Financial Analysis Report: Car Sales Performance (MBA403)

This report presents a comprehensive financial analysis of Car Sales.com, an ASX-listed company, evaluating its performance over four years (2015-2018) based on its annual reports. The analysis employs ratio analysis, encompassing efficiency, liquidity, and profitability ratios to assess the company's financial health and operational effectiveness. The efficiency ratio examines the time taken to adjust receivables and payables, the liquidity ratio assesses the working capital position, and the profitability ratio evaluates the company's returns on assets, net profit margin, and return on equity. The report interprets these ratios, highlighting trends and providing insights into the company's financial management and its ability to meet its financial obligations and generate returns. The conclusion summarizes the overall financial position of Car Sales, emphasizing the importance of strategic decision-making for enhancing future financial performance, and the report is a valuable resource for understanding the company's financial standing and future prospects.

Running head: FINANCIAL ANALYSIS
FINANCIAL ANALYSIS
Name of the student:
Name of the university:
Author Note:

1FINANCIAL ANALYSIS
Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Efficiency Ratio.....................................................................................................................2
Liquidity Ratio.......................................................................................................................4
Profitability Ratio...................................................................................................................4
Conclusion..................................................................................................................................6
References..................................................................................................................................7

2FINANCIAL ANALYSIS
Introduction
Car sales is an online marketplace which deals with the business of motorcycles and
automobile. In recent years the online purchase and sales has been increasing in quite a
drastic manner. The chosen company for this assignment is listed in the ASX or rather known
as the Australian Stock Exchange. For the purpose of acknowledging the financial
performance of Car Sales for the last years of business operations, the tools which is used to
comprehend the financial performance of the company is ratio analysis based on the annual
report of the last four years starting from the year 2015. It is significant to apprehend the
business performance of Car sales and further its effectiveness in the domain of the online
market selling.
Discussion
It is significant for the business to understand financial performance of the company
by analyzing the annual report. Based on the analysis and interpretation the directors of the
entity actually take major business decisions which will definitely create impact on the future
business performance (Fisher 2018). The daily business activity must be considered at the
time of evaluating the overall business performance of the entity based on the long- or short-
term objectives of the business. The ratios of the company which is Car sales.com have been
depicted accordingly.
Efficiency Ratio
The efficiency ratio of the Car Sales has analyzed in order to understand the overall
business financial effectiveness of the business. The fundamental of the efficiency ratio
actually deals with the time period taken by the company to adjust the receivables and
payables.

3FINANCIAL ANALYSIS
Interpretation
As the company is a large organization based on its size, the average receivables
turnover ratio from the above computation is satisfactory. The standards of the receivable and
payables of the company actually varies between the 30 to 60 days. The credit policy which
is adopted by the company is quite accurate in that case. Higher receivable ratio indicates that
the company is able to pay off its debt quickly (Shoup 2017).
The payables turnover over the last fore year is satisfactory but in case of the year
2017 and 2018 which is 86.86 and 90.23 respectively. This means that based on the payables
policy of the company, management is taking time to meet the demand of the business. The
receivables and payables of the company actually acts simultaneously based on the policies
and procedure which is developed at the commencement of the organization (Gitman, Juchau
and Flanagan 2015).

4FINANCIAL ANALYSIS
Liquidity Ratio
The liquidity ratio of the company actually measures the working capital position of
the business in order to meet the say to day expenses in that case. The liquidity position of
Car Sales has been analyzed for the last four years of business operations.
Interpretation
Based on the standard of the current ratio of the company it can be said that till the
year 2017 the current ratio of the company is quite satisfactory. But in the year 2018 the
current ratio along with the quick ratio of the company has significantly dropped to 0.42 and
0.41 respectively. This situation actually specifies that the business of the company is
actually running out from the effective management in the working capital system of the
company. It generally falls under the core responsibilities of the company to take care about
the working capital of the company in order to ensure smooth flow in the business operations
without any disrupt (Morrell 2018).
Profitability Ratio
The profitability ratio of Car Sales.com has been analyzed along with the other factors
which are associated with it. Each and every organization actually tries to enhance the
profitability position of the entity whether it is based on short- or long-term business aspects.

5FINANCIAL ANALYSIS
Interpretation
The three parameters in this case have been discussed which are the return on asset,
net profit margin and return on equity of the organization based on the four years of business
evaluation. The net profit margin of the entity is highest in the financial year 2018 along with
the return on equity of the company. This means compared to the other three years, in the
year 2018 the company has created more return out of the business which is operated by the
company. But in the year 2018 the return on asset of the company was low which means that
there was ineffectiveness in the working capital management of the organization (Arcand,
Berkes and Panizza 2015).
The overall profitability situation of the Car Sales.com is quite satisfactory based on
the conducted evaluation of the annual report of the company. This kind of profitability
position of the company will entice possible stakeholders in the business in order to make the
potential investment in some of the significant projects which are associated with it.
Profitability position in the business will further help the organization to take the necessary
investment decision by analyzing viability of the project (Shareholder.carsales.com.au. 2019).

6FINANCIAL ANALYSIS
Conclusion
The significant conclusion which can be drawn from the above study is that the
overall financial position of Car Sales.com based on the online marketing strategy is quite
effective. The overall profitability position of the company based on the goals is
accomplished by the management system of the company accordingly which is further
reflected in while conducting the analysis of the business. The senior level management
needs to adopt some of the significant business decisions strategy for the purpose to enhance
overall financial performance of the entity.

7FINANCIAL ANALYSIS
References
Arcand, J.L., Berkes, E. and Panizza, U., 2015. Too much finance?. Journal of Economic
Growth, 20(2), pp.105-148.
Fisher, R.C., 2018. State and local public finance. Routledge.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson
Higher Education AU.
Morrell, P.S., 2018. Airline finance. Routledge.
Pilbeam, K., 2018. Finance & financial markets. Macmillan International Higher Education.
Shareholder.carsales.com.au. (2019). [online] Available at:
http://shareholder.carsales.com.au/FormBuilder/_Resource/_module/NwbnH0pKFk-
uPGxM7cmTrw/docs/reports/annual/Annual_Report_2018.pdf [Accessed 6 Oct. 2019].
Shoup, C., 2017. Public finance. Routledge.