ACCY801 Financial Management: Comparative Report of BLX and AX1

This report provides a detailed financial analysis of two companies, BLX and AX1, focusing on their financial performance and key metrics. The analysis includes an executive summary, introduction, objectives, and long-term plans. It covers financial ratios such as liquidity, capital structure, asset management efficiency, operating profitability, and returns on shareholders' investment. The report compares the performance of both companies, identifies areas for improvement, and provides recommendations based on the financial data. The report uses data from the 2019 annual reports of both companies and assesses their financial health and strategic direction, highlighting the strengths and weaknesses of each. The report offers insights into the financial health, performance, and strategic direction of both companies, with a comparative analysis to determine which company is performing better and providing recommendations for improvements.

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Accounting & Financial Management

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Executive summary
The company involves various aspects that need to be identified and evaluated and the same
has been done in the report. The complete analysis has been performed for AX1 and BLX.
The business is set up with some goal and objective and all of that in relation to the two
companies has been discussed in the report in an adequate manner. There is the evaluation of
financial factors and it is made with the help of ratio analysis that has been performed. The
performances of the two are identified and it is shown that the BLX is performing in a better
manner in comparison to AX1 and due to this, the BLX has been considered as the
competitor. The areas of the business which are in the lower position and in which the scope
for improvement is involved have been identified and the required steps for them are to be
taken by the company.
All of the investors are important and for that, the focus will also be made on the returns
which are paid to them and this will gain the funds for the company. The expansion will be
made possible with this and the overall growth will be attained.

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Table of Contents
Executive summary....................................................................................................................2
Introduction................................................................................................................................4
Objectives and long term plans..................................................................................................4
Financial ratios...........................................................................................................................5
Liquidity, Capital structure and asset management efficiency..................................................6
Operating profitability................................................................................................................8
Returns on shareholders’ investment.........................................................................................9
Capital expenditures.................................................................................................................10
Conclusion and recommendations...........................................................................................10
References................................................................................................................................12
Appendix..................................................................................................................................14

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Introduction
The performance and other aspects of the BLX and AX1 will be analyzed in the given report.
It will be covering all the important information and details about the company which is
relevant and will help in taking the correct decisions. The company which is performing
better is BLX and this will be considered to be the competitor. On this basis, the other
calculation for the ratios is made which helps in evaluating the complete position and
performance. There will be consideration of the profitability and liquidity position of the
company and with that, the capital structure will also be taken into account. There will be
consideration of the shareholders' returns which are available and their suitability. The capital
expenditures which are made by the company will be identified and with all of the data the
proper recommendations will be made.
Objectives and long term plans
In the company, there is the need to have certain objectives that are to be attained and for
which all the operations are performed. It has been found with the BLX that they make the
required selection on the basis of the merits. They aim at laying the strong foundation for all
the people and management involved. The board of the company is designed in a very strong
manner and it helps in adding value to the company. The company focus on acting in a
manner that is responsible and ethical in all means (BLX, 2019). Corporate reporting is an
important aspect and for that, the objective is involved to safeguard the integrity of the same.
The company is involved in the process by which the required disclosures are made on time
which is of help to many people. The security holders who are involved with the company
have certain rights and the company respects the rights and secure them in an appropriate
manner. Proper remuneration is paid and with that, the risk is also managed in the best
possible manner.

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There are many such decisions which are made in the business that helps in having long-term
success. For this, the goals are set and BLX is also ensuring the same by setting the required
goals. There are several strategies that are set so that the long term growth and success can be
achieved. There will be an opening of the new stores operated by the company in Australia.
The sales will be increased with the help of online measures and that will enhance the
profitability also.
In the case of AX1, there are various objectives that are set for the achievement of growth.
There are various investments which are made by the company and in that the use of several
innovations is made. With the help of that store, the environment will be maintained and the
development of the new and digital business will be made possible (AX1, 2019). The
shareholders’ value will be experiencing the growth as there will be better services which will
be given and the level of satisfaction will increase with the same. The main preferences of all
the involved parties will be identified and then the combined strategy will be formulated to
attain the same goal. This will be enhancing the overall position.
The long-term goals are set by the company and in that the planning for growth has been
made. There is the goal to open the stores in various new places in such a manner that people
will be attracted. This will help in increasing the value of the company and also the cash
flows will be maintained positively. The profits of the company are to be increased and this
will be made possible with the corporate stores.
Financial ratios
The calculation of the ratios is made below for the proper financial evaluation.
BLX AX1

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Particulars 2018 2019 2018 2019
Current ratio 1.85 1.74 1.27 1.22
Quick ratio 0.50 0.56 0.49 0.43
Receivable turnover 23.56 20.57 38.24 26.73
Inventory turnover 1.30 1.29 3.10 2.58
Fixed asset turnover 7.96 5.39 9.41 9.24
Total asset turnover 1.79 1.50 1.16 1.19
Debt ratio 0.42 0.50 0.35 0.40
Interest coverage 18.28 12.73 17.13 22.60
Gross profit margin 65.98% 64.27% 56.51% 57.39%
Operating profit
margin
12.33% 10.12% 9.21% 10.12%
Net profit margin 8.24% 6.47% 6.26% 6.77%
Return on assets 14.77% 9.73% 7.26% 8.05%
Equity multiplier 1.74 1.98 1.55 1.66
Return on equity 25.67% 19.29% 11.25% 13.36%
Liquidity, Capital structure and asset management efficiency
Liquidity:
In the company, there are various liabilities that are required to be met and for that, the
appropriate balance of the assets shall be maintained. In that, the liquidity will be required to
be managed and for that, the liquidity position is evaluated. There shall be a proper balance
among the current assets and current liabilities which are involved and for that the current
ratios are calculated (Babalola and Abiola, 2013). It has been noted that the current and quick
both the ratios are declining for AX1 and in the case of BLX the current ratio is declining but
there is an increase in the quick ratio. Also, the level at which they are maintained is very low
in comparison to the standards which are set for them (Erdogan, Erdoga. and Ömürbek,
2015). The current assets of the company are increasing but then also the decline is faced and
this is because of the high increase in the liabilities which are to be paid by the company.
There is a need for the company to identify the liabilities which can be avoided and also the
assets will be further increased to improve the position.

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Capital structure:
The capital structure of the company represents the level at which the capital is maintained
with the help of various sources. The proper evaluation for the same shall be made and in that
the balance of the assets, liabilities and equity is to be considered. The debt ratio of the
company has been calculated and it can be noted that there is an increase in both the
companies (Mankin and Jewell, 2014). The ratios are the higher increase of the competitor
company BLX and although the rise is made in AX still it is below the competitor. The
company will further make improvements by increasing investment in assets. The increase in
debt also leads to the rise in the interest expense which is made and for that the control shall
be made on it.
The interest coverage of the company is ascertained and there is a rise which is made in the
same. The competitor company BLX is facing a decline in the same which shows that the
position is better for AX1. The higher interest coverage shows that the company will be able
to meet the interest expense in an appropriate manner. The reduction of the debt will be made
so that the ratio can be further raised.
Asset management efficiency:
In the business, there are various assets that are involved and used and it is the responsibility
of the management that they are utilized in the required manner. If the proper use of the
assets will be made then the company will be able to make an increase in the revenue which
is made (Dalnial et al., 2014). To identify this position there is the calculation of efficiency
ratio which helps in evaluating the management efficiency in using the available resources.
The turnover ratios have been calculated for the accounts receivable, total assets and fixed
assets. In that, it is identified that there is a decline which is made in both the companies. By

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making the comparison it is identified that the decline in the case of AX1 is far more than that
of the BLX.
This shows the inefficiency of the management in handling resources and the revenue is
affected adversely due to the same. The management will be required to take the steps by
which the downfall can be eliminated.
Operating profitability
The profitability in the company is required to be managed and it is mostly dependent on the
operations which are performed in the company. This is because the operations which are
undertaken require the cost and by that, the overall profitability is affected (Delen, Kuzey and
Uyar, 2013). The evaluation for the same in case of AX1 and BLX is also made and in that it
has been determined that the increase is made in the profitability of AX1. The profits of the
BLX are declining but after that also there is overall better profitability in BLX.
The gross profit margin which is maintained by BLX is more than that of the AX1 and in that
it can be said that the company needs to make improvements. The operations are analyzed
and the operating profit which is calculated for both the companies is arriving at the same
point of 10.12%. This is attained with the decline in BLX and an increase in the case of AX1.
This is positive for the company that the improvement is being made and it is coming at the
level of competitor. The cost will be required to be further decreased so that the profitability
can be enhanced.
The net profit margin which is ascertained for the company is better than the competitor and
this shows an overall improvement in the profitability performance of the company. The
focus will be made by the company on the costs which are incurred and all of those which
can be eliminated further will be identified (Enekwe, Agu and Eziedo, 2014). They will be

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eliminated and this will lead to an increase in the profits. The debt balance will have to be
controlled so that the cost which is incurred for the same in the form of interest can be
avoided and positive change in profit will be made possible. This will lead to the attainment
of the long term success in this aspect and the profits will be managed for long.
Returns on shareholders’ investment
The company required funds to manage the operations and for that, the main source is equity
which is obtained from the shareholders. There is the amount that is paid by the investors on
the shares which are provided to them. This acts as the gain to the company as funds are
available which can be used for various processes (Nirajini and Priya, 2013). The investors
want to make the appropriate returns on the investment which is their main motive. It is the
responsibility of the company that the investors are paid with the appropriate returns and this
will be made possible when the company itself will be making the required returns. The
company will be analyzing this area with the help of a return on equity that is calculated. The
amount of the net profit in comparison to the equity funds is considered under this approach.
The return on equity which is made by the AX1 is increasing from 11.25% to 13.36% which
shows an increment whereas the competitor company is facing the downfall in the same. This
increase is made due to the rise of the profits which are made and with that the equity capital
is raising but not at that rate. This position will be required to be maintained and further
improvement will also be made so that the competition in the market can be dealt with in an
appropriate manner (Muritala, 2012). The cost will be controlled by which net profits will be
raising further thereby increasing the return for the investors. The equity multiplier is also
calculated and in that also the increase is shown which is beneficial for the company.

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Capital expenditures
Capital expenditure is the investment that is made for only one item and in this, the
investment in assets and other aspects is made. By this, the returns are gained which helps in
making the additional profits. They are made in all the companies in some or other form and
BLX is also considering the same. In order to maintain the macro environment, the company
makes various adjustments in its capital expenditures. In the current year, there is a capital
expenditure of $5 million which has been made (BLX, 2019). In order to make this
investment, the company has utilized the balance from the retained earnings. The new stores
are opened in which the cost is incurred and is considered as the capital cost (Baños-
Caballero, García-Teru and Martínez-Solano, 2014). This will be helping the company in
various manners as the revenue will be increasing and with that, the profits which are made
by the company will also raise.
IN the case of AX1 also there are capital expenditures that have been made and for that
complete data has been considered. The amount has been invested for the non-current assets
which are amounting to $12970000. The amount which is involved under this is committed
but the recognition of the same as the liability has not been made (AX1, 2019). It is because
the payment has not been made by the company currently and will be paid later. There is the
borrowing that is also involved and the amount for the same has been recognized in the
books. With the help of this, the operations will be performed in a better manner and that will
raise the overall performance of the company.
Conclusion and recommendations
The analysis for the BLX and AX1 has been made in the report that is presented above. In
that, the goals and objectives which are involved with the company have been ascertained
and with that, the long term goals that are made and will help in making the long term

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success have also been identified. There is the use of the information that is provided in the
financial statements and with that, the ratios have been calculated. There is the calculation
that is made in various areas and that an effective evaluation has been made. The Liquidity
position and capital structure are considered and the manner in which AX1 is performing in
comparison to BLX has been identified. The efficiency of the management in maintaining the
assets has also been considered and for that efficiency, ratios have been calculated. The
profitability is analyzed and it is identified that there is an improvement that is made by the
AX1 from the past will continue this in the coming period. The shareholders' return is also
considered and in that also the improvement is identified. This will be beneficial as the
investors will stay with the company and will invest further.
The expansion is required in the company and for that capital expenditures are made. The ain
expenses which are incurred by both the companies in this respect have been identified and
that will yield additional returns for the company. By taking all of this information into
consideration it can be recommended to the management of AX1 to make the investment in
current assets by which the liquidity position will be improved. There is a need to control the
available costs so that the profitability can be increased and further investments can be made.

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References
AX1. (2019) Annual report. [Online] Available at:
http://onlinereports.irmau.com/2019/AX1/4/ [Accessed 17 April 2020]
Babalola, Y.A. and Abiola, F.R. (2013) Financial ratio analysis of firms: A tool for decision
making. International journal of management sciences, 1(4), pp.132-137.
Baños-Caballero, S., García-Teruel, P.J. and Martínez-Solano, P. (2014) Working capital
management, corporate performance, and financial constraints. Journal of Business
Research, 67(3), pp.332-338.
BLX. (2019) Annual report. [Online] Available at:
http://www.beaconlightinggroup.com.au/media/pdfwidget/BLX-FY2019-Annual-Report.pdf
[Accessed 17 April 2020]
Dalnial, H., Kamaluddin, A., Sanusi, Z.M. and Khairuddin, K.S. (2014) Accountability in
financial reporting: detecting fraudulent firms. Procedia-Social and Behavioral
Sciences, 145, pp.61-69.
Delen, D., Kuzey, C. and Uyar, A. (2013) Measuring firm performance using financial ratios:
A decision tree approach. Expert Systems with Applications, 40(10), pp.3970-3983.
Enekwe, C.I., Agu, C.I. and Eziedo, K.N. (2014) The effect of financial leverage on financial
performance: Evidence of quoted pharmaceutical companies in Nigeria. Journal of
Economics and Finance, 5(3), pp.17-25.