Financial Performance Analysis Report for AGL Energy

This report provides a financial analysis of AGL Energy, examining its performance based on key financial statements and ratios. The report begins with an overview of AGL Energy's business, highlighting its role in the energy sector and its historical context. It then identifies key items from the financial statements, such as borrowings, cash equivalents, and property, plant, and equipment, emphasizing their significance in assessing the company's financial health. The analysis further delves into the application of accounting conventions, specifically the historical cost convention, and its impact on financial reporting. The core of the report focuses on the evaluation of financial performance through liquidity, efficiency, and profitability ratios. It discusses the current ratio and quick ratio for liquidity, receivable turnover and inventory turnover ratios for efficiency, and net profit margin and gross profit margin for profitability. The report concludes by summarizing the company's improved financial standing across these metrics and references relevant sources, including AGL's annual reports and academic research on financial ratios and analysis.

Accounting and financial
management
Name of the student
Name of the university
Student ID

Introduction
AGL Energy Ltd is the integrated leading energy
business and operates for more than 180 years with
proud heritage for innovation. It is engaged in selling
and buying of electricity and gas and associated
products as well as services, operation and construction
of the power generation.

Key items in the financial statements
Some of the key items including assets, liabilities, incomes
and expenses those have significant impact on the
reported position of the company, its performance and
decision making process are as follows –
Borrowings
Cash and cash equivalents
Property, plant and equipment

Measurement of key assets
Accounting conventions are basic accounting rules that
become acceptable procedures over the time and are
considered as the basis accounting rules. Most commonly
used convention is historical cost convention. It requires
that the transactions shall be recorded at the cost at
which the item is acquired.

Financial performance analysis

Liquidity ratio –Major liquidity ratios used for measuring
the liquidity are current ratio and quick ratio. Current ratio
measures the current assets against current liabilities
whereas the quick ratio measures the quick assets against
the current liabilities. Quick assets mean the assets which
are readily available or can be convertible into cash like
cash, trade receivable and marketable securities.

Efficiency ratio –Major liquidity ratios used to measure
the efficiency of the firm are receivable turnover ratio and
inventory turnover ratio. Receivable turnover ratio
measures the time taken by the company in collecting
the dues from its debtors whereas inventory turnover
ratio measures time the firm takes in replacing or selling
its entire stock of inventories on an average.

Profitability ratios –Major profitability ratios used
for measuring the profitability of the firm are net
profit margin and gross profit margin. Net profit
margin is the earning generated by the firma after
paying all the expenses whereas gross profit margin
is the profit generated by the firm after paying cost of
sales.

Conclusion
From above discussion it is concluded that in financial terms
the company has improved in all aspects like liquidity,
profitability and efficiency. Various items that have notable
impact on its financial statements include ling-term
borrowing, cash and cash equivalents and plant, property
and equipments.

References
Agl.com.au. (2019). AGL Energy | An Electricity Provider & Gas Supplier | AGL.
Retrieved 15 August 2019, from https://www.agl.com.au/
Annualreport.agl.com.au. (2019). 2018 Retrieved 15 August 2019, from
https://www.2018annualreport.agl.com.au/xmlpages/resources/TXP/agl_energy/
finrep/pdf/AGL_Energy_Annual_Report_2018.pdf
Olesen, O. B., Petersen, N. C., & Podinovski, V. V. (2015). Efficiency analysis with
ratio measures. European Journal of Operational Research, 245(2), 446-462.
Öztürk, H., & Karabulut, T. A. (2018). The Relationship between Earnings-to-Price,
Current Ratio, Profit Margin and Return: An Empirical Analysis on Istanbul Stock
Exchange. Accounting and Finance Research, 7(1), 109-115.
Sari, R. K., Nurlaela, S., & Titisari, K. H. (2018). The Effect of Liquidity Ratio,
Profitability Ratio, Company Size, and Leverage on Bond Rating in Construction
and Real Estate Company.