Transurban Financial Position and Performance: A Comprehensive Report

This report provides a comprehensive financial analysis of Transurban, examining its performance and position through ratio analysis and trend assessment. It evaluates key aspects such as liquidity, profitability, leverage, and asset efficiency, highlighting a concerning downward trend in the company's financial health. The analysis reveals a weak liquidity position, declining profitability margins, and an adverse leverage position, indicating a need for strategic financial improvements. The report assesses the company's performance from 2018 to 2019, comparing various financial ratios and identifying areas requiring attention, such as the need to increase investment in current assets and modify the capital structure to reduce costs and improve profits. The conclusion emphasizes the need for improvements to address the company's financial challenges and ensure long-term sustainability. The report offers a detailed overview of Transurban's financial standing, providing valuable insights for stakeholders and guiding strategic decision-making.

1
Managing financial resources

2
Executive summary
The report that is presented has provided a brief overview of the Transurban and its
operations which are carried in various parts of the world. It has been identified that there is a
downward trend that is involved and that has been ascertained with the help of the ratio
analysis that is performed. The liquidity and profitability position of the company is not in
favor and there is a high decline which is noted in this respect. With the current situation,
there are various issues that will be faced by the company and they will be difficult to be
dealt with in the current scenario. The capital structure of the company also requires
modification by which the performance will be improved as there will be a reduction in the
cost that will eventually increase the profits. The overall position is not very good and
requires improvements which are made clear which analysis that is performed.

3
Table of Contents
Executive summary....................................................................................................................2
Introduction................................................................................................................................4
Company review........................................................................................................................4
Ratio analysis.............................................................................................................................4
Liquidity assessment..............................................................................................................4
Profitability assessment..........................................................................................................5
Leverage assessment..............................................................................................................6
Asset efficiency assessment...................................................................................................6
Evaluation of financial performance and position.....................................................................7
Conclusion..................................................................................................................................9
References................................................................................................................................10

4
Introduction
In the business, there are various areas that are required to be analyzed and for that proper
technique is to be used. The financial position and performance will be evaluated in this
report for Transurban. In this, there will be consideration of various techniques such as ratio
analysis and trend analysis. This will help in evaluating the overall performance and with
that, there will be proper strategic decisions that will be made. In the report, they will also be
identified which will help in making further decisions. This will be used by all the
stakeholders as they will be identifying the position of the company and will take decisions
accordingly.
Company review
Transurban is an Australian owned company which is one of the largest toll-road operators
and helps in providing people with transportation services. The services are carried in various
areas and that includes Sydney, Melbourne, Brisbane, United States and Canada. The roads
are designed in such a manner that they will deliver the services for a longer duration of time
(Transurban, 2019). The company is using the best technique which helps in providing
advanced services. Innovative tolls are developed and transport technology is used in such a
manner that all the people are made available with easier traveling services. It is a leader in
the industry and due to that acts as the benchmark for their performance.
Ratio analysis
In the business, there are various areas and aspects which are involved and due to that, it is
advised to use the same in the companies. In this, there is coverage of various aspects that are
relevant and are important to evaluate the performance of the company together with its
position (Innocent, Mary and Matthew, 2013). Several types of ratios are calculated and with
that, there is a comparison that is made possible among a period of time. The main ratios
which are required are provided below under the specific areas.
Liquidity assessment
The business is required to meet with various liabilities and obligations which become due to
various transactions. There are various such liabilities which are required to be paid and for
that, it is required that appropriate assets shall be maintained (Omar et al., 2014). For this

5
there are various ratios such as current ratio and quick ratios are calculated in which current
assets and current liabilities are compared with one another. The calculations in this respect
are provided below.
Particulars Formula 2018 2019
Current ratio Current assets/current liabilities 0.82 0.51
Quick ratio Current assets – Inventories / Current
liabilities
0.71 0.51
The ratios have been calculated and in that there is the ascertainment of the liquidity position
of the company. It can be noted that there is a decline in the current and quick ratios. The
current ratio has reduced from 0.82 to 0.51 and the quick ratio has also reduced from 0.71 in
2018 to 0.51 in 2019 (Transurban, 2019). The current ratio should be 2 as per the standards
and the quick ratio should be 1. In the given case the standards are not met and instead, there
is a very low level at which the ratios are maintained. Due to this, it can be said that there is a
weak liquidity position which is maintained in the company. There is the need to make
improvements in this respect and for that various actions will be required to be undertaken by
the management in the coming period.
Profitability assessment
Profit is the main aim for which any business is carried and the same is the case with this
company. The profitability is required to be evaluated and for that, there is the consideration
of various profits that are made with the help of sales and other available assets. The
calculations for the same are made with the help of net profit and other profits that are made
(Islam, 2014). The performance is also analysed with the help of this and it also helps in
making the decisions in relation to the coming period.
Particulars Formula 2018 2019
Net profit margin net income/sales 14.19
%
4.08%
Returns on assets net income / assets 1.77% 0.47%
Returns on
equity
Net income / Equity 6.92% 1.72%
From the calculation which is made above it can be noted that there is a decline in the
profitability and that is required to be taken into account. The net profit margin has reduced
from 14.19% to 4.08% and this is because of the decline in profits (Transurban, 2019). The

6
sale has increased but with that, there was an even higher rise in the expenses and that has
lead to an overall decline in profitability. The return on assets has also been decreased
because there is an increase the assets which are maintained but corresponding income has
reduced. The return on equity has been declined greatly from 6.92% to 1.72% as the equity
balance of the company has improved but the case is not the same as the profits which are
made. By the evaluation, it can be said that the overall profitability position of the company is
not good and there will be various enhancements that are required to be made.
Leverage assessment
In the business, there are various operations that are performed and for that, the funds are
required. There are various sources from which funds can be collected and in that, both the
internal as well as external sources are taken into account (Almazari, 2012). The equity and
debt are main among all the resources and it is required that there is a proper balance that is
maintained among them. For that various ratios are calculated which helps in ascertaining the
leverage position of the business.
Particulars Formula 2018 2019
Total debt to assets liabilities / assets 0.74 0.72
Total debt to equity liabilities /
equity
2.91 2.63
Time interest earned EBIT / interest 1.35 1.16
The leverage position of the company is not satisfactory and this can be said with the help of
the calculations which have been made. It can be noted that there is a decline in the debt-
equity ratio but the ratio is at a high level. It is maintained at 2.91 in 2018 and 2.63 in 2019
which is very high (Transurban, 2019). Due to this the obligation of the company will be
increasing as there will be higher interest expense which will be required to be paid every
time. By that, the expense is increasing and that also affects the profitability in an adverse
manner. The times' interest earned is maintained has also reduced and this is because of the
increase in the interest and the same is higher than the rise in income (Delen, Kuzey and
Uyar, 2013). This shows that there is an adverse leverage position and so that the company is
required to take control over the debts and should focus on the internal sources for fund
requirements.

7
Asset efficiency assessment
Assets are the main element of any business and they are required to be maintained in an
effective manner. It is required that they shall be used in the best manner by which the
operations of the business can be improved and performance can be enhanced (Tugas, 2012).
Assets help in generating the revenue and by that profitability is also improved. The
calculations are provided hereunder which will provide a better understanding in this respect.
Particulars Formula 2018 2019
Assets turnover sales / total assets 0.12 0.12
Fixed asset turnover Sales/PPE 8.82 10.06
For the carrying out of various operations in the business, there are various assets that are
maintained. It is the duty of management to use the available assets in an efficient manner by
which the required results can be attained. In the given case it can be noted that the asset
turnover is at the same level which is 0.12 in both the years (Transurban, 2019). This shows
that the assets are used with the same efficiency and there is no improvement which is made
over the period of time in the company. With the fixed asset turnover there is an increase in
the ratio from 8.82 to 10.06 which is good and this shows that management is working in an
efficient manner and is utilizing the assets appropriately.
Evaluation of financial performance and position
All the required calculations have been made and in that there is the consideration of various
aspects which are relevant for the business. It has been noted that there are various changes
that are taking place in the company and by that the position and performance are getting
affected. In that, there has been consideration of various aspects by which the business is
affected. It has been identified that there is the need to increase the investment in current
assets by which the obligations which are arising in the business can be met in an effective
manner (Mousa, 2015). The liquidity position which is maintained currently is not that proper
and that requires the changes to be made by which the improvement will be made possible.
This is important as then only the liabilities will be met on time by the company and that will
enhance the goodwill of the business in the market.
The amount of debt that is maintained by the company has increased and that the complete
position is getting affected. There is an increase in interest because of the same and that is the
main impact that has been borne by the company. The overall financial performance is

8
affected by the same as the expense increase with this and that leads to a reduction in the
profits which are maintained by the company. This affects the financial position also as there
is an increase in the debt and by that the balance which is required to be maintained among
the debt and equity is affected adversely (Transurban, 2019). There shall be an increment in
the equity balance and by that the cost which is incurred in the form of interest will be saved
and that can be used by the company for various other purposes. It will be used for the further
expansion of the business and by that additional advantage will be received.
The company is required to maintain the profit as that is the final benefit that is made and
various others are dependent on the same. In the company there is a decline which is made in
terms of profits and that will be adverse for the business in the long term. The profits which
are made are used for various purposes and that is affected by this decline. The investors will
be affected as there will be less amount of return which will be made available to them in the
form of dividends (Faello, 2015). This will make them disinterested in making an investment
in the company and that will affect the capital structure of the company. The retained
earnings which are kept out of the profits for further use will not be made and that will make
the company weak in taking decisions regarding further investments and expansions. Due to
this, there is a huge need to make an improvement by which the situation can be made in
favor of the company.
It has been identified in the analysis that the company has made an investment in the assets
and also the management of the company is efficient. This can be said as the management is
using the available assets in an appropriate manner and by that the revenue which is made by
the company is enhancing (Lee, Lin and Shin, 2012). This is beneficial in the long term as the
management will be able to make the better use of the assets and by that, the business will be
gaining additional advantages. It has been determined that there will be the use of the new
approaches by which the position will be improved and there is an increase which is
identified in the current year also.
With all of the aspects which have been covered it has been ascertained that there was a
better position in 2018 and after that decline in most of the areas is experienced (Transurban,
2019). This is harmful to the company as by this all the areas such as profitability, liquidity
and leverage are affected in a negative manner. Due to this, it is recommended that
improvement shall be made by the company and there should be proper rules and decisions

9
which shall be made in this respect so that the position and performance can be improved in
the coming period.
Conclusion
From the report that has been presented, it can be concluded that there is a need for the
evaluation of the performance and position of the business. With the help of the analysis,
there is the identification of the shortcomings which are involved and the trend which is there
is also identified and taken into account. The ratio analyses have been used for this purpose
and in that calculation for various types of ratios have been presented. By that the manner in
which the company is performing has been ascertained and that helped in making the
conclusion regarding the company and its decisions. There are various areas in respect of
which improvement is required and they have been identified in the report by which further
expansion will be made possible.

10
References
Almazari, A.A. (2012) Financial performance analysis of the Jordanian Arab bank by using
the DuPont system of financial analysis. International Journal of Economics and
Finance, 4(4), pp.86-94.
Delen, D., Kuzey, C. and Uyar, A. (2013) Measuring firm performance using financial ratios:
A decision tree approach. Expert Systems with Applications, 40(10), pp.3970-3983.
Faello, J. (2015) Understanding the limitations of financial ratios. Academy of Accounting
and Financial Studies Journal, 19(3), p.75.
Innocent, E.C., Mary, O.I. and Matthew, O.M. (2013) Financial ratio analysis as a
determinant of profitability in Nigerian pharmaceutical industry. International journal of
business and management, 8(8), p.107.
Islam, M.A. (2014) An analysis of the financial performance of national bank limited using
financial ratio. Journal of Behavioural Economics, Finance, Entrepreneurship, Accounting
and Transport, 2(5), pp.121-129.
Lee, P.T.W., Lin, C.W. and Shin, S.H. (2012) A comparative study on financial positions of
shipping companies in Taiwan and Korea using entropy and grey relation analysis. Expert
Systems with Applications, 39(5), pp.5649-5657.
Mousa, G.A. (2015) Financial ratios versus data envelopment analysis: the efficiency
assessment of banking sector in bahrain bourse. International Journal of Business and
Statistical Analysis, 2(2), pp.75-84.
Omar, N., Koya, R.K., Sanusi, Z.M. and Shafie, N.A. (2014) Financial statement fraud: A
case examination using Beneish Model and ratio analysis. International Journal of Trade,
Economics and Finance, 5(2), p.184.
Transurban. (2019) About us. [online] Available at: https://www.transurban.com/about-us
[Accessed 12 February 2020]

11
Transurban. (2019) Corporate report. [online] Available at:
https://www.transurban.com/content/dam/investor-centre/04/2019-Corporate-Report.pdf
[Accessed 12 February 2020]
Tugas, F.C. (2012) A Comparative Analysis of the Financial Ratios of Listed Firms
Belonging to the Education Subsector in the Philippines for the Years 2009-
2011. International Journal of Business and Social Science, 3(21).