Finance Assignment Sample

  • 95032+ Project Delivered
  • 503+ Experts 24x7 Online Help
Download Full Sample
Downloads 7456 Words
This is a Sample Assignment Submitted by Student. Contact our Experts for 100% Plagiarism Free Assignment Solutions

Introduction

Get free samples written by our Top-Notch subject experts for taking assignment help services.

Macquarie is an eminent player in the financial services group having a presence in 31 markets and covering areas such as asset management, banking, financing, investment and other premier services. The company consists of a sound capital structure with the risk management framework that has helped the company to ensure the profitability trend. It operates through various wings that is the Banking and Financial Services, Macquarie Capital and Macquarie Asset Management (MAM)

MAM operates as the asset management business, and the business pertains to full-service asset manager hence it can meet the need of the customers through investment solution that consists of real estate, private credit, fixed income and agriculture. On 31 March 2020, the company projected $A597.7 billion of assets. The division consists of 1890 staffs and presence in 22 markets.

 Macquarie Banking and financial services is another retail base of the company that provides services relating to management of wealth, finance, banking and other services in respect to brokers, clients and advisers. On 31 March the group comprised of deposits amounting to $A63.9 billion and home loan amounting to $A52.1 billion. The third is the Macquarie capital that provides specialist expertise and helps in giving advise together with the capital solution that helps the client (Macquarie 2020).

Company Analysis

The net profit margin of Macquarie amounted to $A2,31 million in 2020 that happened to be 8% lowered as compared to 2019. The higher performance of 2019 was offset by the credit increment and other relevant charges of impairment hence projecting deterioration in the present situation. The net operating income dropped a decline of 3% from $A12,754 million in the past year (Macquarie). 

The higher charges of credit were followed by the higher charges of impairment that led to a drop in the net profit. 

The operating expense amounting to $A8871 for 2020 was in tune with the amount of last year that is $A8,887 million followed by the increment in the employment expenses and expenses of non-salary together with the drop in the trading expenses (Macquarie 2020). 

As per the annual report, the fundamentals remained intact and was supported by the risks management policy that is possible through the underlying strength. It is properly disciplined and thereby provides sufficient capital that helps in growth activities. As the headquarters is located in Australia, thereby it carries the benefit of operating in a healthy financial environment that supports long term growth and success (Macquarie 2020).

The major highlight of 2020 is as follows:

The operating income of the company stood at $A12,325 million.

The operating expenses of the company were $A8871 million.

The ROE was seen at 14.5% in 2020 in comparison to 18% of 2019 (Macquarie 2020)

The EPS dropped to $A8871 million

The payment of the dividend was $A4.30

The market scenario of the company remained challenging considering the short terms scenario. The year 2020 was disturbed by COVID-19 pandemic and the aftermath will still be seen in the year 2021. Hence, instead of the same, there will be a drop in the business and drop in the customers confidence. Further, the market scenario will be volatile and will lead to crisis.

Ratio Analysis 

Ratio analysis is a primary analytical tool when it comes to an understanding the financial statements for comparison of the performance and position. This helps in getting a proper comparison with the rivals and thereby helps in understanding the overall status of the company.

Ratio analysis helps in understanding the trend and pattern of the company that leads to comparison with the predetermined or past result. This helps to make the study easier. Looking at the financial result and getting the ratio is more comfortable; thereby, the method is widely prevalent.

However, the ratio analysis is not free from shortfalls. The analysis can fetch a better result when the differentiation or comparison happens between two companies that belong to the same industry; otherwise; the result will be invalid. Secondly, different company follow the different framework and thereby difficult in evaluating because different adjustments might be needed.

Performance evaluation

Profitability ratios

Profitability is an important parameter because it denotes the ability of the company to fetch result from the sales, utilize the assets and the equity. The ratio helps in projecting the profit derived through the investment of the shareholders, asset management, and profit over sales.

Return on Assets indicates the proficiency through which the company has put the assets to use (Pucheta-Martiinez & Garcia-Meca, 2019).

As indicated by the calculation that the ratio dropped from 2% in 2019 to 1% in 2020, which is very alarming for the company. The change owes to the improper utilization of the assets. Similarly, the ROE ascertains how effectively the wealth of the shareholder is used to reap returns. In the case of MCQ. The ratio has dropped from 18% in 2019 to 14.5% in 2020. If visualized from the perspective of the investor, it can be commented that the performance has dropped in 2020 but managed to remain above the industry average. If ROE and ROA are compared it can be commented that the performance of the company has dropped.

Further, the NPM of the company has underwent a dip from 51% in 2019 to 49% in 2020 hence projecting a declining net profit margin.

The drop in the performance can be linked to the higher charges of credit followed by the high changes of impairment and drop in the operating income. The expense ratio increased from 69.7% in 2019 to 72% in 2020, that indicates the company has a potent expense ratio. The expenses are justified as per the result of 2019 and can be linked to the brokerage decline, expenses of commission and trading.

Profitability

2020

2019

Industry average

Return on assets

1%

2%

0.73%

Return on equity (reported)

14.5%

18.0%

9.77%

Net profit margin

49%

51%

18.17%

Net interest income ratio

0.82%

0.89%

n/a

Expense ratio or Cost to income ratio (reported)

72%

69.70%

n/a

Cash flow to sales

22.27%

19.78%

n/a

Market-based ratio

The companys EPS has dropped from m$8.33 in 2019 to $7.910 in 2020 that projects a drop in the profitability. The drop in the performance was the primary reason for the PE ratio decline. As the profitability was less thereby, the dividend policy of the company was disturbed because the company pays dividend only when it earn a profit. A drop in the dividend was noticed from $4.30 per share as compared to $5.75 per share. Marginal dip in the profitability ratio was witnessed; however, the overall fundamentals remained intact.

Earnings per share

AUD$7.910

AUD$8.833

n/a

Dividends per share

AUD$4.30

AUD$5.75

n/a

Dividend payout ratio

54%

69%

n/a

Price earnings ratio

10.84 times

XX times

16.72 times

Efficiency ratios

The efficiency ratio projects how efficiently the company can use the assets to generate revenue and the companys ability to manage the assets (Sherman 2015). The efficiency of MQG is known through Asset turnover, fixed asset turnover and times receivable. The asset turnover and FTO projects the companys ability in using the assets and fixed assets. As seen from the performance, the ratio is weak and projects the weakness in the company utilization of the resources. Hence, it is an indicator that the company failed to use the resources effectively. The day's receivables remained unchanged, indicating that 235 days will be needed to transform the inventory into sales.

2020

2019

Industry average

Asset turnover

0.024367282

0.029516022

n/a

Fixed asset turnover

0.043210359

0.055755086

n/a

Days receivables

235

232

n/a

Times receivables turnover

1.55

1.56

n/a

Solvency ratio

Short term solvency

Short term solvency or Liquidity is a significant factor because it pertains to the ability of the company in honouring the obligations of the company. Further it denotes the ability of the cash when required so that the company does have a deficiency. The presence of cash for any organization is vital because that determines how the company take care of the current and upcoming obligations (Smith & Venter 2020). 

Current ratio projects the presence of an excess of current assets over the current liabilities. The sound current ratio denotes that the working capital is balanced, and hence the payment can be meeting effectively. Current ratio will guide the company to a better level of efficiency and risk. the company reduce the cost or use the funs elsewhere when more funds are attached to current assets. From the computation, it can be commented that the year 2019 is projecting a lower level of current assets in comparison to current liabilities. At present, the company has $0.88 current assets for every $1 of current liabilities. The reason for the ratio betterment in 2020 can be linked to the addition of more current assets to the organization.

The cash flow ratio further indicates the number of times the company will be able to repay the current debt with the cash level.

As seen from the computation, the ratio ranked lower in both the year and hence this will be a challenging part of the company to repay the money. thereby, it can be commented that the company will face a liquidity problem if the management does not sort the liquidity woes.

2020

2019

Industry average

Current ratio

0.883880017

0.789211696

n/a

Cashflow ratio

0.018967531

0.021395136

n/a

Long term Solevncy

Solvency helps in telling about the ability of the company to survive and succeed in the business. The main aim of the company is to conduct business and expand for expansion it requires debt, and hence opting for debt is useful for the business. If the debt is adequately used it leads to growth and creation of more project (Chen & Gong 2019). However, if used negatively it will cost the company and leads to insolvency. The debt ratio of the company remain undisturbed in both the years hence signifying that the company has higher debt component as it is 91% which is an indictor of higher interest payment. The equity ratio of the company stands at 9% which is very low, comparing the operations of the company. Hence, in this regard, it can be commented that the reliance on debt is high, which might lead to erosion of profit in the long run.

New Investment

MQG can open another stock market financial service that will boost the companys income and expand the business.

WACC is influenced by the external scenario and not by the companys management. It projects the minimum return a company will earn on the base of the asset to satisfy the owners, creditors, and the capital providers; otherwise, the investment will be made elsewhere (Deegan 2016). Here it is noted that MQG has various sources of capital that the regular debt, common stock, and liabilities. It will only capitalize 40% through their capital. Hence considering it, the WACC seems a good option as the usage will help in telling the different sources of finance and the returns generated by them. However, the complicated capital structure will make the scenario difficult in computing the WACC.

Going by the capital structure and performance of the company, it can be commented that the company should use retained earnings because it has earned profit and has built a strong retained earnings base. Some cash portion can be infused into the system. This means the money that was saved is now being used to generated return. Hence, this policy can be used in expansion and growing the business.

Using of cash can be dangerous because the current ratio of the company is weak and hence requirement of cash is mandate for the smooth performance of the business. If the business fails to gather the desired cash, then it will not be able for the business to perform uninterrupted. Thereby, the usage of retained earnings best suits the business.

 Conclusion

 MQG is aware of the responsibility as a corporate citizen, and the performance indicates a drop but the overall fundamentals remain intact. The group operates both nationally and internationally, and hence it needs to develop significant infrastructure that will help in the expansion of the business. If the ratio of the year 2019 is contrasted with 2020, then it comes to the limelight that the ROA and ROE have dropped in the year 2020. The NPM has reduced in 2020 to 49%. Similarly, the EPS has dropped to $7.33 per share in 2020, which denotes light weakness. Further, the management needs to check the liquidity pattern because the liquidity and solvency of the company are weak, thereby projecting weakness in the performance. Weak liquidity can hamper the ability of the company in repayment of the debt, and the weak debt can lead to more interest payment.

References

Chen, A., & Gong, J. (2019). Accounting comparability, financial reporting quality, and the pricing of accruals. Advances in Accounting, Incorporating Advances in International Accounting, 45. doi:10.1016/j.adiac.2019.03.003

Deegan, C. M. (2016). Financial accounting (8e ed.). McGraw-Hill Education.

Macquarie. (2020). Macquarie 2020 annual report & accounts. Retrieved from: https://www.macquarie.com/au/en/investors/reports/full-year-2020.html

Pucheta-Martiinez, M. & Garcia-Meca, E. (2019). Monitoring, corporate performance and institutional directors. Australian Accounting Review, 29(1), 208-219. doi:10.1111/auar.12262

Sherman, E. (2015). A manager's guide to financial analysis : Powerful tools for analyzing the numbers and making the best decisions for your business (6th ed) Ama Self-Study 

Smith, C., & Venter, E. R. (2020). Financial statement comparability in the extractive industry. Accounting Research Journal33(3), 523541. https://doi.org/10.1108/ARJ-08-2019-0161

Appendix

MACQUARIE GROUP LTD (MQG) CashFlowFlag BALANCE SHEET

Fiscal year ends in March. AUD in millions except per share data.

2016-03

2017-03

2018-03

2019-03

2020-03

Assets

Current assets

Cash

-

-

-

-

-

Cash and cash equivalents

-

-

-

8,643

9,717

Short-term investments

29,136

33,826

21,751

17,446

16,855

Total cash

29,136

33,826

21,751

26,089

26,572

Receivables

59,447

27,471

38,559

4,285

3,405

Deferred income taxes

-

-

376

-

-

Other current assets

30,082

28,664

30,931

62,693

97,939

Total current assets

1,18,665

89,961

91,617

93,067

1,27,916

Non-current assets

Property, plant and equipment

14,371

14,301

15,695

7,142

8,034

Accumulated Depreciation

- 2,850

- 3,292

- 4,269

- 2,441

- 2,990

Net property, plant and equipment

11,521

11,009

11,426

4,701

5,044

Equity and other investments

10,197

3,597

5,489

11,380

17,249

Goodwill

525

442

469

1,032

1,717

Intangible assets

553

567

524

999

1,551

Deferred income taxes

850

638

650

1,031

1,340

Other long-term assets

54,444

76,663

81,150

85,547

1,00,985

Total non-current assets

78,090

92,916

99,708

1,04,690

1,27,886

Total assets

1,96,755

1,82,877

1,91,325

1,97,757

2,55,802

Liabilities and stockholders' equity

Liabilities

Current liabilities

Short-term debt

52245

60112

61775

56191

67342

Capital leases

-

-

-

-

1038

Accounts payable

2203

3103

3329

1745

1716

Deferred income taxes

469

212

262

413

-

Other current liabilities

54065

44983

32481

59575

74625

Total current liabilities

1,08,982

1,08,410

97,847

1,17,924

1,44,721

Non-current liabilities

Long-term debt

71566

56576

59109

66469

89063

Deferred taxes liabilities

543

621

749

425

234

Minority interest

-

-

-

-

-

Other long-term liabilities

-

-

15440

-

-

Total non-current liabilities

72,109

57,197

75,298

66,894

89,297

Total liabilities

1,81,091

1,65,607

1,73,145

1,84,818

2,34,018

Stockholders' equity

Common stock

6422

6290

6243

6181

7851

Other Equity

1152

2462

2745

1552

1478

Retained earnings

7158

7877

8817

9807

10439

Accumulated other comprehensive income

932

641

375

824

2016

Total stockholders' equity

15,664

17,270

18,180

18,364

21,784

Total liabilities and stockholders' equity

1,96,755

1,82,877

1,91,325

2,03,182

2,55,802

Income Statement

MACQUARIE GROUP LTD (MQG) CashFlowFlag INCOME STATEMENT

Fiscal year ends in March. AUD in millions except per share data.

2016-03

2017-03

2018-03

2019-03

2020-03

Revenue

4862

4331

4670

5526

5837

Cost of revenue

-

-

-

-

-

Gross profit

4,862

4,331

4,670

5,526

5,837

Operating expenses

Sales, General and administrative

4656

5030

4903

5673

5594

Other operating expenses

3758

2603

3776

4874

5085

Total operating expenses

8414

7633

8679

10547

10679

Operating income

- 3,552

- 3,302

- 4,009

- 5,021

- 4,842

Interest Expense

3182

2953

2957

3595

3297

Other income (expense)

9749

9359

10430

12483

11593

Income before taxes

3,015

3,104

3,464

3,867

3,454

Provision for income taxes

927

868

883

879

728

Net income from continuing operations

2,088

2,236

2,581

2,988

2,726

Other

-25

-19

-24

-6

5

Net income

2,063

2,217

2,557

2,982

2,731

Net income available to common shareholders

2,063

2,217

2,557

2,982

2,731

Earnings per share

Basic

6.55

6.57

7.58

8.83

7.91

Diluted

5.83

6.45

7.43

8.68

7.64

Weighted average shares outstanding

Basic

315

321

322

324

333

Diluted

354

344

344

344

357

EBITDA

7032

6208

7553

8980

8116

Profitability and Market Ratios - MQG

2020

2019

Average for Industry

Return on Assets

Net Profit / Average Total Assets

2732/ ((255802 + 197757)/2)

2982 /197757

0.012046944

0

1%

2%

0.73%

Return on Equity

Net Profit / Average Equity

2732/ ((21784 + 18364)/2)

2982 /18364

0.136096443

0.162382923

14%

16%

Return on Equity taken from Annual Report 2020 p102

14.50%

18.00%

9.77%

Net Profit Margin

Net Profit / Revenue

2732 / 5526

2982 /5837

0.494390156

0.510878876

49%

51%

18.17%

Net Interest Income

Net Interest Income / Average Earning Assets

1,859,000,000 / ((255,802,000,000 + 197,757,000,000)/2)

1760000000/ 197,757,000,000

0.00819739

0.008899811

0.82%

0.89%

result%

Expense ratio

Expenses (excluding tax) / Revenue

8,871,000,000 / 12,325,000,000

8887000000 / 12,754,000,000

Expenses = Total Operating Expenses (see below)

0.719756592

0.696801004

Reveue = Net Operating Income

72%

69.68%

result%

Expense to income ratio taken from Management Discussion 2020 p11

72.00%

69.70%

Cash flow to sales

Net cash flow from operating activity / Revenue

2745 / 12325

2523/ 12754

0.222718053

0.197820292

51.00%

19.78%

result%

Earnings per share

Profit for shareholders / Number of ordinary shares

AUD$7.910 per share

AUD$8.833 per share

$xx per share

Basic EPS taken from Annual Report 2020 p102

Dividends per share

Dividends - Special dividends/ No of shares

AUD$4.30 per share

AUD$5.75 per share

$xx per share

DPS taken from annual report 2020 p102

Share price

share price taken from Annual Report 2020 p102

AUD$85.75

AUD$129.40

Dividend payout ratio

DPS/EPS

4.30 / $7.910

5.75/8.33

DPS & Basic EPS taken from Annual Report 2020 p102

0.543615676

0.69027611

54%

69%

result%

Price earnings ratio

Share price last day of reporting year / EPS

AUD$85.75 / 7.910

AUD$129.40 / 8.833

share price taken from Annual Report 2020 p102

10.8407

14.6496

10.84 times

result times

16.72 times

Efficiency Ratios - MQG

2020

2019

Average for Industry

Asset turnover

Sales or Revenue / Average Total Assets

5526 / ((255802 + 197757)/2)

5837 / 197757

0.024367282

0.029516022

result times

result times

result times

Fixed-Asset Turnover Ratio

Sales or Revenue / Total Non Current Assets

5526 / 127886

5837 / 104,690

Non Current Assets figures provided by Morning Star

0.043210359

0.055755086

http://financials.morningstar.com/balance-sheet/bs.html?t=MQG&region=aus&culture=en-US

result times

result times

result times

Days receivables

(Average Receivables / Sales or Revenue) x 365

(((3405+ 3719)/2)/5526) x 365

(3719/5837)*365

Accounts Receivables = Debtors and Prepayments Annual report p175

(((3405+ 3719)/2)/5526) x 365

232.5569642

235.2750633

result days

result days

Times receivables turnover

Sales or Revenue/Average Receivables

5526/((3,405 + 3,719)/2)

5837/3719

Accounts Receivables = Debtors and Prepayments Annual report p175

5526/3562

1.569507932

1.551375632

result times

result times

Short term solvency Ratios - MQG

2020

2019

Average for Industry

Current Ratio

Total Current Assets / Total Current Liabilities

127,916,000,000 / 144,721,000,000

93,067,000,000 / 117,924,000,000

Current Assets and Current Liabilities figures provided by Morning Star

0.883880017

0.789211696

http://financials.morningstar.com/balance-sheet/bs.html?t=MQG&region=aus&culture=en-US

result:1

result:1

XX:1

Cashflow Ratio

Net Cash from Operating Activities / Total Current Liabilities

2745000000 / 144,721,000,000

2523000000/ 117,924,000,000

Current Liabilities figures provided by Morning Star

0.018967531

0.021395136

http://financials.morningstar.com/balance-sheet/bs.html?t=MQG&region=aus&culture=en-US

result times

result times

result times

Long term solvency Ratios - MQG

2020

2019

Average for Industry

Debt to Equity

Total Debt / Total Equity

64,556 / 21,784

51,389 / 18364

Debt issued taken from Annual Report 2020 p133

2.96345942

2.798355478

296%

280%

332.99%

Debt ratio

Total Liabilities / Total Assets

234,018/ 255,802

179393 / 197757

0

0

91%

91%

24.92%

Equity Ratio

Total Equity / Total Assets

21,784 / 255,802

18364 / 197757

0

0

9%

9%

result%

Cash debt coverage

Non Current Liabilities / Net Cash from Operating Activities

89,297,000,000 / 2745000000

66,894,000,000 / 2523000000

Non Current Liabilities figures provided by Morning Star

32.53078324

26.5136742

http://financials.morningstar.com/balance-sheet/bs.html?t=MQG&region=aus&culture=en-US

result times

result times

result times

Interest coverage ratio

EBIT / Interest expense

5,313,000,000 / 3,297,000,000

5,627,000,000 /3,595,000,000

EBIT (see below)

1.611464968

1.565229485

Interest expense taken from Annual Report 2020 p131

1.61 times

1.57 times

result times

(figures from www.macquarie.com 2020 annual report)

https://www.macquarie.com/assets/macq/investor/reports/2020/Macquarie-Group-FY20-Annual-Report.pdf

Industry averages taken from Bloomberg

MQG 2020 annual report

Profit/(Loss) before taxation

3,45,40,00,000

3,86,70,00,000

p131

Adjust for interest income and expense

1,85,90,00,000

1,76,00,00,000

(see below)

EBIT

5,31,30,00,000

5,62,70,00,000

interest income

5,15,60,00,000

5,35,50,00,000

p131

interest expense

3,29,70,00,000

3,59,50,00,000

p131

Interest capitalised

-

-

p

Total interest income/(expense)

1,85,90,00,000

1,76,00,00,000

Save Time & improve Grades

just share your requirements and get customized solutions on time

- +
35% Off
£ 6.69
Estimated Cost
£ 4.35
Your Paper will Include
  • Title Page
  • Table of Contents
  • Body
  • Bibliography & References
  • Any Additional requirements that you specify!
Free Product features
  • Free Product Features
  • Free Quality Assurance Reports
  • Grammar Report
  • Compliance Report
  • Plagiarism Report
Free Service Features
  • Free Order Management
  • Free E-Guides
  • Free 24x7 exclusive customer support
Free Assignment Sample on New assignment help
Get best price for your work

offer valid for limited time only*

in a hurry-get a callback