Financial Performance of Bega Cheese-Free-Samples-Myassignment

Question: Discuss about the Financial Performance of the Organisation Bega Cheese. Answer: Financial Statement and Trend Analysis Bega Cheese is one of the leading dairy product selling organisations in Australia. The organisation was started by some dairy suppliers and it was floated publicly in the year 2011. The organisation has so far generated significant amount of revenue from selling dairy products all across Australia. The main income of the organisation is generated through the sales of dairy products sold to the domestic household in Australia and it also sells its products in the international market. The organisation has done pretty good in the recent years and has become a leading dairy product selling organisation in the country. As stated by the organisational statistics the company has been able to generate total revenue of $1000 million in 2013 which is a significant hike of around 8.4% as compared to the previous financial year of 2012 (Dharma, 2012). The organisation Bega Cheese is known for its customer centric business strategy and focuses on research and development to constantly improve its customer service and product quality. The main agenda of the organisation is to reach each and every customer through quality product at a price that the customer wouldnt be reluctant to pay and this has largely helped the organisation to cater to the needs and wants of the consumers effectively. By the financial year of 2014 the organisation recorded sales of over $ 1050 million with a substantial rise by 6.47%. It is normally stated that the rise which has come in the revenue generated is due to the proactive and effective defensive strategy of increasing the amount of market share and also looking to start off new ventures in the form of acquiring Saputo Inc. through a bid of around 19% of the Bega Cheese Group (Smith and Pititto, 2014). The organisation has also focused on securing its gross profit margin which is likely to help the organisation to cement its position in the market and also help to bear much bigger expenses for the development purpose of the business. The gross profit margin of the organisation has fluctuated in the financial years of 2012, 2013 and 2014 respectively with the counting being 12.45 percent, 12.95 percent and 11.06 percent respectively. This is an excellent indicator of the increasing cost of the company to manufacture products. The dip in the gross profit percentage shows that the organisational manufacturing cost is increasing faster as compared to the sale price of the product (Petty et al., 2015). There are number of aspects which have contributed to the increase in the cost of manufacturing some of the major being currency inflation, increase in the labor wage and also due to the increase in the price of the raw materials which are essential for the manufacturing of the dairy prod ucts. It is important for the organisation Bega Cheese to focus on realising certain key avenues. The organisation to consider to expand its business into new markets either with the help of product diversification or through the strategy of penetration pricing in order to achieve cost leadership in the new market to generate higher revenue and balance the gross profit margin (Ho et al., 2013). Talking about the expenditure of the company it could be said that the main expenditure involved in the company is mainly distribution and official expenses. It is important to note that the organisation spends a huge amount of money for effective distribution of the products and administrative expenses which clearly indicate the main reason of the reduction in profit before tax and interest. In order to analyse the net profit of the organisation we have considered a transaction of a WCB stake worth $ 66 million nearly. This has helped to realise the net profit margin which comes to 2.20, 2.53 and 6.18 percent respectively for the three years. The Bega Cheese management has tried to take responsibility to reduce cost especially in the secondary procedures like marketing which contributed to the improvement of the net profit margin (Dharma, Shafron and Oliver, 2012). It could be seen that the total revenue in the financial year of 2014 is just enough to cover up the expenses of the or ganisation as the organisation had to pay up a huge amount of tax which increased by around 177% to be precise and this happened due to the WCB transactions which clearly shows that the organisation couldnt do much except that one transaction which occupies a huge space in the financial statement of the organisation (Smith and Pititto, 2014). In this case it is important to mention that the Net profit margin is considered mainly by the shareholders and the prospect investors to analyse the financial position of the company which helps them to assume the possibility of their investment coming back and bigger transactions like the WCB gives them hope. The proceeds which were received from this transaction was effectively utilised to fulfill long term financial obligations and to improve the liquidity of the organisation. On the other hand the organisation will also have to consider their return on assets as it provides a mirror reflection on the financial utilisation of assets and how their employment contributes to the financial efficacy of the organisation (Brigham and Daves, 2012). The return on asset reckoned shows an increase from 7.03 percent in the financial year of 2012 and moved up to by 11% in the following two years coming to a figure of 18%. Capital Employed is another key ratio which shows the total equity and the debt finance. According to records it could be said that the organisation has just one major long term loan which has been slowly repaid by the organisation. Between the financial year of 2012 and 2014 the maximum share of the loan had been repaid and the total equity has been reported on 27.57%. Even though the value of the financial assets dipped due to the decline in the reserves but the organisation was able to pull back the value due to the sales of new shares that boosted the earnings to a large extent. The return on capital employed climbed up to 19.63 % with increase in profit in the financial year of 2014 as the organisation did generate increased profit, repaid loans which helped to come back on track (Grant, 2016). Liquidity plays an important aspect for every business and through the understanding of quick ratio and current ratio it could be effectively understood. Both of these ratios are effective in understanding the organisational capability of paying back loan and having effective strategy to be able to pay back loans. It could be said that it is suitable for an organisation to have similar current assets to liabilities but higher assets is desirable. The current ratio helps to assess whether an organisation has the ability to pay back loans within a stipulated time (Brigham and Houston, 2012). Current ratio of Bega Cheese has to be stable and as per the information given in the table attached below it shows that there has been fall in the ratio in 2014 as compared to 2012. It could be said that even though the organisations current ratio has dipped but it is still acceptable as the company still has enough to pay the creditors due to the increase in investment of current assets, receivab les. The increase in tax liabilities and payables could be considered as the main reason of decline in current ratio. On the other hand the quick ratio of the organisation stayed fixed on 0.65 which means the organisation has the ability to pay fair amount of current liabilities within a stipulated time (Brigham and Ehrhardt, 2013). The Efficiency of the organisation Bega Cheese is analysed with the help of receivable turnover and inventory turnover which helps the organisation to understand how faster or slower they receive from the debtors and how fast they can develop raw materials and inventories to finished products. It could be said that receivable turnover of Bega Cheese is bit weak and the organisation has started to call up customers more than 5 to 6 times a year now for payment. On the other hand the organisation will have to become strict on quality control which would help to improve inventory turnover effectively. As the latest record shows the organisation could turnover inventory 5 times now with increased need of the products (Higgins, 2012). The Debt ratio of Bega Cheese is at 43 % now which means theres a positive outcome for the shareholders for investment as stated in 2014. Due to increased profit interest repayment has been effective to be precise now it pays 15.64 times interest in a year. The asset turnover ratio also shows effective result showing effective utilisation of asset which clearly shows that the organisation has been able to manage long term solvency (Smith and Pititto, 2014). Limitations of Financial Ratio Calculations There are significant limitations to calculations of financial ratio. First of the entire ratio calculation is done based on the previous data and assumptions and hence changes in accounting standards and policy will impact the calculation (Healy and Palepu, 2012). The financial calculations dont consider the social responsibilities of the organisation and hence reduce the social impact of the organisation. Finally it could be said that financial interpretation are also largely dependent on the skills and expertise of the person doing them and hence the interpretation might differ given the consideration the person makes (Delen, Kuzey and Uyar, 2013). Conclusion From the above discussion it could be said that Bega Cheese has evolved as an organisation over the years and financial year of 2014 has brought remarkable results for the organisation making it well placed in the Australian Market. Its return on capital employed, return on asset, turnovers have been effective which means the company is doing good from the financial point of view. From the parlance of a prospect investor it could be said that this is the best time to invest on this organisation to get suitable returns. Overall it could be said that the information presented in the form of financial statement and trend analysis more or less provides effective data to decide on investment (Ho et al., 2013). References Brigham, E. and Daves, P., 2012.Intermediate financial management. Nelson Education. Brigham, E.F. and Ehrhardt, M.C., 2013.Financial management: Theory practice. Cengage Learning. Brigham, E.F. and Houston, J.F., 2012.Fundamentals of financial management. 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