Financial Performance Analysis of G8 Education Limited (ACC100)

This report provides a comprehensive ratio analysis of G8 Education Limited, an ASX-listed childcare company, evaluating its financial performance based on the 2018 annual report. The analysis includes profitability ratios such as return on equity, return on assets, gross profit margin, and net profit margin, revealing a strong profitability but not showing a good mark. Liquidity ratios, including current ratio, quick ratio, and cash flow ratio, indicate a poor short-term solvency and liquidity crisis. The report concludes that while G8 Education Limited demonstrates efficient financial and operational performance with revenue growth, it should focus on improving profitability and liquidity by managing resources more efficiently to maximize shareholder wealth. The report references the 2018 annual report and other relevant sources.

G 8 E D U C AT I O N
L I M I T E D
RAT I O A N A LY S I S
P R I N C I P L E S O F A C C O U N T I N G

INTRODUCTION
• Financial statements are prepared for the financial information users
to provide them meaningful information about the financial
performance and financial position of the company. It is not easy for
all the information users to understand the financial performance
and position of the business from the financial statement without
having proper knowledge. Therefore, various financial statement
analysis tools and techniques can be applied to analyses and
interpreted the information contained in the financial statement to
help the stakeholders in their various decision making process.

BRIEF OVERVIEW TO THE
COMPANY
• G8 Education Limited is an ASX listed largest Australian child care
company. Its main operating activity is to provide educational services
and high quality child care services. The company is oriented towards a
sustainable growth and improvement in the quality of their educational
and child care services.
• The company is listed in the Australian Stock Exchange with a present
market capitalization of $911.15 million. The company has been
performing very well for the last few years and a sharp growth in their
revenue can be observed along with a growth in the net income.

PROFITABILITY RATIOS
• The company can be computed to 8.17%. It implies a
significant profitability of the company which is helping the
objective of shareholders wealth maximization.
• The company is having a return on assets of 5.36% which is
satisfactory but not showing a good mark.
• G8 Education Limited is having a gross profit margin of
12.08%.
• The G8 Education Limited is having a net profit margin of
8.37% for the year 2018.
• the company is having a cash flow to sales ratio of 12.35%. It
implies, though they are having a significantly lower net profit
margin, the cash generation is well enough to pay off their
expenses and finance costs.

LIQUIDITY RATIOS
• The company is having a current ratio of 0.30:1 while the standard is
2:1. Hence, the company is having a poor solvency in terms of
current ratio.
• The company is having a quick ratio of 0.30:1, while the standard is
1:1. Hence, the company is having liquidity crisis which they need to
consider and focus on.
• The company is having a cash flow ratio of 0.27:1. It implies that,
their cash generation in a year is not sufficient to pay off all of their
current obligation

CONCLUSION
• From the above analysis and discussion it can be concluded that,
the G8 Education Limited is having an efficient financial and
operational performance for the last few years and a sustainable
growth in their revenue can be observed but they are having a
poor profitability.
• As the company is having a lower net profit margin and a poor
overall short term solvency, it can be recommended that they
focus on managing their resources more efficiently to increase the
profitability and liquidity of the company which can help them in
achieving the objective of the shareholders wealth maximization.

REFERENCES
• G8 Education Annual Report 2018, 2018 [ebook] Australia: G8 Education Limited,
p.122. Available at:
http://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_GEM_2018.pdf
[Accessed 15 Jan. 2020].
• G8 Education, 2020. Home - G8 Education. [online] Available at:
https://g8education.edu.au/ [Accessed 15 Jan. 2020].Buvaneswari, R. and Lakshmi, S.,
2015. A study on financial statement analysis of Sri Ram perfumes, Trichy.
International Journal of Advanced Research in.
• Robinson, T.R., 2020. International financial statement analysis. John Wiley & Sons.
• Wahlen, J.M., Baginski, S.P. and Bradshaw, M., 2014. Financial reporting, financial
statement analysis and valuation. Nelson Education.

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