HI5002 Finance: Comprehensive Financial Analysis of Mako Gold Limited

This report provides a comprehensive financial analysis of Mako Gold Limited, an exploration company focused on gold deposits. The analysis includes a review of the company's governance and ownership structure, performance ratio analysis (short-term solvency, long-term solvency, asset utilization, profitability, and market value), and share price movement in comparison to the All Ordinaries Index. It also covers announcements impacting share price, beta calculation using regression analysis, computation of the required rate of return using the CAPM method, and the weighted average cost of capital. The report further discusses the company's debt ratio, gearing ratio, and dividend policies, ultimately offering insights into the company's financial health and providing recommendations for potential investors. The analysis uses data from Mako Gold Limited's annual reports and other financial sources to assess the company's financial performance and future prospects.

RUNNING HEAD: Financial analysis of Mako Gold Limited
1
Name of the student
Topic- Financial analysis of Mako Gold Limited
University name

Table of Contents
Introduction...........................................................................................................................................3
1. Description of Mako Gold Limited............................................................................................3
2. Governance and Ownership structure............................................................................................4
3. Performance ratio analysis of Mako Gold Limited........................................................................5
Short term solvency ratio...................................................................................................................5
Proving the equation.........................................................................................................................7
Long term Solvency ratios.................................................................................................................7
Asset utilization.................................................................................................................................8
Profitability ratios..............................................................................................................................9
Market value ratios..........................................................................................................................11
4. Share price graph of the Mako Gold Limited...............................................................................12
4.1 Graph reflecting the share price movement of Mako Gold Limited and All ordinary share
price index.......................................................................................................................................12
4.2 The comparison between the Share price movement of Mako Gold Limited and share price
movement of all ordinary stock exchange.......................................................................................12
5. Announcements...........................................................................................................................14
6. Research via internet....................................................................................................................14
6.1 Beta calculation...................................................................................................................15
6.2 Computation of required rate of return by using CAPM method...............................................15
6.3 Determining the investment method (Conservative investment)................................................16
7. Computation of the weighted average cost of capital...................................................................16
7.1 Computed Cost of Capital through Capital Assets Pricing model........................................16
7.2 Implications that a higher WACC on investment decision........................................................17
8. Debt ratio consideration of Mako Gold Limited..........................................................................17
8.1 Stable Debt to equity ratio of company..........................................................................................17
8.2 Gearing ratio discussion.............................................................................................................18
9. Divided policies of company.......................................................................................................18
Letter of recommendation....................................................................................................................19
10. Conclusion...............................................................................................................................20
11. References...............................................................................................................................21
12. Appendix.................................................................................................................................23

Financial analysis of Mako Gold Limited 3
Introduction
There are several financial tools which could be used by the management of the Mako
Gold Limited to implement the effective strategic program. Ratio analysis, top-down
analysis, bottom-up analysis and Du Pont analysis are the some of the financial tools which
could be used by investors and management to make the effective financial planning. The
ratio analysis and CAPM methods are used to evaluate the capital structure and financial
performance of the company. In this report, financial analysis of Mako Gold Limited has
been taken into consideration to identify the future performance of the company.
.
1. Description of Mako Gold Limited
The Mako Gold Limited is an exploration company focussed on the discovery of large high-
grade hold deposit under-explored terrains working in the several countries This Company has
been undertaking several gold projects which are mainly mineralised terrains business around the
globe (Mako Gold Limited. 2018).

2. Governance and Ownership structure
The CEO of the company is M Elliott who takes all the imperative decisions in an effective
manner. Mako Gold Limited established harmonization in its reporting frameworks by complying
with the IFRS rules and regulations.
The governance structure of Mako Gold Limited is accompanied by the following key
managerial person who takes all the imperative decisions.
It Is evaluated that the Mark Elliott who is the executive directs holds 8,666,667 shares, Peter
Ledwidge, Executive directors holds 18,333,433 shares and independent directors Michele Muscillo
holds 500,000 shares in the company (Yahoo Finance, 2017).
Shareholder details of the company
Source: Mako Gold Limited, 2017).

Financial analysis of Mako Gold Limited 5
3. Performance ratio analysis of Mako Gold Limited
By using the ratio analysis, financial performance and trend of Mako Gold Limited could be
analyzed (Mako Gold Limited, 2015).
Short-term solvency ratio
1. Current ratio
The current ratio of Mako Gold Limited has increased the drastic rate which divulges that
company has invested more capital in its current Assets (Mako Gold Limited, 2017).
Liquidity ratio Years
2017 2016
Current ratio 3.8 .10
Quick ratio 3.5 .08
Interpretation
The Mako Gold Limited has increased its current ratio to 3.8 points in 2017 which is 3 points
higher as compared to last year data. It has increased its current ratio with a view to meet its
future liabilities.
Quick ratio
The quick ratio of Mako Gold Limited has also increased to .08 which reveals company’s
investment in its current assets other than inventory. The quick ratio shows company’s
immediate ability to pay off its short term and long term debts from its current assets except
for inventory.

Proving the equation
Providing equation 2016 2017
Net profit After tax/OE
-
0.5157 -0.917238987
EBIT/TA*NPAT/EBIT*TA/
OE
-
0.5157 -0.917238987
.
Long term Solvency ratios
Debt to equity
The debt to equity ratio reveals the debt to equity capital structure of the company. It
is observed that the debt to equity of company was showing the negative results in 2016.
Company maintained an impartible debt to equity ratio in 2016 which went down to 17% in
2017. This reveals that company increased its equity portion by issuing more capital in the
market.
Computation of debt to equity of Company
3. Debt Ratio
2017 2016
A. Total Liabilities 1,34,348 28830
B. Total assets 7,77,724 2,486.00
(A/B) 17% 1160%
Interpretation
The debt to equity of company has been reduced to 17 % which shows that Mako
Gold Limited increased its debt portion and equity portion and maintained 17% debt to equity
ratio.
Gearing ratio discussion
The gearing ratio of Mako Gold Limited shows its ability to pay off its interest
payment out of the earning available. After analysing the annual report, it could be inferred
that Mako Gold Limited has negative earnings in its business. However, the interest payment
of company is also zero which shows no gearing risk in business (Mako Gold Limited, 2017).

Financial analysis of Mako Gold Limited 7
Gearing Ratio
2016 2017
Gearing Ratio 0% 0%
This ratio is zero as the company has no interest payment in its business.
Asset utilization
1. Inventory turnover ratio
It is observed that Mako Gold Limited has not been keeping the inventory in its business.
Therefore, there would be no efficiency to reduce the cash blockage in its inventory assets.
Efficiency ratio Years
2017 2016
Inventory turnover ratio 0 0
Asset turnover ratio 0.120 2.10
Receivable turnover ratio 4.13 0
Days' sales in inventory 0 0
Days' sales in receivables 0 0
(Mako Gold Limited, 2017)

2. Assets turnover ratio
The asset turnover ratio of Mako Gold Limited reflects its ability to earn money from its
deployed assets. Mako Gold Limited is having a negative profit which shows that it has Assets
turnover in 2016. However, in 2017, it had 101 times asset turnover ratio.
3. Debtor turnover ratio
The debtor turnover ratio should be higher if a company want to maintain effective business.
The debtor turnover is 4.13 times which is very less. The debtor turnover ratio of Mako Gold
Limited should be higher if a company want to block less capital in its business. However,
the company has already kept its cost of capital by keeping the high debt portion and less cost
of capital. All of the capital funding of the business is private funding.
Profitability ratios
The profitability ratio divulges Mako Gold Limited’s ability to earn a profit on its investment.
Return on assets
1. The rate of Return on Assets
2017 2016
A. Net income -69,280 -26,444
B. Total assets 7,77,724 2,486
(A/B) -9% -1064%
Interpretation
The return on total Assets of the company has been showing negative results which reflects
that company has destructed the business assets and failed to use it efficiently. With the
increased profitability, the company will have good and effective sustainable future.
Return on Equity
Return on Equity
2017 2016

Financial analysis of Mako Gold Limited 9
A. Net income available to equity
shareholders. -69,280 -26,444
B. Shareholder’s Equity 1,34,348 28,830.00
(A/B) -52% -92%
Interpretation of the data
It is the amount of return available to equity shareholders. It is observed that Mako Gold
Limited has shown the negative % of its earning which is available to shareholders. The company
has destructed the value of an investment which will negatively impact the business sustainability of
the Mako Gold Limited.

Market value ratios
1. Earnings per share
The earning per share is the amount of earning available for the equity shareholders.
Market Value ratios Years
2017 2016
Earnings per share 0` 0
P/E ratio - -
Dividend payout
ratio - -
There is no market value of the company has company has been facing high destruction in its
business.
Price to earnings ratio
The price to earnings ratio of the company has been negative which reflects the negative
indicator for the future growth.
Dividend payment ratio
The dividend payment ratio shows that company has negative business output and failed to
pay a dividend since last five years.

Financial analysis of Mako Gold Limited 11
4. Share price graph of the Mako Gold Limited
4.1 A graph reflecting the share price movement of Mako Gold Limited and All
ordinary share price index
4/1/2016
6/1/2016
8/1/2016
10/1/2016
12/1/2016
2/1/2017
4/1/2017
6/1/2017
8/1/2017
10/1/2017
12/1/2017
2/1/2018
4/1/2018
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
0.2
0.25
Mako Gold Limited (MKG.AX)
Mako Gold Limited
(MKG.AX)
(Yahoo Finance, 2017)

4.2 The comparison between the Share price movement of Mako Gold Limited and
share price movement of all ordinary stock exchange
6/1/2016
8/1/2016
10/1/2016
12/1/2016
2/1/2017
4/1/2017
6/1/2017
8/1/2017
10/1/2017
12/1/2017
2/1/2018
4/1/2018
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
0.2
0.25
-1.00
-0.50
-
0.50
1.00
1.50
2.00
2.50
Average Return
Mako Gold Limited (MKG.AX) 0.21 0.185
Average Return
(Yahoo finance, 2017)
Introduction
The above graph shows that company has increased its share price since last two
years. However, there is a loss of its business which reflects that company will have to face
liquidation or winding soon if it does not maintain its business.
Analysis
In 2017, Mako Gold Limited had good increment and maintained stable business
output (Badenhorst, and Ferreira, 2016). If Company failed to lower down its cost of capital
then it will result to destruction of business in long run.
Conclusion
After analysing all the information, it could be inferred that Mako Company need to lower
down its debt portion and increase its overall profitability throughout the time.

Financial analysis of Mako Gold Limited 13
5. Announcements
These are the announcement which has positively and negatively impacted the share price
movement of Mako Gold Limited (Morningstar, 2018).
The company has maintained a stable debt to equity ratio by increasing the equity portion of
its business.
The strategic alliance has been showing the positive results for the business growth of the
Mako Gold Limited in long run.
The market factors and adoption of the advanced technologies will positively impact the
share price movement of Mako Gold Limited throughout the time.
The positive return on capital employed and strategic planning of the Mako Gold Limited
will create an effective shield for the business loss of organization.
6. Research via internet
Stock information and Beta calculation
The beta is calculated by using the excel and reversion analysis (Mako Gold Limited. (2015).
SUMMARY OUTPUT
Regression
Statistics
Multiple R
0.0657403
3
R Square
0.0043217
9
Adjusted R
Square
-
0.0409363
Standard Error
0.0240766
4
Observations 24
ANOVA

d
f SS MS F Significance F
Regres
sion 1 5.53553E-05
5.53553E-
05
0.09549
2 0.760215
Residu
al
2
2
0.01275306
6
0.0005796
85
Total
2
3
0.01280842
1
Coefficie
nts
Standard
Error t Stat
P-
value
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercept
0.00933
5838
0.004924
553
1.895773
49
0.0712
03
-
0.0008
8
0.0195
49
-
0.00088
0.01954
9
X Variable 1
0.00238
2571
0.007710
137
0.309017
973
0.7602
15
-
0.0136
1
0.0183
72
-
0.01361
0.01837
2
Source: Morningstar, 2018
6.1 Beta calculation
The beta of the company is computed by using the regression analysis between share price
movement of the all ordinary index and share price of Mako Gold Limited (Mako Gold
Limited, 2017).
6.2 Computation of required rate of return by using CAPM method
E(R) = Rf +( β∗R p)
E(R) = expected Amount of rate of return
Rf = Risk free % rate of return
β = Computed Beta
Rp= Market premium risk factor (Mako Gold Limited, 2017).
Calculation of Required rate of return of Mako Gold Limited
Risk-free rate (A) 4%
Beta (B) 0.002382571
Market Risk premium (C) 6%
Required rate of return [A+(B*C)] 4.01%
(Please see the excel)

Financial analysis of Mako Gold Limited 15
Notes- RF risk-free rate of return, computed by using the return available on the 10-year
treasury bonds.
6.3 Determining the investment method (Conservative investment)
The investment option or method used by Mako Gold Limited is based on the opportunity
available in the market for the investors and investment decisions of the company.
After analysing the annual report of Mako Gold Limited, it could be inferred that company
has not been following conservative investment method.
It has made an investment in its research and development department by investing AUD
# 24 million capitals for the better expansion of its business. Nonetheless, due to the sluggish
market Condition Company had to stop its investment in its operating activities. The
company raised capital by using the private funding to lower down its financial leverage.
7. Computation of the weighted average cost of capital
7.1 Computed Cost of Capital through Capital Assets Pricing model
Cost of capital= KE= 4.37%
CAPM method is being used to compute the cost of equity of the company.
Cost of debt- 1.93%
The cost of debt is determined by using the cost of interest payment and debt funding.
WACC = cost of debt* portion of the debt capital+ cost of Equity * portion of the Cost of
equity (Morningstar, 2018).
WACC
Capital
Amount
Cost of
capital
% of
portion WACC
Equity 28,830 4.01% 50% 2.01%
Debt 28,830 0.00% 50% 0.00%
Total
capital 57,660 WACC 2.01%
After analysing all the details, it could be inferred that the weighted average cost of
capital of the company is 2.01% which is too low. It will assist the company to increase its
overall outcomes and assist it to accept as many projects as it could.

7.2 Implications that a higher WACC on investment decision
The weighted average cost of capital of Mako Gold Limited is very low which shows
that company could accept more projects which will eventually increase the overall return on
capital employed. It is analyzed that if Mako Gold Limited will have higher WACC then it
will negatively impact the company either in terms of return on capital employed and
financial leverage. The higher WACC of the company will charge the higher cost of capital
on business which will eventually increase the overall financial risk and result in the
destruction of business if the company failed to earn a profit. It will also restrict company to
create value on its investment by accepting more investment projects the lower WACC is the
positive indication for the future growth and sustainable business or the organization. In case
if Mako Gold Limited has higher WACC then it will negatively impact the sustainable future
of the company (Mako Gold Limited, 2017).
8. Debt ratio consideration of Mako Gold Limited
8.1 Stable Debt to equity ratio of the company
The debt to equity of Mako Gold Limited was totally unimaginable which reflects the
negative indicator for the future growth of the business. It is observed that debt to equity ratio
reveals the debt to equity capital structure of the company. It is observed that the debt to
equity company reflected highly negative results in 2016. Company maintained an impartible
debt to equity ratio in 2016 which went down to 17% in 2017. This reveals that company
increased its equity portion by issuing more capital in the market (Crazier, et al. 2015).
Computation of debt to equity of Company
3. Debt Ratio
2017 2016
A. Total Liabilities 1,34,348 28830
B. Total assets 7,77,724 2,486.00
(A/B) 17% 1160%
Interpretation
The debt to equity of company has been reduced to 17 % which shows that Mako
Gold Limited increased its debt portion and equity portion and maintained 17% debt to equity
ratio.

Financial analysis of Mako Gold Limited 17
8.2 Gearing ratio discussion
The gearing ratio of Mako Gold Limited divulges its ability to pay off its interest
payment out of the earning available. The gearing ratio of this company impracticable to
compute as Mako Gold Limited is having negative earnings in its business. However, the
interest payment of company is also zero which shows no gearing risk in business (Mako
Gold Limited, 2017).
Gearing Ratio
2016 2017
Gearing Ratio 0% 0%
This ratio is zero as the company has no interest payment in its business
9. Divided policies of the company
The dividend policy of Mako Gold Limited is profit based dividend policy. However,
since last two years, Mako Gold Limited has not issued a dividend to its shareholders which
may negatively impact its business. The dividend is the amount of return given to
shareholders as an additional benefit for their long term benefit plan. The profit-based
dividend policy is the mostly adopted policy which assists listed company to establish eh
nexus between the organization developments with the stakeholder’s growth in the long run.
However, the company needs to focus on creating value on the investment by using the
proper work program and effective work functions it is the right time when Mako Gold
Limited needs to change its dividend policy to attract more shareholders for the capital
investment (Dahir, Mahat, and Ali, 2018).

Letter of recommendation
To,
Directors of Mako Gold Limited
Address:-
With the ramified changes in the economic factor, Mako Gold Limited has also faced
several challenges and used the opportunities to create value on its investment. The main
positive factors which have impacted the share price movement of the Mako Gold Limited is
related to reduced financial leverage and increased profitability in 2017. It is analyzed that if
directors want to maintain sustainable future then firstly they will have to analysis that
company has not been using its capital effectively. There is zero amount of inventory
turnover which has negatively impact the business efficiency. In addition to this, the
company has also faced high financial leverage which has been compensated by the
management and directors by increasing the capital portion. In 2017, debt to the equity
portion of the company has been 17% which reflects the positive indicator throughout the
time. It is analyzed that share price trend of the company is also increased since last two year
which might be used as a positive indicator of the survival of the business. The directors of
Mako Gold Limited need to take strategic decisions to win over the market as the company
has to run its business in this tough competition (Ballas, Skoutela, and Tzovas, 2010). Using
of the strategic alliance, effective strategic planning and proper financial tools are the keys to
the success of Mako Gold Limited. Now, in the end, it could be inferred that directors need
to focus on increasing the overall turnover and maintain the low financial leverage. The lower
WACC is the positive indication for the future growth and sustainable business or
organization (Brigham, and Ehrhardt, 2013).

Financial analysis of Mako Gold Limited 19
10. Conclusion
After analysing all the detail shown in the annual report of Mako Gold Limited, it could
be inferred that company has been using the effective financial planning to maintain its
business stable. As compared to last year data, the company has planned to manage its debt
portion by increasing its equity capital business. The negative net profit of company has also
converted to the positive results in 2017 which reflects the positive indicator for the
sustainable future and effective growth of the business. There are several other factors which
have pointed out that company will survive in future. If investors want to invest their capital
in Mako Gold Limited then they are advised to invest their capital in long run. If they invest
their capital for short run then they will have to high loss in their investment. Now, in the
end, it could be inferred that with the less financial leverage and high profitability chances
company will surely create value on its investment in the long run.

11. References
Badenhorst, W.M. and Ferreira, P.H., 2016. The Financial Crisis and the Value‐relevance of
Recognised Deferred Tax Assets. Australian Accounting Review, 26(3), pp.291-300.
Ballas, A.A., Skoutela, D. and Tzovas, C.A., 2010. The relevance of IFRS to an emerging
market: evidence from Greece. Managerial Finance, 36(11), pp.931-948.
Brigham, E.F. and Ehrhardt, M.C., 2013. Financial management: Theory & practice.
Cengage Learning.
Cazier, R., Rego, S., Tian, X. and Wilson, R., 2015. The impact of increased disclosure
requirements and the standardization of accounting practices on earnings management
through the reserve for income taxes. Review of Accounting Studies, 20(1), pp.436-469.
Dahir, A.M., Mahat, F.B. and Ali, N.A.B., 2018. Funding liquidity risk and bank risk-taking
in BRICS countries: An application of system GMM approach. International Journal of
Emerging Markets, 13(1), pp.231-248.
Mako Gold Limited (2015). Annual report. Available at https://www.Mako Gold
Limited.com/latest-annual-report/. Accessed on 22nd May 2018
Mako Gold Limited. (2016). Annual report. Available at https://www.Mako Gold
Limited.com/latest-annual-report/. Accessed on 22nd April 2018
Mako Gold Limited. (2017). Annual report. Available at https://www.Mako Gold
Limited.com/latest-annual-report/. Accessed on 22nd May 2018
Morningstar, 2018 retrieved, Available at http://www.morningstar.com/funds.html/ Accessed
on 22nd May 2018
Yahoo finance, 2018 Available at https://in.finance.yahoo.com/ Accessed on 22nd May 2018

Financial analysis of Mako Gold Limited 21

12. Appendix
WACC
Capital
Amount
Cost of
capital
% of
portion WACC
Equity 28,830 4.01% 50% 2.01%
Debt 28,830 0.00% 50% 0.00%
Total
capital 57,660 WACC 2.01%
Date
Adj
Close
Mako Gold Limited
(MKG.AX)
Adj Close (All ordinary
share index)
Average
Return
30-04-
2016 0.210 null
31-05-
2016 0.185 4947.899902
30-06-
2016 0.185 - 5151.799805 0.04
31-07-
2016 0.168
-
0.09 5316 0.03
31-08-
2016 0.156
-
0.07 5447.799805 0.02
30-09-
2016 0.143
-
0.08 5310.399902
-
0.03
31-10-
2016 0.131
-
0.09 5644 0.06
30-11-
2016 0.118
-
0.10 5529.399902
-
0.02
31-12-
2016 0.106
-
0.11 5525.200195
-
0.00
31-01-
2017 0.093
-
0.12 5402.399902
-
0.02
28-02-
2017 0.081
-
0.13 5502.399902 0.02
31-03-
2017 0.068
-
0.15 5719.100098 0.04
30-04-
2017 0.056
-
0.18 5675
-
0.01
31-05-
2017 0.043
-
0.22 5761 0.02
30-06-
2017 0.031
-
0.29 5903.799805 0.02
31-07-
2017 0.018
-
0.41 5947.600098 0.01
31-08-
2017 0.006
-
0.68 5761.299805
-
0.03

Financial analysis of Mako Gold Limited 23
30-09-
2017 -0.007
-
2.14 5764 0.00
31-10-
2017 -0.019 1.88 5773.899902 0.00
30-11-
2017 -0.032 0.65 5776.299805 0.00
31-12-
2017 -0.044 0.39 5744.899902
-
0.01
31-01-
2018 -0.057 0.28 5976.399902 0.04
28-02-
2018 -0.069 0.22 6057.200195 0.01
31-03-
2018 -0.082 0.18 6167.299805 0.02
30-04-
2018 -0.094 0.15 6130.399902
-
0.01
23-05-
2018 -0.107 0.13 6131.399902 0.00