Step 1:
Ratios:
After finishing the ratios for Greenearth Energy, I am
feeling mixed results about them. Majority of my ratios are in the negatives which
isn’t a good sight, but it appears my company is also losing money and running
at a loss i.e. the profit was actually a loss. Percentages and ratios have
never been my strong point but once I struggled my way into them, I found it relatively
easy. At first glance it doesn’t seem that way but just linking cells between
spreadsheets wasn’t so bad. Compared to the previous assignments this one has
taken about a third of the time and seems more reasonable! The thing I struggled
most with was the Market Ratios. The shares issued and share price was
confusing and took about as long as all the other combined; nonetheless I still
got it finished. Also shareholders’ equity was a little tricky and in the end I
just went with total equity. As to why the ratios for Greenearth Energy are so
bad, I wouldn’t know where to point my finger. It could be many different
reasons as the results are similar across the board.
I put a post on Moodle to try gain some interaction
with other people and compare.
https://moodle.cqu.edu.au/mod/forum/discuss.php?d=43537.
As of yet, I haven’t heard any feedback so I went and looked at some other
peoples that had it available. The layout all seems the same but the values and
ratios are very different. I found some with small numbers but mine involves
hundreds of thousands and most seems to be so bad with all the negatives. My company
must not be doing as well as it could at this stage.
Economic Profit:
Admittedly had a bit of a
brain malfunction with this! The actual working out of this was simple but I made
it so much worse. The formula to use is already provided but I couldn’t find
the cost of capital. I went searching through my company spreadsheet and carefully
through the financial statements and footnotes trying to find the cost of
capital and I was really started to stress out… them it occurred to me that the
assessment task said to use 10% unless given reason for something else. Feeling
just a little silly!
My economic profit starts
off in the -$3M and improves year my year to approximately -$800K (as of 2014).
There is a big improvement but I'm thinking it is so bad because my Return on
Net Operating Assets (RNOA) is so poor which also makes it the negative too.
I put a post on Moodle to try gain some interaction
with other people and compare.
https://moodle.cqu.edu.au/mod/forum/discuss.php?d=43537.
Like above I haven’t heard anything back or received any feedback but I assume there
are other business in a similar position, but majority would be in a better
position with hugely different economic profits.
By breaking it down it has enabled me to see just how
my company – Greenearth Energy – is performing; not good! But I am still
struggling to understand why this is happening even though I can see the
results I’m not able to specifically point something out. That is the biggest
thing I haven’t gained from pulling apart my financial statements.
Step 2:
With developing capital
investments there a few options available here. One option is to expand their
horizons and open a research company (or another branch/industry) overseas and
try gain more attention and revenue which also increases expenses. The second
option could be just to focus here on Australia and maybe just work on their
marketing strategies here. Get their brand name out and have demonstrations on
what they do and inform people of their technological advancements. I would recommend
working on the latter. Seeing as though it is an Australian based company I think
its base needs to be strong. Minimise expenses and try to work on getting its
economic profit out of the red and expand later.
I have finished my ratios and economic profit but couldn't find a way to attach my excel file. if you click on the link below you can see my two attached files I have posted else where:
https://moodle.cqu.edu.au/mod/forum/discuss.php?d=43583
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