University Financial Statement Analysis of API Report

This report presents a financial statement analysis of Australian Pharmaceutical Industries (API), exploring the factors influencing its performance. The analysis utilizes a PESTLE framework to examine political, economic, social, and technological factors impacting API's financial health. The report assesses API's performance over a three-year period (2014-2017), analyzing revenue, operating profit, net profit, and earnings per share. It considers industry-specific elements such as political stability, regulatory environments, economic conditions, and technological advancements. The report also references key financial metrics such as operating profit ratio and net profit, highlighting the impact of these factors on API's overall financial outcomes. The analysis aims to provide a comprehensive understanding of API's financial standing within the Australian pharmaceutical market.

Running head: FINANCIAL STATEMENT ANALYSIS
Financial Statement Analysis
Name of the Student:
Name of the University:
Authors Note:

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FINANCIAL STATEMENT ANALYSIS
Contents
Introduction:....................................................................................................................................2
Factors affecting the performance:..................................................................................................2
References:......................................................................................................................................6

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FINANCIAL STATEMENT ANALYSIS
Introduction:
Specific industry and its growth in a country depends on number of factors. The growth
in sales, net profit margin, net dividend pay-out ratio, asset turnover ratio, cost of debt and cost
of equity of Australian Pharmaceutical Industries (API) shall be dependent on number of
factors. These factors can be explained using PESTLE analysis.
Factors affecting the performance:
Political:
Political stability: The political stability in the country has certainly helped the pharmaceutical
industry as a whole to grow at a rapid pace. Despite the overall growth in pharmaceutical
industry in the country API has struggled to continue its business with profitability. Its operating
margin has deteriorated though net profit margin and its revenue have all improved each year
slightly (Paul, Yeates and Cadle, 2014).
Corruption level: The strict rules and regulations in health care service sector has ensured
minimum corruption in the sector. The lack of corruption the growth in sales of API has been
positive for number of years now.
Intellectual property protection: The intellectual property protection law in the country has also
helped API to improve its sales. As a result for growth in sales, the profit margin as well as the
dividend pay-out ratio have all have improved with passing of each year.
Regulations in pricing: Regulations in pricing specific to the services in Health Care industry has
played a major part in increasing the overall sales and PM of API (Moro Visconti, 2016).

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FINANCIAL STATEMENT ANALYSIS
Industrial safety regulations: Industrial safety regulations in the country has ensured that the API
gives utmost importance to safety requirements in the industry. The strict rules and regulations in
terms of safety requirements in the country have helped the existing players in Pharmaceutical
industry. The sales, PM, dividend pay-out ratio of API have all improved due to the ability of the
entity to adjust with the changing industrial safety regulations.
Trade regulations and tax legislations: The Corporations Act 2001 and the Income Tax
Assessment Act 1997 are the primary legislations governing the functions of a corporate and its
tax liabilities. These legislations have played significantly important part in ensuring orderly
development and progress of API (Ho, 2014).
Economic factors:
Types of economic system in operation: The country has a free and fair economy that allows
corporations to freely operate within the restrictions provided in appropriate legislations. API has
struggled in free economic condition to improve its operating parameters as much as it would
have liked.
Government intervention: Government intervention is significantly low in Healthcare Equipment
& services compared to other countries. API’s lack strategy to deal with government intervention
has played a major part in improving net profit margin, net dividend pay-out ratio of the entity.
Business cycle stage: API is in the prosperity stage of life cycle as a result the sales, NM, ATO,
are all increasing with passage of each year. The reduction in cost of debt and cost of equity is
also due to the improvement of the financial performance of the entity (Robinson et. al. 2015).
Interest rate: Australian Economy is one of the most successful economies in the whole world
where the economy has managed to keep its interest rates more or less within a range. This has

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FINANCIAL STATEMENT ANALYSIS
helped entities operating in the company irrespective of the industry to maintain a stable cost of
equity and debt.
Social factors:
Demographics: The demographics of the country has always been an enabler for any business. It
is not an exception even in the case of pharmaceutical industry in the Australia.
Ageing population: Ageing population of the country has played a major role in the overall
development of pharmaceutical industry in the country. API has utilized the opportunity of
ageing population by providing health care equipment services as required to the citizens of the
country. As a result the growth in sales, PM and dividend pay-out ratio have all improved
(Trotman and Carson, 2018).
Technological factors:
Technological developments: Ever improving technology and recent developments in the field
have played a major role in reducing the cost of operations of business. As a result cost of debt
and cost equity have all reduced significantly.
Improvement in the quality of product: Use of improved technology has improved the quality of
product and its usage. API has used technology to provide its customers with better quality
products and services. Growth in sales; improvement in profitability and efficiency in cost
reduction have become easier with use of advanced technology (Gregory, Matthew and Baguley,
2018).

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FINANCIAL STATEMENT ANALYSIS
A brief evaluation of the financial performance of API on the basis of comparative analysis of its
performance in last three years would be helpful in understanding how the above factors have
affected the performance of the entity (Al‐Hadi et. al. 2017).
The financial information accumulated about API over a period of three years, i.e. form 2014-15
to 2016-17 will clearly indicate the improvement in sales, net profit and earnings per share of the
entity.
2014-15 2015-16 2016-17
Revenue (In $' Billions) 3.46 3.84 4.06
Operating profit (In $' millions) (27.39) (26.84) (24.54)
Operating profit ratio (0.79) (0.70) (0.60)
Net profit (In $' millions) 43.13 51.67 52.37
EPS 0.09 0.11 0.01

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FINANCIAL STATEMENT ANALYSIS
References:
Al‐Hadi, A., Chatterjee, B., Yaftian, A., Taylor, G. and Monzur Hasan, M., 2017. Corporate
social responsibility performance, financial distress and firm life cycle: evidence from
Australia. Accounting & Finance.
Gregory, K.P., Matthew, S.M. and Baguley, J.A., 2018. Analysis of the costs of veterinary
education and factors associated with financial stress among veterinary students in
Australia. Australian veterinary journal, 96(1-2), pp.11-16.
Ho, J.K.K., 2014. Formulation of a systemic PEST analysis for strategic analysis. European
academic research, 2(5), pp.6478-6492.
Moro Visconti, R., 2016. Healthcare public-private partnerships in Italy: Assessing risk sharing
and governance issues with PESTLE and SWOT analysis.
Paul, D., Yeates, D. and Cadle, J. eds., 2014. Business analysis. British Computer Society.
Robinson, T.R., Henry, E., Pirie, W.L., Broihahn, M.A. and Cope, A.T., 2015. International
Financial Statement Analysis, (CFA Institute Investment Series). John Wiley & Sons. Available
at: https://books.google.co.in/books?
hl=en&lr=&id=o54cBgAAQBAJ&oi=fnd&pg=PR17&dq=Financial+statement+analysis+in+aus
tralia&ots=efQhHHaVOB&sig=g_QyU_8hS7uCwBmbGVCfkNMOKJc#v=onepage&q=Financi
al%20statement%20analysis%20in%20australia&f=false [Accessed on 6 October 2018]
Trotman, K. and Carson, E., 2018. Financial accounting: an integrated approach. Cengage AU.
Available at: https://books.google.co.in/books?
hl=en&lr=&id=yylvDwAAQBAJ&oi=fnd&pg=PA32&dq=Financial+statement+analysis+in+au

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stralia&ots=j06PG0YN0k&sig=5vr1Z7uv9XQYk7bCSbAl9FHHSJs#v=onepage&q=Financial
%20statement%20analysis%20in%20australia&f=false [Accessed on 6 October 2018]