Ramsay Health Care Ltd: Financial Performance Analysis Report

This report provides a financial analysis of Ramsay Health Care Ltd, focusing on its capital structure and financial performance from 2013 to 2017. The analysis includes the calculation of the debt-to-equity ratio, revealing an increasing reliance on debt financing over the period, with the ratio exceeding 1.6 in 2013 and reaching over 3.0 in 2015 and 2016 before decreasing to 2.6 in 2017. Despite the increasing debt, the report notes a rise in profitability, suggesting an optimal capital structure. The report also references the company's balance sheet and income statement data to support its conclusions, highlighting key financial metrics such as revenue, operating income, and net income. The analysis draws on academic sources to support its findings.

RUNNIG HEAD: Financial analysis of Ramsay Health Care Ltd
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CAPITAL STRUCTURE OF Ramsay Health Care Ltd
Capital structure of Ramsay Health Care Ltd divulges the way company has backed its
finance. i.e. debt and equity to raise the funds. The debt to equity ratio assists in determining
whether Ramsay Health Care Ltd has optimum capital structure or not (Weygandt, Kimmel,
and Kieso, 2015).
The capital structure is determined as optimum capital structure when it maximises the
shareholder’s wealth (Gitman, Juchau, and Flanagan, 2015). If in case, the profitability of the
Ramsay Health Care Ltd is low then it should keep the debt to equity ratio below 70:30 i.e.
70% equity and 30% debt portion in capital structure (Ehrhardt, and Brigham, 2016).
Whether Ramsay Health care has optimal capital structure
or not
The debt to equity ratio has been computed to determine whether Ramsay Health Care Ltd
has optimum capital structure or not.
Debt to equity structure of AMSAY HEALTH CARE LTD (AUD in millions)
Particular 2013-06 2014-06 2015-06 2016-06 2017-06
Total stockholders' equity 1544 1703 1860 2023 2276
Total liabilities 2521 2807 5784 6218 5977
Debt To equity ratio of Ramsay Health 1.632772 1.648268 3.109677 3.073653 2.626098
(Ramsay Health Care Ltd, 2017).
The debt to equity ratio of company shows that company has more than 50% its debt portion
in its capital structure and consistently increasing its debt to equity to 70% i.e. 70% part of its
capital is debt and rest is for the equity (Zhu, 2014).
Nonetheless, the profitability of the company has been increasing throughout the time
which shows that company could pay off all of its interest payment and charge from its
earnings before interest and tax (Brigham, and Ehrhardt, 2013). It could be inferred that
Ramsay has optimum capital structure as it has increased its financial leverage with the
increase in its profitability. If in case, company has downfall in its revenue then it could
reduce its debt portion in near future by redemption of its bonds.

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References
Brigham, E.F. and Ehrhardt, M.C., 2013. Financial management: Theory & practice.
Cengage Learning.
Ehrhardt, M.C. and Brigham, E.F., 2016. Corporate finance: A focused approach. Cengage
learning.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson
Higher Education AU.
Ramsay Health Care Ltd, 2015, annual report, accessed on 9th May, 2018 available at
http://www.ramsayhealth.com/Investors/Annual-and-Financial-Reports
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & Managerial Accounting.
John Wiley & Sons.
Zhu, J., 2014. Quantitative models for performance evaluation and benchmarking: data
envelopment analysis with spreadsheets (Vol. 213). Springer

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Appendix
RAMSAY HEALTH CARE LTD (RHC) CashFlowFlag BALANCE SHEET
Fiscal year ends in June. AUD in millions
except per share data.
2013-
06
2014-
06
2015-
06
2016-
06
2017-
06
Assets
Current assets
Cash
Cash and cash equivalents 272 167 316 329 420
Total cash 272 167 316 329 420
Receivables 499 569 1025 1169 1220
Inventories 113 124 192 205 226
Deferred income taxes 26 22 9
Prepaid expenses 39 51 100 112 97
Other current assets 57 -21 -5 6 -11
Total current assets 980 890 1654 1843 1960
Non-current assets
Property, plant and equipment
Gross property, plant and equipment 3185 3481 5216 5685 5856
Accumulated Depreciation -1209 -1326 -1625 -1825 -1990
Net property, plant and equipment 1976 2155 3592 3860 3866
Equity and other investments 2 195 238 242 241
Goodwill 918 1102 1775 1948 1937
Intangible assets 62 62 103 112 100
Deferred income taxes 87 99 205 200 179
Other long-term assets 37 46 50 59 52
Total non-current assets 3082 3660 5963 6421 6375
Total assets 4062 4551 7617 8265 8335
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt 15 30 359 55 23
Capital leases 4 4 67 63 62
Accounts payable 253 339 722 788 743
Deferred income taxes 35 5 42 50 37
Other current liabilities 488 544 982 1039 1037
Total current liabilities 794 923 2171 1994 1902
Non-current liabilities
Long-term debt 1226 1320 2504 3131 3078
Capital leases 16 14 220 196 183
Deferred taxes liabilities 30 33 310 296 239
Pensions and other benefits 133 155 96 102 108
Minority interest -2 41 -27 23 82
Other long-term liabilities 324 322 509 476 383

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Total non-current liabilities 1727 1885 3613 4225 4074
Total liabilities 2521 2807 5784 6218 5977
Stockholders' equity
Common stock 664 663 633 625 643
Other Equity 82 82 19 -30 -18
Retained earnings 629 767 955 1176 1399
Accumulated other comprehensive income 169 191 252 252 252
Total stockholders' equity 1544 1703 1860 2023 2276
Total liabilities and stockholders' equity 4064 4510 7644 8241 8253
RAMSAY HEALTH CARE LTD (RHC) Cash Flow Flag INCOME STATEMENT
Fiscal year ends in June. AUD in millions except
per share data.
2013-
06
2014-
06
2015-
06
2016-
06
2017-
06
TT
M
Revenue 4134 4909 7320 8648 8667
879
4
Cost of revenue 1254 1413 1670 2007 1998
201
9
Gross profit 2880 3497 5649 6641 6669
677
5
Operating expenses
Sales, General and administrative 2327 2826 4315 5144 5192
534
1
Other operating expenses 147 170 603 678 630 654
Total operating expenses 2474 2996 4918 5822 5822
599
5
Operating income 406 500 732 819 847 780
Interest Expense 68 76 121 129 128 109
Other income (expense) 48 18 30 19 30 17
Income before taxes 387 443 640 709 750 688
Provision for income taxes 118 133 221 198 199 177
Net income from continuing operations 268 310 419 511 551 511
Other -2 -6 -34 -61 -62 -31
Net income 266 304 386 450 489 480
Preferred dividend 16 14 14 13 6 6
Net income available to common shareholders 251 290 372 437 483 473
Earnings per share
Basic 1.25 1.44 1.85 2.18 2.37
2.3
1
Diluted 1.24 1.43 1.83 2.16 2.35
2.3
1
Weighted average shares outstanding
Basic 201 201 201 201 201 201
Diluted 202 203 203 202 206 205
EBITDA 602 688 1068 1212 1251
117
9

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Debt to equity structure of AMSAY HEALTH CARE LTD (AUD in millions)
Particular 2013-06 2014-06 2015-06 2016-06 2017-06
Total stockholders' equity 1544 1703 1860 2023 2276
Total liabilities 2521 2807 5784 6218 5977
Debt To equity ratio of Ramsay Health
1.63277
2
1.64826
8
3.10967
7
3.07365
3
2.62609
8