Analysis Of The Financial Reports Of Ansell Limited Finance Essay

Ratio analysis is an of import tool for apprehension and comparing concern public presentation. Ratios and certain fiscal computations are non often used and looked isolated. It is of import to transport out computations of ratios and other important fiscal figures with old old ages ( many companies publish five or ten twelvemonth sum-ups as portion of their one-year studies ) in order to place positive or inauspicious tendencies ) . Comparison with other, relevant rivals and industry “ norms ” is besides of import.

The intent of this assignment is to analyse the fiscal study of Ansell Limited and aid directors and stockholders to doing determination. Ansell Limited is the new name of the company once known as Pacific Dunlop Limited. The company ‘s name was changed in April 2002 as a consequence of a strategic repositioning of the company to concentrate on its nucleus concern, protective merchandises and services in a wide health care context. The company leverages the solid foundation provided by the Ansell Healthcare concern that has been a major portion of the parent company ‘s portfolio of concerns since it was acquired in 1969.

Ansell Limited, as the company is now known, has a long and distinguished calling dating back to when its first concern, pneumatic bike Sur industry, commenced in Australia in 1889. Since its beginning the company has changed its name on many occasions to reflect the nature of the concerns in which it was involved at the clip. Ansell Limited is an Australian publically listed company with its Corporate Head Office located in Richmond, Australia. The company is listed on the Australian Stock Exchange as its place exchange.

1.0 Profitability Ratios

1.PROFITABILITY

2007

2006

Tax return on Equity ( ROE )

16.71 %

18.15 %

Tax return on Assetss ( ROA )

9.59 %

10.40 %

Gross Profit Margin

36.84 %

37.42 %

Net income Margin

9.89 %

11.64 %

Cash Flow to Gross saless Gross

11.95 %

11.57 %

Tax return on equity

One of the most of import profitableness prosodies is return on equity. Return on equity means the sum of net income a company obtained in comparing to the entire sum of stockholder equity found on the balance sheet. There is a lessening ROE between two old ages from 18.15 % to 16.71 % . Any concern that has high return on equity will be easy able to bring forth hard currency internally. In many parts, the higher a company ‘s return on equity compared to its industry, the better. This should be obvious to even the less-than-astute investor. We can reason that the higher you can acquire the return ; on your equity, in this instance 18.15 % in 2006, the better.

Tax return on Assetss ( ROA )

We know that return on assets is a profitableness ratio that compares an entity ‘s net incomes to the assets available to bring forth the net incomes. Efficaciously, the ratio reflects the consequences the consequences of the entity ‘s ability to change over gross revenues gross into net income, and its ability to bring forth income from its plus investing.

ROA indicates of how profitable a company is comparative to its entire assets. The higher the ROA figure, the better, because the company is gaining more money on less investing. Ansell Limited has an ROA of 9.59 % in 2007, but there is a higher ROA in 2006. So we can state the twelvemonth 2006 is better at change overing its investing into net income. The direction ‘s most of import occupation is to do wise picks in apportioning its resources.

Gross Profit Margin

The gross net income border reflects the gross net income generated per dollar of gross revenues gross. Entities with high turnover tend to hold smaller gross borders. 36.84 % of gross net income border agencies for every RM1sales generated the concern earn RM 0.3684 gross border. The above ratio of 36.84 % compares with 37.42 % at 2006 of Ansell, there are a little lessening in gross net income border, hence, 2006 is better. The ratio above shows slight diminishing tendency in the gross net income since the ratio has reduced from 37.42 % in 2006 to 36.84 % in 2007. This indicates that the rate in addition in cost of goods sold is more than rate of addition in gross revenues, therefore the increased inefficiency.

Net income Margin

An single must run into all other disbursals from its gross net income. Profit border can be refereed as the comparing of gross revenues gross and EBIT. This ratio reveals that per centum of gross revenues gross dollars consequences gaining before involvement and revenue enhancement. This is a manner used to mensurate public presentation and can be compared across companies in simliar industry. The net income border ratio shows that the border is an betterment from 9.89 % to 11.64 % about Ansell Limited between two old ages. The net income border demo how much net income a company makes for every $ 1 it generates in gross, the higher a company ‘s net income border, the better.

Cash Flow to Gross saless Gross

The ratio is the per centum step of a house ‘s ability to change over gross revenues into hard currency, and an of import index of its creditworthiness and productiveness. In twelvemonth 2007 of Ansell Limited, the ratio is 11.95 % that is higher than twelvemonth 2006. The high figure of 2007 means the house will be able to turn because it has sufficient hard currency flow to finance extra production ( Bebbington, 2001 ) .

2.0 Asset Efficiency Ratio

2.Asset Efficiency

2007

2006

Asset Turnover Ratio

0.98 times

0.90 times

Inventory Turnover ( yearss )

86 yearss

88 yearss

Debtors turnover ( yearss )

67 yearss

68 yearss

An entity ‘s plus efficiency depends to a great extent on the efficiency with which it manages its current and non-current investing. A major portion of an entity ‘s investings in assets is investings in stock list and debitors. It is hence utile to measure direction ‘s efficiency in pull offing these assets. This can be done by ciphering the entity ‘s stock list and debitor turnover.

Ansell ‘s ability to change over a dollar investing in assets into gross revenues gross dollars has improved over the two old ages. In 2007, an investing of $ 1 assets generated 98 cents of gross revenues gross, compared to 90 cents in 2006. The addition in the plus turnover has contributed to the entity ‘s betterment in ROA.

The twenty-four hours stock list indicates the mean period of clip it takes for an entity to sell its stock list. In 2007, Ansell Limited on mean 86 yearss to sell its stock list points, that less than the mean yearss taken in 2006. The tendency shows a lessening in yearss which indicates a quick of stock turnover. When we conclude, we can state that the higher the stock list turnover period means the less effectual is in its operations, the higher the sum of investing that must be tied up in stock lists and the longer the operating rhythm necessary to refill hard currency. In other words, twelvemonth 2007 with the lower stock lists turnover period than twelvemonth 2006 is more efficient in its buying, receiving, and gross revenues activities.

The yearss debitor indicates the mean period of clip it takes for an entity to roll up the money from its trade debitors. Gaining at a zero rate of return it is advantageous for an entity to turn over its stock list and debitors every bit rapidly as possible. We know that lower twenty-four hours stock list and yearss debitors by and large reflect better direction efficiency. Ansell Limited ‘s direction of debitors besides appears to hold improved, with the debitors being converted to hard currency on norm in 67 yearss in 2007 compared to 68 yearss in 2006 ( Bebbington, 2001 ) .

3.0 Liquidity Ratios

3. Liquid

2007

2006

Current Ratio

2.75 times

2.32 times

Quick Asset Ratio

1.96 times

1.74 times

Cash Flow Ratio

0.64 times

0.41 times

The current ratio shows the dollars of current assets the entity has per dollar of current liabilities. A lower ratio suggest that the entity will hold trouble in run intoing its short-run duties. However, a high current ratio is non needfully good, as it could be due to extra investings in unprofitable assets ( hard currency, receivables or stock list ) . Ansell Limited had $ 2.32 of current assets for every $ 1 of current liabilities in 2006. This increased to $ 2.75 of current assets for $ 1 of current liabilities in 2007. Remember that a lower ratio can bespeak greater efficiency so, if this ration continues to travel upwards, it might bespeak that the entity has extra investing in current assets.

The speedy plus ratio estimates the dollars of current assets available to serve a dollar of current liabilities. It is a tougher trial of liquidness because it does n’t include current stock list from the numerator. Inventory is excluded because it is the current plus that takes the longest period of clip to change over to hard currency. This means that Ansell Limited has RM 1.74 worth of liquid current assets for every RM1 worth of short-run duties in 2006. This ratio besides increases at 2007 that is RM 1.96 worth of liquid current assets for every RM1 worth of short-run duties. So Ansell Limited has better ability to pay short-run duties in 2007. That because the lower the current and acerb -test ratios, the lower the liquidness of the concern. And liquidity ratios may be excessively low, thereby an inability to pay short-run duties.

Cash flow ratio helps to measure liquidness is the hard currency flow ratio. The hard currency flow ratio indicates an entity ‘s ability to cover its current duties from runing activity hard currency flows. We know that the higher the ratio, the better the place of the entity to run into its duty. In 2007, Ansell Limited had $ 0.64 of operating hard currency flows for every $ 1 of current liabilities. This increased from $ 0.41 of operating hard currency flows for every $ 1 of current liabilities in 2006, proposing that the company has a greater capacity to run into its current duties from its operating activities hard currency flows ( Bebbington, 2001 ) .

4.0 Capital Structure Ratio

4.Capital Structure

2007

2006

Debt to Equity Ratio

103.7 %

100.1 %

Debt Ratio

50.92 %

50.02 %

Equity Ratio

49.08 %

49.98 %

Interest Coverage Ratio

6.63 times

6.63 times

Debt Coverage Ratio

2.72 times

2.55 times

The debt to equity ratio indicates how many dollars of debt exist per dollar of equity funding. If this ratio exceeds 100 per cent, so the entity is more reliant on debt support than equity support. 103.7 % of debt to equity ratio in 2007 indicates $ 1.037 of debt exist per dollar of equity funding. Because this ratio is exceeds 100 per cent, so the entity is more reliant on debt support than equity support.

The debt ratio indicates how many dollars of liabilities exist per dollar of assets. If the debt ratio exceeds 50 per cent, so the entity finances its investing in assets by trusting more on debt relation to equity. The debt ratio of 2007 indicates that the entity is financing every $ 1 of assets with 50.92 cents of debt. The staying 49.08 cents is financed with equity. The ratio exceeds 50 per cent, so the entity finances its investings in assets by trusting more on debt comparative equity. This ratio is above the arbitrary regulation of 50 per cent debt and 50 per centum equity. Both of the two old ages, the debt ratios are exceeds 50 per cent, but non transcend excessively much. Compare the two old ages, the 2006 is better because it more near the “ 50-50 ” regulation ( debt ratio is 50.02 % and equity ration is 49.98 % ) .

The involvement screen ratio used to find how easy a company can pay involvement on outstanding debt. Debt disbursals can be said as burdening Ansell limited if the ratio is lower. When a company ‘s involvement coverage ratio is 1.5 or lower, its ability to run into involvement disbursals may be questionable. An involvement coverage ratio below 1 indicates the company is non bring forthing sufficient grosss to fulfill involvement disbursals. The involvement coverage ratios in two old ages are same and at 6.63 times, that are satisfactory.

The debt coverage ratio links the hard currency flows from runing activities with long-run debt, and is found by spliting non-current liabilities by hard currency from operating activities. It besides measures an entity ‘s ability to last in the longer term and stay solvent, as it indicates how long it will take to refund the bing long-run debt committednesss at the current operating degree. The debt coverage ratio for 2006 indicate that, if Ansell Limited maintains its operating hard currency flow, it would take the company on mean 2.55 old ages of operating hard currency flows to refund its non-current liabilities. This hard currency debt coverage ratio is lower than in 2007 ( Atrill, 2001 ) .

5.0 Market Performance Ratios

5.Market Performance

2007

2006

Net Tangible plus ratio

0.50

0.55

Gaining Per Share

0.67

0.73

Dividend Per Share

0.23

0.20

Dividend Payout Ratio

34 %

27 %

Operating Cash flow Per Share

9.99

8.44

Net Tangible Asset Ratio

The net touchable plus backup per portion provides an indicant as to the book value of the company ‘s touchable assets per ordinary portion on issue. Compare Ansell Limited ‘s NTAB per portion with its portion monetary value. The portion monetary value exceeds the NTAB per portion. The magnitude of the extra reflects the market ‘s appraisal of the entity ‘s future growing chances.

Dividend Per Share

The dividend per portion is the former step of return, and indicates the distribution of the company ‘s net incomes in the coverage period via dividends expressed comparative to the figure of ordinary portions on issue. Dividend per portion is 2.27 in 2007 and 2.01 in 2006. There is an addition in DPS. In order to avoid dividend cuts unless their fiscal status demands it or there has been some other alteration in the concern or its capital construction. As a consequence of this, increases in the dividend are taken to be a mark that the direction is confident that the new degree can be maintained or improved on. The increasing of DPS is non good because dividends are a signifier of net income distribution to the stockholder. Having a turning dividend per portion can be a mark that the company ‘s direction believes that the growing can be sustained.

Gaining Per Share

Gaining per portion is the portion of a company ‘s net income allocated to each outstanding portion of common stock. Gaining per portion is thought to be the one most of import variable in corroborating a portion ‘s monetary value. It is besides a major constituent of the price-to-earnings rating ratio.

Gaining per portion is a definition utilized in measuring the profitableness and success of a company on a per-share footing. It ‘s non normally really helpful to compare the EPS of one company with others. Differences in capital construction can render any such comparing meaningless. However, it can be really utile to supervise the alterations that occur in this ratio for a company over clip. In 2007, the EPS of Ansell Limited is 67.6 cents, which means 67.6 cents ‘ company net income allocated to each outstanding portion of common stock. There is a lessening of EPS from 2006 to 2007.

5.1 Dividend Payout Ratio

The dividend payout ratio provides an thought of how well net incomes support the dividend payments. The dividend payout ratio has increase from 27 % in 2006 to 34 % in 2006. By and large, the high growing companies have lower dividends payouts and low growing companies have higher dividend payouts. More mature companies tend to hold a higher payout ratio. For every bit much above exoterica, Ansell Limited is in growing phase and have more high growing rate ( Atrill, 2001 ) .

Decision

In decision, the five ratio analyses are used in this assignment: profitableness ratios, plus efficiency ratios, liquidness ratios, capital construction ratios and market public presentation ratios. Ansell Limited is in a really unafraid fiscal place. The company has strong future chances in the countries of profitableness, liquidness, plus efficiency, capital construction and market public presentation on its current way.

Profitableness is the ability of a concern to gain net income over a period of clip. After analysis, Ansell Limited has the lower ROA, Gross net income border and net income border in 2007, and the profitableness to ordinary stockholders is non good and demoing an downward tendency. The ROE measurings show us that 2006 is higher, so he makes better usage of its capital. 2007 compares to 2006, it has lower net income border, so the public presentation of 2006 is better. 2006 has a higher gross net income border that is good.

A comparing of the efficiency ratios between two old ages provides a assorted image. As a general regulation, 2007 with the lower stock lists turnover period than 2006 in Ansell Limited is more efficient in its buying, receiving, and gross revenues activities. 2007 has the higher plus turnover ratio. That reveals 2007 is more efficiency at utilizing its assets in bring forthing gross revenues or gross.

The current ratio and speedy plus ratio of 2007 are higher. We can acquire cognize that 2007 has higher liquidness of the concern and better ability to pay short-run duties.

For every bit much dividend payout ratio, we can acquire cognize Ansell Limited is in growing phase and have more high growing rate because it has higher dividends payout ratio in 2007. And Ansell Limited has the higher dividend output ratio that is considered to be grounds that a stock is underpriced in 2007. Although it ‘s non normally really helpful to compare the EPS of one company with others, but we know Ansell Limited is increase bigger per centum between two old ages.