=65731/9276.5
=7.08
=65411/6716
=9.73
Return on
equity
Net
income/Shareholder’s
equity
=13,049/54,250
=0.24
=14,206/52,997
= 0.26
Return on
assets
Net income/Total
assets
=13,049/82,383
=0.15
=14,206/64,977
=0.21
Debt to equity Total liabilities/equity = 28,133/54,250
=0.51
=11,980/52,997
=0.22
Earnings
before interest
and taxes
Net income+ interest+
taxes+ depreciation+
amortization
=13,049+
4,705+432+5,186
=23,372
=14,206+543+2,470+5,630
=21,763
Price earnings
ratio
Share price/earnings
per share
=2.90/13.04%
=22.23
=2.90/14.21%
=20.40
Earnings per
share
Net income available
to
shareholders/weighted
average number of
shares outstanding
=13,048,905/100,000,000
= 13.04
=14,205,702/100,000,000
=14.21
Notes:
Average receivables: Opening receivable+ closing receivable/2
For 2020:

=6932+4689/2
=9276.5
For 2019:
= 4689+4054/2
=6716
Comparison:
Current ratio:
It is also known as liquidity ratio which shows the capacity of the company in terms of
making payment to short term obligation (Husna & Satria, (2019)). while having a comparison of
current ratio of PWR Holding it can be analysed that the ratio is decreasing from 4.07 to 3.40
from 2019 to 2020. The ideal current ratio is 2:1. This shows that the liquidity position and
condition of the company is declining and it is not being able to pay off its short term obligations
and liabilities. This decline also shows that the company’s current liabilities are being increased
from 2019 to 2020 due to non-timely payment to it.
Quick ratio:
It is also known as liquidity ratio which is used to determine the company’s liquidity
position. Its ideal ratio is 1:1. This means that as per this ratio there is a need to have balance
between the current assets and liabilities so that none of them will be over. In comparison of this
ratio of 2019 and 2020 it is analysed that the ratio is declining from 3.20 to 2.80. This declining
stage again shows that the company capacity with management of current liabilities are not good
and as a result the liabilities are being raising over the assets and affecting the balance.
Receivable turnover:
As per this ratio the turnover or the return is being calculated over the receivable. This
means that it shows how much debtors are being recovered and debt is being received over the
credit sales (Myšková & Hájek, (2017)). In having a comparison of this ratio with regard to PWR
holding it is observed that the ratio is declining from 9.73 to 7.08 from 2019 to 2020. This
decline shows that the company’s policies in terms of recovering the due from its customers are
declining or the company is not efficiently using its assets. This decline shows an adverse impact
towards the company.
Return on equity:

This ratio is related with the profitability. This ratio shows that whether the company is
operating its business with the perspective of raising profitability or not. since this ratio is
concerned with the shareholder’s equity which directly shows the return made on share. In
comparing the results of the PWR holding with regard to this ratio it is found that the ratio is
declining from 0.26 to 0.24 from 2019 to 2020. This declining ratio directly shows that the
company is earning low return and profitability with regard to its shareholders. This also shows
that the company is not operating well that it can raise the profitability and thereby the return.
Return on assets:
This ratio can be understood by its name that it measures the return that is being
employed over the use of assets. This ratio shows that how efficiently the assets are being used
by the company in order to generate the return for the company (Kurniawan, (2021)). While
making comparison of the ratio in respect to company it is being analysed that the ratio is
declining from 021 to 0.15 from 2019 to 2020. This means that the company is not efficiently
utilising its assets in order to have a generation of adequate return.
Debt to equity ratio:
This ratio is also known as leverage ratio that is being used to determine the leverage of
the company. this ratio shows the availability of shareholder’s equity and debt that is being made
available to the company for financing its assets (Nuryani & Sunarsi, (2020)). This is also known
as gearing ratio. While having a comparison of 2019 and 2020 it is found that the ratio is raising
from 0.22 to 0.51. This raise in the ratio shows that the company structure is comprised of more
percentage of debt in comparison of equity. This means that the company uses more debts in
order to finance its business rather than equity.
Earnings before interest and tax:
This ratio show that the company’s earnings before making payment of taxes and interest
and other expenses. This is the earning that the company generate and persist before the making
payment of duties. With regard to PWR holding this amount is raising from $ 21763 to $23372
from 2019 to 2020. This raise in the earning is a good sign for the company that it may make
high sales and raise the earning.
Price earnings ratio:
This ratio enables the company to have an analysis of the price of the share in regard to
earning. This ratio assist the company that whether that had made adequately valued the prices of

its share or not (Rulandari & Sudrajat, (2017)). As this ratio shows the comparison of prices of
share with respect to earning so from this ratio companies can determine that whether the price
set by company of its share is appropriate or not. With regard to PWR holding the ratio is raising
from 20.40 to 22.23 from 2019 to 2020. This means that the earning of the share raises with
respect to year but the price remain same which shows non-appropriation of price and need to be
change as per the percentage of earning.
Earnings per share:
This ratio shows the percentage of earning per share. This is an indicator of company’s
efficiency that how efficiently it operates its business in order to raise the percentage of earning.
While comparing the earnings of PWR holding it is analysed that the ratio is declining from
14.21 to 13.04 from 2019 to 2020 (Annual Report, 2021). This shows that the company operation
with respect to raise the percentage of earning is not appropriate and as a result the earning per
share is declining.

REFERENCES
Books and journals
Husna, A., & Satria, I. (2019). Effects of return on asset, debt to asset ratio, current ratio, firm
size, and dividend payout ratio on firm value. International Journal of Economics and
Financial Issues. 9(5). 50.
Kurniawan, A. (2021). ANALYSIS OF THE EFFECT OF RETURN ON ASSET, DEBT TO
EQUITY RATIO, AND TOTAL ASSET TURNOVER ON SHARE RETURN. Journal
of Industrial Engineering & Management Research. 2(1). 64-72.
Myšková, R., & Hájek, P. (2017). Comprehensive assessment of firm financial performance
using financial ratios and linguistic analysis of annual reports. Journal of International
Studies, volume 10, issue: 4.
Nuryani, Y., & Sunarsi, D. (2020). The Effect of Current Ratio and Debt to Equity Ratio on
Deviding Growth. JASa (Jurnal Akuntansi, Audit dan Sistem Informasi Akuntansi). 4(2).
304-312.
Rulandari, N., & Sudrajat, A. (2017). Financial Ratio (Altman Z score) with Statistic
Modelling. International Journal of Scientific Research in Science and
Technology. 3(6). 341-344.
Online reference
Annual Report., 2021. [Online]. Available through <
https://www.pwr.com.au/wp-content/uploads/PWRAR20-final-web-ready.pdf>
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