SEEK Ltd Financial Analysis: Evaluating Performance with Ratios

This assignment provides a comprehensive financial statement analysis of SEEK Ltd, a company operating in the online employment industry, utilizing ratio analysis, trend analysis, and various graphs to evaluate its performance. The report identifies and analyzes three major expense items impacting the company's net profit: marketing-related expenses, operation and administration expenses, and employee benefit expenses. It also examines three significant assets affecting the company's asset efficiency: plant and equipment, trade and other receivables, and cash and cash equivalents. Key ratios such as Return on Equity (ROE), Profit Margin, and Asset Turnover Ratio are calculated and discussed, highlighting trends and their potential drivers. The analysis reveals insights into the company's profitability, asset utilization, and liquidity, offering a holistic view of its financial health and sustainability. Desklib provides access to similar solved assignments and past papers for students.

Running head: ACCOUNTING FINANCIAL REPORT ANALYSIS
Accounting Financial Report Analysis
Name of the Student:
Name of the University:
Author’s Note:

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ACCOUNTING FINANCIAL REPORT ANALYSIS
Executive Summary
The main purpose of this assignment is to analyse the financial performance SEEK ltd. The
analysis will be covering reformatted financial statements of the company, various significant
ratios of the business. In addition to this, the report will be identifying three major expenses
which have affected the net profit of the business and also analyse the nature of the expenses.
The report will also be identifying assets or liabilities whose turnover have affected the asset
efficiency of the company. The report will also be containing graphs in order to demonstrate
significant ratios and the change associated with them over a time period.

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ACCOUNTING FINANCIAL REPORT ANALYSIS
Table of Contents
Introduction......................................................................................................................................3
Expenses of the Company...............................................................................................................3
Assets of the Business.....................................................................................................................5
Ratio Analysis..................................................................................................................................7
Cash Flow Analysis and Liquidity Ratios.....................................................................................12
Reference.......................................................................................................................................16
Appendix........................................................................................................................................18

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ACCOUNTING FINANCIAL REPORT ANALYSIS
Introduction
The main purpose of this assignment is to conduct a financial statement analysis of SEEK
Ltd and such analysis will be utilizing techniques like ratio analysis, trend analysis and various
graph for the same. The analysis of the different components such as expenses, assets and
liabilities of the business which affect the net profit of the business will also be considered in the
analysis of the report (Ehiedu 2014).
Overview of the Company
SEEK ltd is a company which is engaged in online employment Industry which is
currently operating in New Zealand and Australia. The company has a variety of business
operations such as online employment, education and volunteer industries. The company is in its
growth phase which can be established from the fact that the business has expanded successfully
in 14 countries. The major markets for SEEK ltd from where the management of the company
earns major portion of revenues is china which comes to about 30.2% of the total revenue as per
recent estimate.
Expenses of the Company
The expenses of the business are shown in the statement of profit and loss account of the
company. The income and expenses of the company which is shown in the statement of profit
and loss account depicts the financial performance of the company for that particular time period
(Brochet, Jagolinzer and Riedl 2013). The expenses of the company comprise of direct cost
related to services, employee benefit expenses, marketing related expenses, technology and
product development expenses, operation and administration expenses, depreciation, transaction
costs and impairment losses. The major expenses which affect the profitability of the company
which can be identified are given below:

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ACCOUNTING FINANCIAL REPORT ANALYSIS
1. Marketing related expenses: These refers to the expenses which are incurred by the
business for marketing the products of the business. In other words, the products which
are manufactured by the business are promoted by incurring certain amount of marketing
expenses. Such market activities involve advertisement, promotion cost, media
advertisement and similar other activities which are related to the marketing area of the
business. The marketing expenses of the business shows a decreasing trend from 2012 to
2017. This can be due to the fact that the product which the business is offering is already
established in the market or the business is trying to reduce their costs so that they can
earn more net profits for the business (Kotler 2015). The marketing related expenses was
maximum in 2015 which was about $ 288 million and this falls drastically to 99.8 million
in 2016 (Appendix, Figure 2). This shows that the business is trying to reduce the overall
cost of relating to marketing of the products of the business. The marketing related
expenses for the year 2017 amounts to $ 110.2 million. The net profit of the company has
decreased from the previous year figure of $ 399.4 million to about $ 362
million(Appendix, Figure 2). The marketing expenses forms a major part of the expenses
of the company and therefore affects the profit of the business.
2. Operation and Administration expenses: These refers to those expenses which are
incurred in the operational activities or administrative activities of the business. In other
words, such relates to different expenses which are incurred in the manufacturing process
of the business. The operational activities of the business comprise of manufacturing
business, maintenance of different departments, production related expenses and similar
types of expenses (Yu, Ramanathan and Nath 2014). The administrative expenses of the
business comprise of different expenses which are related to office and staff maintenance.

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ACCOUNTING FINANCIAL REPORT ANALYSIS
The operations and administrative expenses of the business has increased from the
previous year’s figures which was $ 105 million. The operation and administrative
expenses for the year 2025 has been highest (Appendix, Figure 2). The expenses show an
increasing trend which shows that as the sales of the business increases so that the
operating costs as such are closely related to the revenue generation process of the
business.
3. Employee Benefit expenses: These refers to expenses which are incurred by the business
for the general benefit of the employees of the business. The employee benefit expenses
are incurred so that the employee of the company is provided with extra facilities which
can provide them motivation to perform better and drive towards excellence. Such types
of expenses may include additional benefits to employee, medical perquisites to
employees, insurance claims for the employees, better working conditions for the
employees (Liapis and Thalassinos 2013). As per the reformatted income statement of
the SEEK ltd, the company has recently introduced such a policy as such expenses have
only been incurred from 2016 onwards. The expenses are recognizable as the company
have expended a significant amount of money on such a policy. The expense which
incurred by the business in 2016 is $ 326.9 million and the same increases in 2017 to
about $ 354.7 (Appendix, Figure 2). The amount which is expended by the business is of
significant amount and it will definitely lower the net profit of the business drastically.
The expenses which the business has incurred for employee benefit expenses forms
around 46% approx. of the total operating cost of the business.

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ACCOUNTING FINANCIAL REPORT ANALYSIS
Assets of the Business
The assets of the business are the basis o which the company generates profits. The more
the number of assets shown in the balance sheet, the more favorable it looks for the business.
The assets are generally divided into two categories which are Current assets and Non-current
assets (Shi 2015). The only difference between the two is the nature of the useful life of the asset.
As per the Reformatted Balance Sheet of SEEK ltd, the asset of the company includes plant and
equipment, cash and cash equivalents, trade receivable, other receivables, intangible assets and
deferred tax assets (Storey 2016). The three significant assets which has affected the turnover of
the business affecting the asset efficiency are discussed below in details:
1. Plant and Equipment: These refers to the assets which are used by the business for the
purpose of running the operation of the business. These assets are generally fixed by
nature and forms part of the non-current assets of the company (Wirtz and Lovelock
2016). An annual amount of depreciation is charged in order to record the wear and tear
caused to the asset of the company. As per the balance sheet of SEEK ltd, the plant and
equipment figure for the year 2017 is shown at $ 29.1 million which has increased from
previous year’s figure which suggests that the company has made some purchases for the
assets of the business (Appendix, Figure 1). In other words, the increase in the value of
the assets suggest that there has been certain addition made to the value of the assets. The
increase in the asset is a positive financial indicator for the performance of the business,
however the company needs to further improve on the same.
2. Trade and other receivables: These represents the cash which can be collected from the
debtors of the business. The trade receivables arise generally when the business offers
credit sales to the customers of the business (Cui, Meyer and Hu 2014). The debtor’s

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ACCOUNTING FINANCIAL REPORT ANALYSIS
turnover ratio suggests the minimum time which is taken for a business to collet its debts
from the debtors. In the case of SEEK ltd, the number of debtor have increased for the
business which in turns means that the credit sale of the company has increased. It also
suggests that the company has less amount of cash in hand. The debtor turnover ratio of
the company indicates the financial stability of the business.
3. Cash and Cash Equivalents: These refers to the cash reserves which the business has
which considers both cash in hand and cash at bank. This indicates the liquidity position
of the business. Cash and Cash Equivalents forms part of the current assets of the
company dur to their liquid nature. In the cash of SEEK ltd, the cash and cash equivalent
balance has increases from previous year which was $ 504.9 million in 2016 and it
became $ 652 million in 2017(Appendix, Figure 1). The cash balance of the company has
shown an increasing trend from the year 2012 onwards which shows that the company is
maintaining its cash reserves and this is a positive indicator for the business.
Ratio Analysis
1. Return on Equity: It can be defined as the return which is expected on the investments
which is made on equity share capital (Heikal, Khaddafi and Ummah 2014). The return
on equity for the company is 17.75% which is more than the ROE achieved by the
business in 2016 which was 15.21% (Appendix, Figure 4). The ROE of the business was
highest in 2012 and since then the company is trying to maintain the ROE of the
business. This suggest that the company is improving as it is one of the performance
indicators of the company which every shareholder look for (Innocent, Mary and
Matthew 2013). The economic factors are responsible for changes which takes place in

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ACCOUNTING FINANCIAL REPORT ANALYSIS
return on equity which is one of the reason due to which the trend is falling as shown in
the chart below.
2013 2014 2015 2016 2017
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
0%
20%
40%
60%
80%
100%
120%
ROE
ROE Trend
Figure 1: (Chart showing ROE)
Source: (Created by Author)
2. Profit Margin: The profit margin of the company as per 2017 is 36.03% which has
reduced from previous year estimate of 43.50% (Appendix, Figure 4). The decrease in
profit margin is to be considered by the company and all efforts should be made to
improve the profitability of the company. The profit margin of the company is also
considered to be one of the performance indicators of business therefore the business
needs to improve the same (Sharan 2015). The profit margin of the business has
decreased significantly due to the cost increase and the cost factors which affect the
business.

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ACCOUNTING FINANCIAL REPORT ANALYSIS
2013 2014 2015 2016 2017
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
0%
20%
40%
60%
80%
100%
120%
PM
PM Trend
Figure 1: (Chart showing Profit Margin)
Source: (Created by Author)
3. Assets Turnover Ratio: The assets turnover ratio of the company shows that the ratio has
decreased from the estimates of 2015 which was 0.418 and the same has decreased to
0.398 in 2017. There has been a major decrease in the asset turnover ratio of the
company. Higher assets turnover ratio is more favorable as it then shows that the business
is using the assets effectively (Delen, Kuzey and Uyar 2013). In the case of SEEK ltd the
asset turnover ratio suggests that the business is not using the assets of the company
effectively. The assets turnover ratio depends on the companies performance internally.

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ACCOUNTING FINANCIAL REPORT ANALYSIS
2013 2014 2015 2016 2017
0.000
0.100
0.200
0.300
0.400
0.500
0.600
0%
20%
40%
60%
80%
100%
120%
ATO
ATO Trend
Figure 1: (Chart showing Asset Turnover Ratio)
Source: (Created by Author)
4. Return on Net Operating Assets: The net operating assets of the company show that there
has been a serious fall in the estimates as in 2017 the estimate was 14.35% which is lower
than the results of previous year (Appendix, Figure 4). Considering the trend lines there
has been drastic fall as shown in the chart below.
2013 2014 2015 2016 2017
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
0%
20%
40%
60%
80%
100%
120%
RNOA
RNOA Trend

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ACCOUNTING FINANCIAL REPORT ANALYSIS
Figure 2: (Chart showing RNOA)
Source: (Created by Author)
5. FLEV: The ratio results show that the business has a high financial ratio as per 2017
estimate which is shown at 36.90 which as per trend analysis is about an increase to
153% approx. This is not a good indicator as the business is dependent on the dept
capital.
2013 2014 2015 2016 2017
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
FLEV
FLEV Trens
Figure 3: (Chart showing FLEV)
Source: (Created by Author)
6. NBC: This financial ratio depicts the net borrowing cost of the business of the company.
As per the analysis shown in the calculations, the net borrowing costs of the business has
decreased from previous year which was 3.06% in 2016 and the same has fallen to 2.45%
in 2017. This signifies that the debt of the company has reduced some what from
previous years and hence the net borrowing costs has reduced. The trend analysis also
makes it clear that there has been a decrease in net borrowing cost from previous year.