HI5002 Finance for Business: Financial Performance Analysis Report

This report presents a comprehensive financial analysis of two ASX-listed companies, ITL Health Group Limited (ITD) and Impedimed Limited (IPD), for the HI5002 Finance for Business course. The analysis includes an examination of their operations, competitive advantages, and a detailed compari...Read More

HI5002: Finance for Business
Name of the Student
Name of the University

Table of Contents
Introduction................................................................................................................................4
Operation and Competitive Advantages....................................................................................4
[a] ITL Health Group Limited [ITD].....................................................................................4
[b] Impedimed Limited [IPD]................................................................................................5
Comparison of ratios..................................................................................................................6
[a] Liquidity Ratios................................................................................................................6
Current Ratio......................................................................................................................6
Quick Ratio........................................................................................................................7
[b] Profitability Ratios............................................................................................................9
Gross Profit Margin............................................................................................................9
Net Profit Margin.............................................................................................................10
[c] Capital Structure Ratios..................................................................................................11
Debt to Equity Ratio.........................................................................................................11
Monthly share price movements..............................................................................................12
Factors influence share prices..................................................................................................13
Beta and expected rate of return...............................................................................................14
[a] Beta.................................................................................................................................14
[b] Rate of return..................................................................................................................14
Dividend Policies.....................................................................................................................15
Recommendation letter............................................................................................................16

References................................................................................................................................18

Introduction
Financial statements are the only source of information from which investor can get
necessary information to decide further investment. These different gatherings are keen on
the advancement, position and prospects of such element in different ways. Be that as it may,
these announcements howsoever, accurately and unbiasedly arranged, independent from
anyone else don't uncover the criticalness, which means and relationship of the data contained
in that. For this reason, money related articulations must be deliberately examined,
impartially dissected and insightfully translated.
This empowers a measure of the prospects for future profit, capacity to pay intrigue,
obligation developments both present and in addition long haul, and likelihood of sound
budgetary and profit arrangements. In this manner, investigation of monetary proclamations
alludes to the treatment of data contained in the money related explanation in a path in order
to manage the cost of a full conclusion of the productivity and budgetary position of the firm
concerned. The way toward dissecting money related explanations includes the modifying,
looking at and estimating the hugeness of monetary and working information. Such a stage
uncovers the relative hugeness and impact of things of the information in connection to the
day and age as well as between two associations.
Operation and Competitive Advantages
[a] ITL Health Group Limited [ITD]
ITL Health Group Limited [ITD] is performing in a large number of systems consistently,
their items and arrangements proactively advance industry benchmarks for wellbeing and
viability with wide cross-capacity for different markets. The association is built for

unwavering quality and intended for effortlessness; their course-graphing items are routinely
refined and tried to meet the stringent needs of a consistently developing client encounter. In
ITD, working environment security is their most extreme need, exhibited by shut circled
frameworks that lessen hazard and enhance results (Revelli & Viviani, 2015). The
association's worldwide organizations are the impetus for advancement over the medicinal
services range. The organisation is now joined with therapeutic device organizations, blood
item suppliers, lab testing and supply firms, clinics, medicinal services frameworks, inquire
about associations and colleges, creature human services suppliers, and government
associations, to reinforce supply chains and increment venture wide an incentive with
specially craft, assembling, and get together administrations.
[b] Impedimed Limited [IPD]
ImpediMed creates bioimpedance gadgets with an attention on restorative applications in the
liquid status zone. Essential to this is the L-Dex U400 which estimates extracellular liquid
contrasts in the appendages for one-sided lymphedema. The organization is spearheading the
utilization of cutting edge bioimpedance innovation in BIS (Bioimpedance Spectroscopy).
BIS is the best quality level in bioimpedance. Copy ImpediMed's items are extraordinary in
the watches field of BIS. They examine the full recurrence go from 3kHz to 1000kHz taking
readings from 256 focuses to make them the most exact bioimpedance gadgets accessible.
In BIS, ImpediMed has created gadgets which are the most exact and clinically helpful in this
field. Duplicate ImpediMed is regarded in the BIS field for the solid logical establishment of
its way to deal with BIS. ISO13485: ImpediMed's items are planned and produced to an ISO
13485 Medical Devices Quality System. ImpediMed's administration group incorporates
officials who have worldwide involvement in effectively acquainting inventive restorative

items with worldwide markets, with a reputation in conveying development and piece of the
overall industry to make financial specialist esteem.
The association is dynamic and proficient and has been developed starting from the earliest
stage a solid group of energetic and devoted senior directors, scientists and workers. The
organization is on an emotional development way with the solid interest for its exceptional
item contributions, and offers energizing profession openings.
Comparison of ratios
[a] Liquidity Ratios
Current Ratio
The current ratio enables financial specialists and banks to comprehend the liquidity of an
organization and how effectively that organization will have the capacity to satisfy its present
liabilities. This ratio communicates a company's present obligation as far as present
resources. So a present proportion of 11.8 in case of IPD would imply that the organization
has 11.8 times more present resources than current liabilities. A higher current proportion is
in every case more good than a lower current proportion since it demonstrates the
organization can all the more effectively make current obligation instalments (Brigham et al.
2016). On the off chance that an organization needs to offer of settled advantages for pay for
its current liabilities, this for the most part implies the organization isn't making enough from
tasks to help exercises. As such, the organization is losing cash. Now and again this is the
after-effect of poor accumulations of records receivable. The present proportion likewise
reveals insight into the general obligation weight of the organization. On the off chance that
an organization is weighted down with a present obligation, its income will endure (Grant,
2016). It has seen that the current ratio of ITD over the time frame 2014-2015 to 2016-2017

remained around 2, when the same for IPD was around 11. However, one significant aspect
has been noted over here that during 2015-2016, both the organisation experienced opposite
performance.
Current Ratio 2014-2015 2015-2016 2016-2017
ITD Current Assets 12449000 13033000 14252000
Current Liabilities 6178000 7140000 7113000
Current Ratio 2.0150534 1.8253501 2.0036553
IPD Current Assets 35118000 87649000 61255000
Current Liabilities 2976000 5201000 5469000
Current Ratio 11.800403 16.852336 11.200402
ITD IPD
0
2
4
6
8
10
12
14
16
18
Current Ratio
2014-2015 2015-2016 2016-2017
Quick Ratio
The quick ratio or acid test ratio estimates the liquidity of an organization by demonstrating
its capacity to satisfy its present liabilities with snappy resources. On the off chance that a
firm has enough brisk advantages for cover its aggregate current liabilities, the firm will have
the capacity to satisfy its commitments without auctioning off any long haul or capital
resources (Minnis, & Sutherland, 2017). Since most organizations utilize their long haul
advantages for create incomes, auctioning off these capital resources won't just hurt the

organization it will likewise indicate speculators that present activities aren't making enough
benefits to satisfy current liabilities (Weygandt et al. 2015). Higher fast proportions are more
good for organizations since it appears there are more brisk resources than current liabilities.
An organization with a snappy proportion of 1 demonstrates that speedy resources meet
current resources. This likewise demonstrates the organization could satisfy its present
liabilities without offering any long haul resources. A quick ratio of 1 for ITD and around 10
for IPD is demonstrating that both the organizations have sufficient number of fast resources
than current liabilities. Clearly, as the proportion increments, so does the liquidity of the
organization (Wahlen, Baginski, & Bradshaw, 2014). More resources will be effectively
changed over into money if require be. This is a decent sign for financial specialists, however
a far and away superior sign to loan bosses since leasers need to know they will be paid back
on time.
Quick Ratio 2014-2015 2015-2016 2016-2017
ITD Quick Assets 6804000 6351000 8066000
Current Liabilities 6178000 7140000 7113000
Quick Ratio 1.1013273 0.8894958 1.13398
IPD Quick Assets 34980000 86271000 59790000
Current Liabilities 2976000 5201000 5469000
Quick Ratio 11.754032 16.587387 10.932529

ITD IPD
0
2
4
6
8
10
12
14
16
18
Quick Ratio
2014-2015 2015-2016 2016-2017
[b] Profitability Ratios
Gross Profit Margin
Gross Profit Margin is a gainfulness proportion that estimates how productive an organization
can offer its stock. It just bodes well that higher proportions are greater. Higher proportions
mean the organization is offering their stock at a higher benefit rate. High proportions can
regularly be accomplished by two different ways. One route is to purchase stock extremely
shabby. In the event that retailers can get a major buy rebate when they purchase their stock
from the maker or distributer, their gross edge will be higher on the grounds that their
expenses are down. The second way retailers can accomplish a high proportion is by denoting
their products up higher (Brigham et al. 2016). This clearly must be done intensely generally
merchandise will be excessively costly and clients will shop somewhere else. An
organization with high gross edge proportions imply that the organization will have more
cash to pay working costs like compensations, utilities, and lease. Since this proportion
estimates the benefits from offering stock, it likewise measures the level of offers that can be
utilized to help support different parts of the business. Here is another awesome clarification.
Gross Profit Ratio 2014-2015 2015-2016 2016-2017

IT
D
Gross Profit 11523000 11200000 15852000
Net Sales 28330000 31083000 34774000
Gross Profit Margin 0.406742 0.3603256 0.4558578
IPD Gross Profit 3603000 4364000 4644000
Net Sales 4927000 5947000 6133000
Gross Profit Margin 0.7312766 0.7338154 0.7572151
ITD IPD
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Gross Profit Margin
2014-2015 2015-2016 2016-2017
Net Profit Margin
Speculators and examiners commonly utilize net edge to check how effectively an
organization is overseen and conjecture future gainfulness in view of administration's
business gauges. By contrasting net pay with add up to deals, financial specialists can
perceive what level of incomes goes to paying working and non-working costs and what rate
is left over to pay investors or reinvest in the organization (Grant, 2016). A higher net profit
margin is in every case superior to a lower net profit margin since it implies that the
organization can decipher a greater amount of its deals into benefits toward the finish of the
period. It is mainly the reason that net profit margin change radically among enterprises and
simply end up one industry has a lower normal edge than another doesn't imply that it is less

beneficial. Enterprises, such as retailing, may have a lower normal net profit margin than
different ventures, however they compensate for it in sheer volume of offers making them
more beneficial in complete dollars.
Net Profit Margin 2014-2015 2015-2016 2016-2017
ITD Net Profit 2121000 344000 3429000
Net Saes 28330000 31083000 34774000
Net Profit Margin 0.0748676 0.0110671 0.0986082
IPD Net Profit -14797000 -25980000 -27571000
Net Saes 4927000 5947000 6133000
Net Profit Margin -3.003247 -4.368589 -4.495516
ITD IPD
-5
-4
-3
-2
-1
0
1
Net Profit Margin
2014-2015 2015-2016 2016-2017
[c] Capital Structure Ratios
Debt to Equity Ratio
A debt to equity ratio of 1 would imply that financial specialists and leasers have an
equivalent stake in the business resources. A lower obligation to value proportion for the
most part infers an all the more monetarily stable business (Gallo, Hann & Li, 2016).
Organizations with a higher debt to equity proportion are viewed as more unsafe to banks and
speculators than organizations with a lower proportion. Not at all like value financing, debt
must be reimbursed to the bank. Since debt financing likewise requires obligation

overhauling or standard intrigue instalments, debt can be a much more costly type of
financing than value financing (Campbell et al. 2018). Organizations utilizing a lot of
obligation probably won't have the capacity to make the instalments. Lenders see a higher
debt to equity proportion as hazardous in light of the fact that it demonstrates that the
financial specialists haven't subsidized the tasks as much as loan bosses have (Minnis, &
Sutherland, 2017). At the end of the day, financial specialists don't have as much skin in the
amusement as the loan bosses do. This could imply that speculators would prefer not to
finance the business tasks on the grounds that the organization isn't performing admirably
(Rey, 2015). Absence of execution may likewise be the motivation behind why the
organization is searching out additional obligation financing.
Debt to equity Ratio 2014-2015 2015-2016 2016-2017
ITD Total Debt 5645000 6136000 5284000
Total Equity 11879000 14266000 17608000
Debt to equity ratio 0.4752084 0.4301136 0.3000909
IPD Total Debt 0 0 0
Total Equity 34837000 85254000 58797000
Debt to equity ratio 0 0 0
Monthly share price movements
While considering the share price of selected companies, it has seen that over the last three
years, both of them has experienced several up and down (Chang et al. 2015). However, if the
comparison is done, then it can be said that IPD is still showing better price than ITD.
Nevertheless, the deviation is far higher in case of IPD than ITD. At the current situation,
both the stock has shown same trend. Both of them are showing a small increment over the
last month following fall in price. However, when compare the movement with AORD, it can
be said that there is no such correlation between AORD index and chosen organisations price

movements (Tadasse et al. 2016). The AORD index evidenced a steady increment over the
last three years, which is opposite to chosen organisations.
01/10/2015
01/12/2015
01/02/2016
01/04/2016
01/06/2016
01/08/2016
01/10/2016
01/12/2016
01/02/2017
01/04/2017
01/06/2017
01/08/2017
01/10/2017
01/12/2017
01/02/2018
01/04/2018
01/06/2018
01/08/2018
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
0
1000
2000
3000
4000
5000
6000
7000
Share Price Movements
ITD IPD AORD
Factors influence share prices
The difficulties confronting the social insurance suppliers specifically, are intricate and
interrelated. A concentration towards more community oriented and information driven
consideration models, which address social and physical strength of unending disease or
maturing patients, may help enhance quiet results and brought down expenses (Masum,
2014). Medicinal services examiners are determining for the whole business, a positive
twofold digit development of 10.89% in the forthcoming year, and a hopeful close term
development of 24.55% throughout the following couple of years. In any case, this rate came
in underneath the development rate of the Australian securities exchange in general (Edwards
et al. 2018). Suppliers that are thinking that its harder to benefit from additionally cost and
operational efficiencies in the wake of picking the low-hanging natural product are starting to
direct their concentration toward more transformative activities to twist the cost bend. In the
previous year, the industry conveyed development of 1.35%, however as yet failing to meet

expectations the more extensive Australian securities exchange. Both ITD & IPD slacks the
pack with its profit falling by the greater part over the previous year, which demonstrates the
organization will develop at a slower pace than its social insurance supplier peers (Barberis,
Mukherjee & Wang, 2016). As the organization trails whatever remains of the business as far
as development, they may likewise be a less expensive stock in respect to its companions.
The social insurance industry is exchanging at a PE proportion of 18x, moderately like
whatever is left of the Australian securities exchange PE of 17x. This implies the business,
overall, is genuinely esteemed contrasted with the more extensive market – insignificant
expected additions and misfortunes from mispricing here (Tekçe, & Yılmaz, 2015).
Moreover, the industry restored a comparative 11.86% on values contrasted with the market's
11.92%. Since both the organisation’s income doesn't appear to mirror its actual esteem, its
PE proportion isn't exceptionally valuable. A free choice to measure their vaue is to expect
the stock ought to be generally in-accordance with its industry.
Beta and expected rate of return
[a] Beta
As mentioned in the requirement file, the beta value calculated in Reuters for ITD is 0.62 and
the same for IPD is 0.68.
[b] Rate of return
Given, risk free rate is 5%, market risk premium is 6%, hence, as per CAPM model, the
required rate of return can be calculated as below:
R = risk free rate + beta*risk premium
Hence, for ITD:

R = 5% + 0.62*6% = 8.72%
For IPD:
R = 5% + 0.68*6% = 9.08%
Dividend Policies
Given the assorted variety in corporate goals and conditions, it is possible to have disparate
profit strategies that are particular to firms, businesses, markets or areas. Through the
exploration an endeavour has been made to recommend how profit approach can be set at
miniaturized scale level. Back troughs would have the capacity to look at how the different
market gratings, for example, topsy-turvy data, office costs, assessments, and exchange costs
influence their organizations, and in addition their present claimholders, to touch base at
sensible profit approaches.
Chiefs of enterprises direct the tasks going for the security of investors' advantage.
Administration is regularly in predicament; regardless of whether to pay profits or to hold
them for future speculations with suggestions on share esteem. The outlining of profit
strategy is a basic errand for money related directors in light of the fact that various factors,
for example, winning limit, accessibility of money, venture opportunity, elective wellspring
of back and investors' necessity and so forth must be consolidated in building the profit
approach. From the significant suppositions of respondents, the examination would give
some solid proposals to the approach settling on and profit choice for both ITD and IPD:
 Dividend is the piece of present and past salary of the company, the profit approach
ought to be guided in view of the gaining limit and accessibility of trade out the firm;
 Dividend approach ought to be centered around the necessities of investors and
additionally expanding the market estimation of the firm;

 The profit dispersions ought to be seen as a lingering salary subsequent to meeting the
financing prerequisite of new speculation roads or development of existing firm.
Recommendation letter
Understanding securities return conduct is essential for all nations. The level of instability
present in the share trading system drives financial specialists to request a higher hazard
premium, along these lines making higher capital cost, which blocks venture and moderates
monetary advancement.
Through this arrangement of examinations, it was featured IPD's attention on its volume and
edge driving models on the grounds that the same was valid in the master plan. The reality
IPD isn't in an exceptionally secure budgetary position. Enhancements in each region of the
organization are required if the organization is, in the principal occasion, to survive and
afterward develop. The key territories of change are the liquidity of the organization and the
amount and nature of working capital, productivity, and money related steadiness.
Administration must address these regions at the same time if the organization is to conquer
its present poor record. On the other hand, ITD has shown balanced performance over the
three years period in terms of all these aspects. Hence, ITD needs to be chosen as the
potential investment option.
It must be recalled that this investigation is constrained: a more noteworthy profundity of
comprehension and assessment can just happen with use of different assets, for example,
correlations with spending estimates and the announcement of changes in monetary position.
Simply after this procedure can a full energy about the organization's present circumstance
and conceivable future happen? Now the organization does not have solid future prospects in
the zones of benefit, liquidity or solidness in the event that it proceeds on its present way.
Financial specialists ought to be worried about current rates of return and administration and

loan bosses ought to be worried about the liquidity of the organization as demonstrated in the
proportion examination.

References
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empirical test. The Review of Financial Studies, 29(11), 3068-3107.
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Theory And Practice, Canadian Edition. Nelson Education.
Campbell, J. Y., Giglio, S., Polk, C., & Turley, R. (2018). An intertemporal CAPM with
stochastic volatility. Journal of Financial Economics, 128(2), 207-233.
Chang, T., Chen, W. Y., Gupta, R., & Nguyen, D. K. (2015). Are stock prices related to the
political uncertainty index in OECD countries? Evidence from the bootstrap panel
causality test. Economic Systems, 39(2), 288-300.
Edwards, R. D., Magee, J., & Bassetti, W. H. C. (2018). Technical analysis of stock trends.
CRC Press.
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233.
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Rey, H. (2015). Dilemma not trilemma: the global financial cycle and monetary policy
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Tadasse, G., Algieri, B., Kalkuhl, M., & von Braun, J. (2016). Drivers and triggers of
international food price spikes and volatility. In Food Price Volatility and Its
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Wahlen, J., Baginski, S., & Bradshaw, M. (2014). Financial reporting, financial statement
analysis and valuation. Nelson Education.
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