Ridley Corporation Limited (Ric) Financial Statement Analysis
INTRODUCTION
Ridley Corporation Limited (RIC), an Australia-based company found in 1987 that manufactures and markets animal nutrition solutions and solar salt, has two major businesses named Ridley AgriProducts and Cheetham Salt.
The purpose of our report is to provide a comprehensive analysis of RIC’s past and current financial performance based on its financial statements. The first part in this report is a detailed ratio analysis with four different categories to evaluate the general performance of the organisation. The second part is cash flow analysis, which shows the company’s efficiency in using its cash resources. The third part shows the inventory situation and policies of the company which have significant influence on the company’s performance. The last part is an analysis of the company’s long-lived assets both tangible and intangible.
PART 1: RATIO ANALYSIS
Profitability
According to 10-year total return diagram in the appendix, RIC’s total return is shown to have an overall under-market performance and thus, relatively low profitability. However, RIC’s profitability is increasing according to rising profitability ratios such as gross profit margin (from 9.53% to 10.35%), pre-tax profit margin (3.07% to 4.18%) and net profit margin (2.48% to 4.05%) in three-year basis of 2009-2011. Also, with an as-a-whole ROA increase from 3.19% to 5.81%, RIC is considered to be able to use its assets effectively to generate profit. Referring to Dupont analysis, ROE is the product of ROA and leverage ratio. Hence, the significant increase in ROE from 2009 (6.29%) to 2010 (10.37%) was mainly due to the growth in ROA from 3.19% to 6.11%, noting that leverage decreased from 1.97 to 1.70.
Liquidity
Liquidity measures company’s ability to meet its short-term obligations and how quickly assets could convert into cash. RIC has a better tendency for company’s liquidity as higher liquidity ratios indicate higher level of liquidity. In details, its current ratio,
Ridley Corporation Limited (RIC), an Australia-based company found in 1987 that manufactures and markets animal nutrition solutions and solar salt, has two major businesses named Ridley AgriProducts and Cheetham Salt.
The purpose of our report is to provide a comprehensive analysis of RIC’s past and current financial performance based on its financial statements. The first part in this report is a detailed ratio analysis with four different categories to evaluate the general performance of the organisation. The second part is cash flow analysis, which shows the company’s efficiency in using its cash resources. The third part shows the inventory situation and policies of the company which have significant influence on the company’s performance. The last part is an analysis of the company’s long-lived assets both tangible and intangible.
PART 1: RATIO ANALYSIS
Profitability
According to 10-year total return diagram in the appendix, RIC’s total return is shown to have an overall under-market performance and thus, relatively low profitability. However, RIC’s profitability is increasing according to rising profitability ratios such as gross profit margin (from 9.53% to 10.35%), pre-tax profit margin (3.07% to 4.18%) and net profit margin (2.48% to 4.05%) in three-year basis of 2009-2011. Also, with an as-a-whole ROA increase from 3.19% to 5.81%, RIC is considered to be able to use its assets effectively to generate profit. Referring to Dupont analysis, ROE is the product of ROA and leverage ratio. Hence, the significant increase in ROE from 2009 (6.29%) to 2010 (10.37%) was mainly due to the growth in ROA from 3.19% to 6.11%, noting that leverage decreased from 1.97 to 1.70.
Liquidity
Liquidity measures company’s ability to meet its short-term obligations and how quickly assets could convert into cash. RIC has a better tendency for company’s liquidity as higher liquidity ratios indicate higher level of liquidity. In details, its current ratio,