Professional Documents
Culture Documents
Assignment
Jaymin U. Patel
72 Christie Street,
ST LEONARDS,
Share Registry
TABLE OF CONTENT
COMPANY OVERVIEW...................................................................................................5
CLASSIFICATION OF AGL AS PER AUSTRALIAN STOCK EXCHANGE................6
Net Profit Margin Ratio..................................................................................................7
Total Assets Turn Over Ratio.........................................................................................8
Current Ratio ..................................................................................................................9
CLASSIFICATION OF COMPANY FUND....................................................................13
External Finance............................................................................................................13
Medium term notes are unsecured and repayable in short term period which
are due in 2007 and 2009 so company will need additional fund in 2007
while senior notes are unsecured and payable in 2015 and 2018 so
company has no problem for that. We can see that company has generated
extra fund in this year from bank loan to pay senior notes. ........................14
ANALYSIS OF CASH FLOW..........................................................................................14
AGL’S APPROACH TO CORPORATE GOVERNANCE..............................................15
CONCLUSION..................................................................................................................17
REFERENCES..................................................................................................................18
COMPANY OVERVIEW
If you want to know the proportion of revenue that finds its way into
profits, you look at the profit margin. The profit margin tells you how
much profit a company makes for every $1 it generates in revenue.
Profit margins vary by industry, but all else being equal, the higher a
company’s profit margin compared to its competitors, the better.
Several financial books, sites, and resources tell an investor to take
the after-tax net profit divided by sales.
= 10.78 %
= 17.26 %
2004 = 349.50 × 100
4201.00
= 8.32 %
As per profit margin ratio, Company earned 10 cents profit from every
$1 revenue in 2006 and similarly it was 17 cents and 8 cents profit
earned out of total revenue respectively in 2005 and 2004. Profit of
2006 has been decreased by 7 cents with compare to the profit of
2005.
The total assets turn over ratio shows how hard the firm’s assets are
being put to use. The asset turnover ratio simply compares the
turnover with the assets that the business has used to generate that
turnover. In its simplest terms, we are just saying that for every $1 of
assets, the turnover is $x.
= 0.40 Times
2005 = 4915.40
5828.20
= 0.84 Times
2004 = 4201.00
6574.10
= 0.64 Times
We see the result of 0.40 times for 2006 that means AGL was able to
generate sales of $ 0.40 for every $1 of assets it owned and used for
the year 2006. For the year 2005 and 2004, it was about to 0.84
times and 0.64 times respectively.
Here Turnover decreased by $ 676 million but total assets increased
by double. That is, the AGL has made major investments in its assets
that have yet to generate their previous level of sales: 0.40 times in
2006 versus 0.84 times in 2005.
Current Ratio
2006 = 1294.40
2836.60
= 0.46 Times
2005 = 1310.10
824.90
= 1.59 Times
2004 = 1015.50
1201.60
= 0.85 Times
In this company the current assets are lower than current liability
which is determine by the ratio i.e. 0.46 times in 2006. Then that
company is not to meet its short-term financial strength. As compare
in 2005, the current ratio was 1.59 times which shows good short
term financial strength and comes down to 0.46 times in 2006.
How was the profit of the company shared? What
portion went to investors as dividend, and how
much was retained in the company to fund growth?
A. Payout Ratio
Formula = Dividend
Earnings
2006 = 287.60
4239.00
= 0.0678
2005 = 448.60
4915.40
= 0.0913
2004 = 289.80
4201.00
= 0.0690
Here in 2006 investors get the 6 cents dividends out of total earnings
which is lower than 9 cents in 2005.
B. Plowback Ratio
2006 = 1 - 0.067
= 0.933 or 93.30 %
2005 = 1 – 0.0913
= 0.9087 or 90.87%
2004 = 1 – 0.069
= 0.931 or 93.10%
External Finance
AGL Company has borrowed money mainly from three sources like
Medium term notes, senior notes, and bank loans. The following table
indicates the external finance of AGL in 2006 and 2005.
The investing cash flow is in minus this year because of the payment
for oil & gas assets i.e. 557.1 million and purchase of new businesses
i.e. 1455.2 million which comes to $ (2288.6) million.
In financing cash flow Company borrowed foreign currency so cash
increased from $ (771.1) million in 2005 to $ 1577.6 million in 2006.
As company receipts increased and company paid its borrowings the
cash at the end of the year decreased to $ 102.1 million in 2006 from
$ 377 million in 2005.
For determining the best practice governance for AGL, the AGL
Board has taken into account the Australian Stock Exchange (ASX)
'Corporate Governance Council, Principles of Good Corporate
Governance and Best Practice Recommendations' of March 2003,
the Corporations Act 2001 (including CLERP 9 amendments) and
other related best practice guidelines.
CONCLUSION
From the ratio of net profit margin, we can see that AGL has profit
over revenue is lesser than in 2006 as compared to 2005. And also
company has not good liquidity position to meet its financial obligation
as company’s current liabilities are higher than its current assets.
Here, company also not utilised its asset in profitable way that shows
by asset turnover ratio. And even a good profit, company did not
declare much dividend as compared to last year.
Here the company much invested in oil and gas assets and
acquisition of business, it was huge money block but later company
gains benefits in future. And company got more finance from foreign
currency borrowing to make such investments.
REFERENCES
1. www.agl.com.au
2. www.asx.com.au
3. http://beginnersinvest.about.com/cs/investinglessons/l/
blassetturnover.htm
4. http://www.investorwords.com/1258/current_ratio.html
5. http://www.answers.com
6. http://www.bized.ac.uk/compfact/ratios/profit4.htm