BUACC5930 Assignment Sample
The financial ratios of Transurban are calculated and presented as below table:
|Ratios and Formulas|
|Net Profit Ratio = Net Profit / Sales||7.65%||14.19%|
|Return on Equity = Profit After Tax/ Equity||3.60%||6.92%|
|Profit After Tax||209||468|
|Current Ratio = Current Assets/ Current Liabilities||0.60||0.82|
|Asset Turnover Ratio = Sales/ Total Assets||0.12||0.12|
|Trade Receivable days = (Trade Receivables/Sales) 365||17.37||49.14|
|EPS (in cents)||11.7||22.7|
|Debt to Equity =Debt/Equity||2.219||2.198|
|Interest Coverage Ratio =Profit/Interest paid||0.28||0.65|
(Source: Annual Report, 2018).
Profitability ratio shows the ability of the firm to generate returns for the shareholders. Based on the financial ratio, it can be analyzed that the profitability of the firm improved from year 2017 and year 2018. The firm earned net profit margin of 14.19% in year 2018 as compared to 7.65% in year 2017 (Annual Report, 2018).
At the same time, the return on equity is also enhanced for the company during this period as it increased from 3.60% to 6.925 showing the improved ability of the firm to generate more profits for the investors. It is because the firm became successful to increase revenues and enhance its net profit by reducing the operational costs properly (Brigham and Ehrhardt, 2011).
The reduction in operational costs and growth due to business expansion enabled the firm to generate high returns in 2018 as compared to previous year.
Liquidity ratio shows the ability of the firm to meet the short term obligations of the firm. In terms of short-term solvency, it can be depicted that the ability of the firm to meet its short term obligations improved during this period.
It is because the firm’s current ratio increased from 0.60 to 0.82 shows the improvement in the ability of the firm to meet its short term obligations. However, the current ratio is far away from the ideal current ratio of 2:1 means the firm is not highly capable of meeting its short term obligations (Finkler et al., 2016). But overall it is able to meet its daily expenses smoothly through its current assets.
Efficiency ratio indicates the ability of the management to utilize the available resources effectively to meet the sales targets. In relation to this ratio, it can be analyzed that asset turnover ratio is constant in year 2017 as well as year 2018.
It is because it remained same in both years. But at the same time, it is very low (0.12) showing inefficiency of the management to convert its assets into sales. At the same time, trade receivables days increased from 17.37 days to 49.14 days means the firm adopted a lenient policy in collection of the trade receivables.
This policy is taken for relaxing the credit terms to the customers to enhance the sales (Gibson, 2010). But at the same time, it may cause the issue related to cash that can affect the ability of the firm to meet the liquidity requirements for the daily operations.
As perspective of investment, earning per share of the company shows an increase from 11.7 to 22.7 from 2017 to 2018. It means the firm’s ability to distribute more profits to its shareholders improved during this period. It is also beneficial for the firm to attract the investors for the further investments in the shares of the firm (Lasher, 2012).
In capital structure ratio, it can be depicted that the debt-equity ratio did not change significantly from year 2017 to 2018. It is because it is approx 2.2 in both years showing the belief of the firm to take more debt as compared to equity in its capital structure. It also shows that the firm keep its investors more safe but there is possibility of the bankruptcy if something happens wrong with the company.
Apart from this, interest coverage ratio also improved from 0.28 to 0.65 showing the improving ability of the firm to repay its interests on loan through the profits earned. But at the same time, it is quite low than 1 indicating the inability of the firm to repay its loan interest by using its profits (Peterson and Fabozzi, 2012).
Ratio analysis enabled to analyze the financial position and profitability of the firm as it improved in 2018 as compared to 2017. But all this information is based on the financial information available in financial reports that do not consider the changes in market conditions and do not provide the current financial position. Information related to management policies and strategies and their outcomes are also considerable to know the positon of the firm.
At the same time, the information of the external environment is also valuable to make a better assessment of Transurban. The consideration of this information could enable to assess the impact of external environment and also evaluate the performance with respect to these changes in the environment.
Apart from this, other information than financial statement including stock performance, conflicts of interest between company’s management, board, and shareholders and management and director compensation can also be beneficial to make assessment of the firm (McKinney, 2015).
There is also information available on company websites, press releases and conference calls that are done by the analysts and investors. It could be effective for the better assessment of the firm.
As per the sustainability report of the Transurban, there are in nine UN Sustainable Development Goals applicable to this company.
These are good health and well being, gender equality, affordable and clean energy, decent work and economic growth, industry innovation and infrastructure, sustainable cities, climate change, responsible consumption and partner ships for the goals.
In regards to good health and well being, there is no such specific target fixed for the company, however, well being program is in place in the organization for eliminating the fatalities and injuries associated with the roads (Transurban. 2018).
At the same time, it has 100 % road safety plan in all regions of Australia. Thus, it can be stated that company is going in this area.
In terms of gender equality, company is targeting at rational gender balance. Currently company has 56% male and 44% female employee workforce. Also, it ensures the active participation and equal opportunities in leadership positions and decision making process of female staff.
It is also taken new initiatives in HR process to encourage the female participations. On the other hand, affordable and renewable energy, company has done the renewable energy installations on their sites.
Although there is no fixed target to achieve the Installed renewable energy capacity and Renewable energy generation, however company is exploring the power purchase contracts that may contribute into renewable energy. At the same time, company’s renewable energy share in total final energy consumption is 0.1 % that is 140kW (Klettner et al., 2014).
In addition to this, company has taken the multiple energy efficiency initiatives focusing on the tunnel ventilation and lighting. Also, company has planned to continue these initiatives in next financial year. it is also found that company has reduced the 20 % reduction in electricity but 44% increase in use of fuel since 2013.
Additionally, company’s energy intensity is measured in terms of primary energy as 568.370 GJ per $2,249 M (Schröpfer, 2012). These data shows the prominent and initiatives taken by the company in renewable energy. Company is aiming at Reduce energy consumption by 10% by 2023.
Company has significantly contributed in economic growth in terms of employment work and resource efficiency. Its major projects are contributing in economic heath and enhancing the productivity of cities by time saving .Although, company has no set targets for travel time saving however, company has saved the 328.000 hours average workday travel time.
At the same time, it has created the 6000 jobs in 6000 (Mehmann, J. and Teuteberg, 2016). Apart from that, company is focusing at using the sustainable practices and raw materials in projects and high level derivatives.
Through taking this initiative, it has uses the supplementary materials in North Connex projects. At the same time, company has done various partnerships with beyond zero remissions and Bora with the purpose of reduces the carbon emission.
Also, it is also promoting the use of the sustainable material in road construction projects. Thus, it can be stated that Transurban has significantly contributed in the areas of use of suitability materials, waste management, energy management and job creation that leads to economic growth to the country.
Apart from that, there are remarkable initiatives taken by the company towards industry innovations and infrastructure. At the same time, it has implemented toll demand notice initiative that will save $36.5 Million per year for customers. Apart from that various projects are in progress such as graphene road sensors LED in-road communications and wire-rope barrier inserts (Ye, 2012).
In addition company has demonstrated the some exemplary work such as CityLink Tulla Widen and Logan Enhancement Project has excellent rating. Moreover, company has continuously committed towards implementing sustainability practices in ongoing and future projects.
Thus, on the basis of Transurban Sustainable report is continuously progressing towards the meeting the UN Sustainable Development goals. it has contributed remarkable in employment generation in the country, energy saving & renewable and waste management.
The initiative o promoting the use of sustainable practices and material sets the example in the industry. It has also worked to reduce the consumption of energy internally(Rouhani, O.M. and Gao, 2016.
As per the sustainability report of the company there is not major gap in found in gender equality and remuneration. Company is sincerely making efforts to increase the participation of female workforce in managerial and executive level.
Apart from that, company conducts the various programs for the well being of employees and reduces the degree of risks in work. Thus, it can be stated that company has done well in order to meet the UN Sustainable Development goals.
|05-Jul||Account Receivables A/c||6,200|
|To sales A/c||6,200|
|(Being Sales Made)|
|14-Jul||Account Receivables A/c||678|
|Credit Cards Charges A/c||28|
|To Sales A/C||700|
|(Being Sales Made)|
|14-Jul||Account Receivables A/c||440|
|To Finance Charges||440|
|(Finance Changes added to account)|
|15-Jul||Account Receivables A/c||6000|
|Interest Receivables A/C||49|
|To Alexis Ltd.||6049|
|(Being Amount Received From Customer)|
|31-Jul||Accrued Interest Income A/c||163|
|To Domino Ltd A/c||163|
|(Accrued Interest not paid by Debtors)|
|31-Jul||Accrued Interest Income A/c||61|
|To ERV Ltd A/c||61|
|(Interest is accrued)|
|01-Jul||Opening Account Receivables||30,000||05-Jul||Sales A/c||6,200|
|01-Jul||Opening Interest Receivables||237||14-Jul||Sales A/c||678|
|14-Jul||Credit Card Charges A/C||28||14-Jul||Finance Charges||440|
|Cash flows from operating activities||Particular||Particular|
|Cash receipts from customers||$450,000|
|Cash paid to suppliers||0|
|Cash paid to employees||0|
|Cash generated from operations||0|
|Income taxes paid||0|
|Net cash from operating activities||$450,000|
|Cash flows from investing activities|
|Purchase of property, plant, and equipment||-320,000|
|Proceeds from sale of motar vehicle||3,000|
|Net cash used in investing activities||-317,000|
|Cash flows from financing activities|
|Proceeds from issuance of common stock||0|
|Proceeds from issuance of long-term debt||-25,000|
|Principal payments under capital lease obligation||0|
|Net cash used in financing activities||-25000|
|Total Cash Flow||108,000|
Brigham, E. F. and Ehrhardt, M. C. 2011. Financial Management: Theory and Practice. USA: Cengage Learning.
Finkler, S. A., Smith, D. L., Calabrese, T. D., & Purtell, R. M. 2016. Financial management for public, health, and not-for-profit organizations. USA: CQ Press.
Gibson, C. H. 2010. Financial Reporting and Analysis: Using Financial Accounting Information. USA: Cengage Learning.
Lasher, W.R. 2012. Practical Financial Management. USA: Cengage Learning.
McKinney, J. B. 2015. Effective financial management in public and nonprofit agencies. UK: ABC-CLIO.
Peterson, P.P. and Fabozzi, F.J. 2012. Analysis of Financial Statements, 2nd edn. USA: John Wiley and Sons.
Annual Report 2018. Transurban. Retrieved From: https://www.transurban.com/about-us/reporting
Klettner, A., Clarke, T. and Boersma, M., 2014. The governance of corporate sustainability: Empirical insights into the development, leadership and implementation of responsible business strategy. Journal of Business Ethics, 122(1), pp.145-165.
Mehmann, J. and Teuteberg, F., 2016. The fourth-party logistics service provider approach to support sustainable development goals in transportation–a case study of the German agricultural bulk logistics sector. Journal of cleaner production, 126, pp.382-393.
Rouhani, O.M. and Gao, H.O., 2016. Evaluating various road ownership structures and potential competition on an urban road network. Networks and Spatial Economics, 16(4), pp.1019-1042.
Schröpfer, T., 2012. Ecological urban architecture: qualitative approaches to sustainability. Walter de Gruyter.
Transurban. 2018. FY18 UN sustainable report development goals progress report. [Online]: available at: https://www.transurban.com/content/dam/transurban-pdfs/01/sustainability-reports/FY18-Sustainability-Report-SDG.pdf (Accessed on 24th May, 2019).
Ye, S., 2012. Research on urban road traffic congestion charging based on sustainable development. Physics Procedia, 24, pp.1567-1572.