Financial Statement Analysis Report: Adelaide Brighton Limited (2016)

This report provides a financial statement analysis of Adelaide Brighton Limited, focusing on the 2016 annual report. The analysis centers on the statement of cash flows, examining cash flow from investing and financing activities. The investing activities section highlights the company's spending on property, plant, and equipment (PPE) and payments of loans to joint venture entities, as well as cash inflows from the sale of PPE and loan repayments. The financing activities section reveals capital raised from the issue of shares, payments made to borrowings, and the payment of dividends to shareholders. The report concludes that Adelaide Brighton Limited has adopted appropriate investing and financing strategies, depending less on long-term borrowings and relying more on equity financing, which offers advantages such as reduced interest expenses and financial risk. The report also discusses the company's capital structure, emphasizing the greater proportion of share capital compared to term borrowings.

Running head: FINANCIAL STATEMENT ANALYSIS
Financial Statement Analysis
Name of the Student
Name of the University
Author’s Note

1FINANCIAL STATEMENT ANALYSIS
Answer to Question 1
Financial statement analysis is a major factor for the financial analysts and investors in
order to measure the financial performance of the companies as well as to know about their
financial health1. In the process of financial statement analysis, the analysis of cash flow of the
companies plays a crucial part as it provides the investors with the knowledge about the cash
inflow and outflow of the companies along with their reasons. In the 2016 annual report of
Adelaide Brighton Limited, the Statement of Cash Flows can be seen. In the cash flow statement
of every business organizations, two of the major activities are cash flow from investing
activities and cash flow from financing activities that play crucial part in determining the
financial position of the companies. Cash flow from investing activities shows the amount of
cash inflows and outflows due to various investing activities like loss or gain from investments,
purchase or buy of assets and others2.
Table: Cash Flow from Investing Activities
(Souce:3)
1 Zack, Gerard M. "Financial Statement Analysis." Financial Statement Fraud: Strategies for
Detection and Investigation(2013): 209-213.
2 Higgins, Robert C. Analysis for financial management. McGraw-Hill/Irwin, 2012.

2FINANCIAL STATEMENT ANALYSIS
As per 2016 cash flow statement of Adelaide Brighton Limited, the company spent
money for the payment of property, plant, equipment and intangibles. Another major head for
cash outflow in investing activities of Adelaide Brighton Limited is payments of loans to joint
venture entities. However, there are two heads in the investing activities of Adelaide Brighton
Limited where there is inflow of cash; they are sale from property, plant and equipment (PPE)
and income from repayment of loan. In this context, it needs to be mentioned that two of the
largest investing activities are payment for PPE that is $86.5 million and sales of PPE that is
$23.2 million4.
Table 2: Cash Flow from Financing Activities
(Source:5)
3 "Financial Statement 2016". Adbri.Com.Au/, 2017.
http://adbri.com.au/-/adbri/lib/pdfs/2016/reports/ABL%202016%20AR%20-%20Financials
%20FINAL.pdf.
4 "Financial Statement 2016". Adbri.Com.Au/, 2017.
http://adbri.com.au/-/adbri/lib/pdfs/2016/reports/ABL%202016%20AR%20-%20Financials
%20FINAL.pdf.
5 "Financial Statement 2016". Adbri.Com.Au/, 2017.
http://adbri.com.au/-/adbri/lib/pdfs/2016/reports/ABL%202016%20AR%20-%20Financials
%20FINAL.pdf.

3FINANCIAL STATEMENT ANALYSIS
Cash flow from financing activities shows companies raise capital from issue of shares.
From the 2016 cash flow statement of Adelaide Brighton Limited, it can be seen that the
company raised capital of $4 million from the issue of shares. On the other hand, Adelaide
Brighton Limited has also made payment of $21 million to its borrowings. However, the highest
item is of 178.5 million that is the payment of dividends to the shareholders. And the second
highest item is of $21 million that is payment of borrowings6.
From the above analysis, it can be said that Adelaide Brighton Limited has taken right
investing and financing strategies as per the current business environment. The above analysis
shows the fact that Adelaide Brighton limited depends less on the long term borrowings for
raising capital7. It is evident from the above analysis as the company has taken less amount of
loan in 2016. In addition, it can be seen hat Adelaide Brighton Limited has spent large amount
by providing dividends to their shareholders. It implies that the company depends largely on
equity financing for raising capital for their businesses. Thus, in the capital structure of Adelaide
Brighton Limited, the proportion of share capital is more than term borrowings. There are several
advantages of equity financing. First, it reduces the interest expenses of the company and it leads
to reduced financial risks. Second, the company has to pay dividends only in case of profits8.
6 "Financial Statement 2016". Adbri.Com.Au/, 2017.
http://adbri.com.au/-/adbri/lib/pdfs/2016/reports/ABL%202016%20AR%20-%20Financials
%20FINAL.pdf.
7 Maravas, Alexander, and John-Paris Pantouvakis. "Project cash flow analysis in the presence of
uncertainty in activity duration and cost." International Journal of Project Management 30, no. 3
(2012): 374-384.
8 Brown, Reilly. "Analysis of investments & management of portfolios." (2012).

4FINANCIAL STATEMENT ANALYSIS
Thus, it can be said that Adelaide Brighton Limited has adopted the correct investing and
financing strategy.

5FINANCIAL STATEMENT ANALYSIS
Bibliography
"Financial Statement 2016". Adbri.Com.Au/, 2017.
http://adbri.com.au/-/adbri/lib/pdfs/2016/reports/ABL%202016%20AR%20-%20Financials
%20FINAL.pdf.
Brown, Reilly. "Analysis of investments & management of portfolios." (2012).
Higgins, Robert C. Analysis for financial management. McGraw-Hill/Irwin, 2012.
Maravas, Alexander, and John-Paris Pantouvakis. "Project cash flow analysis in the presence of
uncertainty in activity duration and cost." International Journal of Project Management 30, no. 3
(2012): 374-384.
Zack, Gerard M. "Financial Statement Analysis." Financial Statement Fraud: Strategies for
Detection and Investigation(2013): 209-213.