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Introduction of Accounting And Finance For Decision Making Assignment
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Accounting and reporting of the financial information are significant for facilitating the smooth flow of investments on the part of shareholders and the interested inventors. Analysis of the financial statement shows the true and fair position of the company and helps the management in making informed business decisions, the current study focuses on the different aspects of the financial statements of Amcor plc (AMCR), and a brief analysis related to the comment as well as other information related to the financial measure. The current study highlights the major financial analysis in the form of gross profit ratio, operating profit and return on assets as well on equity.
I. Company and its environment
Amcor plc (AMCR) is a renowned company operating at the global level and famous for the packaging for their different products. The company assisted in sustainable packaging and improved the level of packaging for the products from medicines to food items from plastic to cans. The CEO of the company is Ron Delia, the management of the company provides the framework which involves not only flexible packaging but also provides a Good scope to the competitors in terms of packaging. As opined by Palepu et al. (2020), the company originated from a group of Australian manufacturers who were collected and identified as the company for manufacturing sustainable packaging. It becomes the basis of the foundation of the company.
In the current scenario, the company is growing positively to the demands of the cone in marketing as well as for the companies who were looking for an opportunity to work with the Amcor plc (AMCR). The recent acquisition of the company took place in the year 2018 when the company acquired BEMIS Company based in the USA market. The company has acted based on shares which are 5.06 billion valued in shares. The company has a strong market share and is quite successful in the packaging industry of packaging. Investors have a positive approach to the market value of the company as the company has been involved in a consistent acquisition process from the year 2010 to 2019. As stated by Borodin et al. (2019), In addition, a financial analysis of the cone helps in understanding the market value of the cone in terms of its total investment for the period 2019 to 2021. The impact of a pandemic can also be intended on the profitability of the cone which is crucial for the investors interested in investing in the monetary s securities of the company.
II. Income statement analysis
Income statements are the most significant statement which is important for understanding the profitability of the company as well as the financial performance of the current as well as for the future prospectus. As stated by Faccia and Mosco (2019), it is one of the most important financial statements which can be understood with the help of extracts from the annual report of the company selected for the financial analysis. As per the reports of the company the gross profit can be estimated for the period from 2019 to 2021. It helps in understanding the financial performance of the company in the past 3 years. The company has an increasing gross profit ratio which is 19 % in 2019, 20.78 % in 2020 and 21.24 % in 2021. It can be said that the company can sell its product with a constant positive approach.
Gross profit ratio
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As stated by Fenyves et al. (2018), operating profit is also one of the significant segments of the income statement and helps in the measurement of the financial condition during the pandemic period of the company. The current scenario provides for the operating profit margin which is approx 12 % in 2019 which decreased to 9.99 % and again reached 11.11 %. It can be said that the company has increased costs in the year 2020.
Operating profit margin
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III. Balance sheet analysis
The balance sheet is the most significant financial statement which represents the total worth of the cony in the form of capital, equity, liabilities and capital as well as field assistance. As stated by Osadchy et al. (2018), an investor chooses the balance sheet as the key document, based on the current balance sheet financial decision regarding the obligation of the company to pay its short term as well as long term liability can be estimated.
The current ratio of the company highlights the company's ability to pay off its current liability and highlights if the company has adequate current assets as compared to the current liability of the company. The current ratio of the company shows that the company does not have sufficient current assets to meet its short term obligation as the current ratio is less than the idle ratio which is 2:1. The company has a decreasing current ratio which is 1.23, 1.16 and 1.14 for the periods 2019, 2020, and 2021, it shows that the company is not able to manage its current assets properly.
Current ratio
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In context, the quick ratio is more liquid as compared to the current ratio as it excludes the value of inventory, which is a major part of the current assets. As stated by Safta et al. (2021), it can be said the that inventories are less liquidity than the other assets in the current ratio the company has no consistent quick ratio as in the year 2019, the quick ratio is 0.47% in 2020, it further decreased to 0.43% in the year 2021.
Quick ratio
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- Returns analysis
The company's return on net assets has increased, as can be seen from the year 2019 to 2021 is 0.047 to 0.05 in 2021. It shows that the company can deploy its net assets effectively as it helps the economy in achieving the increasing rate of return on net assets.
Return on net assets
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In addition, the return on equity shows that the company has decreasing investment in the dorm of equity, it further highlights that the company is not able to deploy its capital in the form of equity effectively, as it is 0.19 in the year 2021.
Return on net equity
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The debt to assets ratio shows the value of debt over the total assets of the company. It results in analyzing the leverage ratio. As opined by Sutopo et al. (2018),it further helps in the analysis of the leverage performance of the company. The company has a 0.35 ratio value in the year 2021, it shows debt accounts for 35 % of the total value of the assets.
Debt to assets ratio
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V. Cash flow analysis
Cash flow represents the inflow and outflow value of the total cash within the organization in the form of operating activities, investing activities and financial activities. It is important to understand the changes that take place in different financial years. In the year 2019, the company has a negative cash flow of -19 million USD, which is further increased to 141 and 107 in 2020, and 2021 respectively.
Cash changes from the year 2019 - to 2020
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VI. Summary
1. Profitability of the company
Growth
The current scenario by estimating the gross profit, as well as operating profit margin, provides for the growth of the company. The company has an increasing gross profit ratio. It can be said it is profitable for investment purposes.
Positioning
The company has strong positioning in the market and can attract investors.
Margins
Investors as well as management of the company can make informed decisions based on the values derived from the computation of the gross profit and operating profit ratio.
Break-Even point
The Break-even point of the company shows a decreasing trend which is negative in the year 2021 which is -207, it can be said that it has a higher cost as compared to the revenue.
Break-even point
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2. Company rentable positing
Return on net operating assets
The company has an increasing rate of return on net assets. It can be said that the company can deploy and utilize its assets effectively. It further shows that the company has a positive trend in return on net operating assets.
Return on equity,
The company has decreased return on equity which shows that the company has decreased the rate of equity as it has issued equity in fewer amounts.
Leverage effect
The leverage position of the company is commendable as it is in the middle position. It shows the country can pay off its obligation.
3. Financial structure
Funding
Based on the company strategies and blueprint for the expansion and acquisition the cony can take the decision related to the funding requirements.
Debt level and self-financing
The company has the correct level of debt as the debt assets ratio has been calculated. It highlights that the company's debt structure is fair and can fulfil desired outcomes.
Ability to repay debt
The company has been issued less equity for the past financial years, it also issues debt in the fair structure. It can be said that the company can pay off its short term as well as long term liabilities.
4. Company cash flow positive or negative
In case
The cash flow of the company for 2019 and 2020 is positive while for 2021 it is negative. It shows that the cash outflow is more than the cash inflow in the year 2021.
Origin of net cash flows: operating, financing, and investment activities.
Cash inflow of the company is from income, goodwill, and sale of assets by the cony in that previous financial year while the cash outflow can be estimated with the help of the company's purchase of machinery and other capital.
Financial analysis is crucial for the company as well as for the other stakeholders who have direct or indirect interests in the profitability of the company. The crucial financial estimates as well a comparison of those financial statements help in getting the true and fair financial information regarding the company and further helps the companies in accessing the positive pool of finances. In the decision making process financial analysis plays a major role in budget making and other investing decisions. Various analyses for finance fury jet assist in deploying the value of the company through investment.
References
Books.
Palepu, K.G., Healy, P.M., Wright, S., Bradbury, M. and Coulton, J., 2020. Business analysis and valuation: Using financial statements. USA: Cengage AU.
Journals
Borodin, A., Shash, N., Panaedova, G., Frumina, S. and Mityushina, I., 2019. The impact of the publication of non-financial statements on the financial performance of companies with the identification of interpectoral features.
Faccia, A. and Mosco, D., 2019. Understanding the Nature of Accounts Using Comprehensive Tools to Understand Financial Statements.
Fenyves, V., Bács, Z., Zéman, Z., Böcskei, E. and Tarnóczi, T., 2018. The role of the notes to the financial statements in corporate decision-making. Corporate Ownership & Control, 15(4), pp.138-148.
MARSELLA, C. and ASWAR, K., 2019. An investigation of financial statement disclosure in local government financial statements. International Journal of Business and Economic Affairs, 4(6), pp.273-281.
Osadchy, E.A., Akhmetshin, E.M., Amirova, E.F., Bochkareva, T.N., Gazizyanova, Y. and Yumashev, A.V., 2018. Financial statements of a company as an information base for decision-making in a transforming economy
Safta, I.L., Sab?u, A.I. and Muntean, N., 2021. Bibliometric analysis of the literature on measuring techniques for manipulating financial statements. Risks, 9(7), p.123.
Sutopo, B., Kot, S., Adiati, A.K. and Ardila, L.N., 2018. Sustainability Reporting and value relevance of financial statements. Sustainability, 10(3), p.678.
Traina, J., 2018. Is aggregate market power increasing? production trends using financial statements. Production Trends Using Financial Statements (February 8, 2018).
