Detailed Financial Analysis and Performance Review of Metcash Limited

This report presents a financial analysis of Metcash Limited, covering various aspects of its performance. Part I addresses revenue recognition, valuation methods for plant, property, and equipment, the role of auditors, and the company's corporate social governance initiatives. Part II delves into the company's efficiency ratios, including inventory and asset turnover ratios, and assesses its profitability through return on total assets and net profit margin. The analysis also examines the company's debt position using leverage ratios such as interest coverage and debt-to-equity ratios, providing a comprehensive overview of Metcash Limited's financial health. The report uses data from the company's 2018 annual report to illustrate the financial standing. References are included.

Running head: METCASH LIMITED ANALYSIS 0
Analysis of Metcash Limited

METCASH LIMITED ANALYSIS 1
Table of Contents
Part I...........................................................................................................................................2
Answer 1....................................................................................................................................2
Answer 2....................................................................................................................................2
Answer 3....................................................................................................................................2
Answer 4....................................................................................................................................2
Answer 5....................................................................................................................................3
Part II..........................................................................................................................................4
Efficiency ratios......................................................................................................................4
Profitability Position...............................................................................................................4
Debt Position..........................................................................................................................5
References..................................................................................................................................6

METCASH LIMITED ANALYSIS 2
Part I
Answer 1
Metcash Company is the company that is involved in the businesses of distribution as well as
the marketing of groceries, fresh produce, alcoholic beverages and the hardware as well as
the consumer goods (Metcash Limited, 2018).
Answer 2
There are different ways to recognise the revenue recognition and one such way is to record
the revenue only to the extent to which the benefits can be derived out of those received. As
observed form the annual report of the Metcash limited the revenue recognition is associated
with the AASB 15 from the financial year 2019. Further it was also found that this method is
going to supersede all the existing measurements or the methods prevailing under the
Australian Accounting Standards (Metcash Limited, 2018).
This policy can be clearly identified on the page number 45 and 48 of the annual report
(Metcash Limited, 2018)
Answer 3
The valuation method used by the Metcash Limited to value the plant property and equipment
is at the cost less the accumulated depreciation. In the annual report this information can be
extracted from the page number 47 (Metcash Limited, 2018).
Answer 4
Ernst and Young is the reputed audit firm that is performing the duties of audit. The core and
the critical reason for why the auditing is necessary is because it gives the management the

METCASH LIMITED ANALYSIS 3
presentation of the genuine and the reasonable presentation. Further the organisation can be
reasonable estimated on the basis of the auditing. The auditor also has the responsibility to
deliver the true and the fair assessment of the financial statements and it is count as his
professional responsibility otherwise he will be held guilty for the negligence of his duties.
There are certain questions which came up concerning the autonomy of the evaluator;
however the major idea lies behind the correct solution for which the auditors can deal with
the experts (Murray & Fiona, 2017).
The primary reason for completing the external audit is that there are a few regions which
might be left by the internal auditor keeping in the mind few of the contemplations. The
contemplations can resemble that the auditor is known to the firm from the longer time frame
and he has the ability to judge the transactions in a go. Further the third party provides a fair-
minded assessment and in the meantime the change if any in the reports of both can be
discovered and the equivalent can be corrected with the end goal of things to reap benefits
(Eulerich & Kalinichenko, 2017).
Answer 5
The business has shown the interest towards the corporate and the social governance and this
is presented below in the form of the proof. The business is fine and it surely takes care of the
environment and the responsibilities associated with it. There are several initiatives which are
taken by the Metcash limited, may it be the culture diversity in the company where the ratio
of the working employees to the male employees is counted at 57%, or whether for company
was being recognised for the type of work they are dealing in. CSPO commonly known as the
Certified Sustainable Palm Oil is used to keep the products free. Moreover as it can be
observed form the annual report, 82.6% of the waste was successfully diverted from landfill.

METCASH LIMITED ANALYSIS 4
The energy was also slowed down by 7.33% from 446366 GJ to 415490 GJ (Metcash
Limited, 2018).
Part II
Efficiency ratios
Efficiency Ratios 2017 2018
Inventory Ratio
Cost of goods sold 16.92 16.83
Average Inventory
Asset turnover ratio
Net Sales 3.60 3.91
Assets
The asset turnover ratio and the inventory ratio are the two major ratios which define the
efficiency of the company. The ratios define how the company performed earlier and the how
it is going to be can be estimated a bit. The company might have improved but it has no

METCASH LIMITED ANALYSIS 5
significance if the other ratios are not in the right condition. The inventory realized at the
faster pace and hence the company shall focus on the current assets section (Campbell, 2015).
Profitability Position
2017 2018
Profitability Ratios
Return on total assets
EBIT 6.05% -1.93%
Total Assets
Net profit margin
Net profit 8.55% -1.03%
Sales
The profitability is the king of any company and it is the one factor which is supervised by
each and every one. The current position of the Metcash with respect to the profitability is
down by 7% (Mantelaers & Zoet, 2018). The net profit margin of the company is 8.57%
whereas it fell down the negative zone of -1.01% and this reflects the company is not able to
generate the profits pout of the activities it is carrying out.
2017 2018
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00% Profitability Ratios
Return on total assets Net profit margin

METCASH LIMITED ANALYSIS 6
More and more investors are backing out of the company, demanding their share. The assets
that are used by the company are also not giving the equal weightage and the value because
of the obsolesce nature and hence this is the situation of the red alert for the company
(Pierret, 2015).
Debt Position
Leverage Ratios 2017 2018
Interest coverage ratio
EBIT 4.63 -2.39
Interest Expense
Debt to Equity ratio
Debt 1.44 1.67
Equity
Under the Metcash Company, the debt position can be clearly observed from the table above.
This table indicates that the company was performing to a common level in the year 2017
along with comparison of the industry benchmarks, however in the successive year the
company showed steeping results in the operations of the business. The performance of the
company is reflecting the negative magnitude and this implies that the company needs
immediate action to improve the falls. The debt to equity ratio increased and the company is
out of cash to pay back the entire liabilities. The leverage burden is high and the operations of
the company are going down (Sari, Nurlaela and Titisari, 2018).

METCASH LIMITED ANALYSIS 7
References
Campbell, J. (2015). When and Why a Bribe is Held on a Constructive Trust: The Method of
Reasoning Towards an Equitable Remedy. Australian Bar Review, 39(3), 320-342.
Eulerich, M., & Kalinichenko, A. (2017). The current state and future directions of
continuous auditing research: An analysis of the existing literature. Journal of Information
Systems, 32(3), 31-51.
Mantelaers, E., & Zoet, M. (2018). Continuous Auditing: A Practical Maturity Model.
Metcash Limited, (2018) Annual report [Online] Available from
file:///C:/Users/Manita/Downloads/3027570_1705165542_attach-file-1548491556263.pdf
[Accessed on 29th April 2019]
Metcash Limited, (2018) Sustainability [Online] Available from
https://www.metcash.com/corporate-social-responsibility/environment-sustainability/
[Accessed on 29th April 2019]
Murray, R., & Fiona, C. (2017). Global Value Limited.
Pierret, D. (2015). Systemic risk and the solvency-liquidity nexus of banks. Available at
SSRN 2346606.
Sari, R.K., Nurlaela, S. and Titisari, K.H., 2018. The Effect of Liquidity Ratio, Profitability
Ratio, Company Size, and Leverage on Bond Rating in Construction and Real Estate
Company.