Managing Business Finances: SkyCity Entertainment Financial Analysis

This report presents a financial analysis of SkyCity Entertainment Group Limited, focusing on its performance over a three-year period. The analysis, presented in a role-play format, assesses the company's profitability, solvency, and liquidity. The financial expert highlights improvements in profitability ratios in 2018 followed by a deterioration in 2019, attributing this to lower earnings. Liquidity ratios are deemed inadequate, while solvency ratios indicate a moderate debt proportion and good solvency. The report provides insights for both internal and external stakeholders, including an investment recommendation for an external stakeholder and an assessment of the company's financial health for an internal stakeholder considering a job offer. The report also mentions the company's diverse business sectors, including casinos, food and beverage, hotel operations, and tower admissions, across Australia and New Zealand. The analysis considers the company's financial risk and its position relative to competitors.

[RolePlay]
2019
SkyCity Entertainment
Limited

Me (Financial expert): Good afternoon all.
Internal stakeholder: Good afternoon
External stakeholder: Good afternoon
Me: As per the prior appointment hope you both know why we are here today. As per your
requirement I am here today with the financial analysis of SkyCity Entertainment based on its
past 3 year’s performance. Hope the same will answer all your queries.
External stakeholder: Yes Mr Hudson I have some surplus amount with me and I am not sure
whether to invest the same into SkyCity’s share. Hope your analysis will help me to decide.
Internal stakeholder: last week I have got a job offer from its competitor and I am not sure
whether to switch or remain with SkyCity. Hope your analysis will answer my query at least
to some extent.
Me: I would love to resolve your queries. If you are interested in knowing the company’s
profitability position I would like to highlight that all the profitability ratios of the entity have
been improved in the year 2018 as against 2017. However, all these ratios have been
deteriorated in 2019. Reason behind this is that the entity was not able to generate higher
earnings in 2019 as against 2018.
External stakeholder: tell me something about its solvency and liquidity position.
Me: Sure. Liquidity ratios of the entity including the current ratio and quick ratio is signifying
that though the same have been improved over the years, it is still inadequate to meet the
creditor’s dues. However, the solvency ratios including debt ratio, proprietary ratio and
interest coverage ratio are signifying that the company’s solvency position is good as the debt
proportion is moderate
External stakeholder: what do you suggest then?
Me: See, though it is determined that the profitability position has been deteriorated in 2019,
it still had adequate earnings to provide return to its shareholders. Moreover, it is not
overburdened with debt that signifies its long term solvency. Further, it has high financial risk
as compared to its competitor and that needs to be considered. However, I think it is a good
investment option at present scenario.

Internal stakeholder: Thank you.
External stakeholder: Thank you Mr Hudson. Will let you know in case we need any further
assistance.