Financial Statement Analysis Fisher & Paykel Healthcare Limited

Question: Discuss about theFinancial Statement Analysisfor Fisher Paykel Healthcare Limited. Answer: Financial Analysis and Evaluation Financial analysis and performance will be done by extracting the annual report of the year 2014, 2015 and 2016 of Fisher Paykel Healthcare Limited. The analysis will be done by calculating liquidity, profitability and solvency ratio (Brigham Ehrhardt,2013). Financial Performance Financial performance of the Fisher Paykel Healthcare Limited will be done by measuring the liquidity regarding current and quick ratio (Arnold,2014). Profitability will be done by calculating return on asset and in terms solvency debt to equity ratio will be calculated. Particulars 2014 2015 2016 Current Ratio 1.82 2.08 1.91 Current ratio will be calculated by dividing total assets by the total liabilities. A fluctuating trend has been observed in the trend of the current ration. In 2014 it was the highest by 2.08, and in 2015 it decreased tremendously to 1.82, and in 2016 it further got decreased to 1.91 (Brigham Houston,2012). Current ratio reflects an ability of the company to meet the liquidity of the company regarding short-term liabilities which will be becoming due within the coming year. It will be reflecting the amount of cash which is needed to generate the cash of the company. But by close analysis it can be analyzed that company will be has increased the capacity of generating cash for the company for the coming year (Fphcare.com.2016). Particulars 2014 2015 2016 Quick Ratio 0.81 1.05 1.01 Quick ratio will be calculated by adding cash and current receivable and then dividing both of them by total current liability. The quick ratio is also called as an acid test (Brigham Daves,2012). Quick ratio will be measuring the amount of cash available for converting the cash under the short term period of the company. Quick ratio show and increasing with decreasing trend form 2014 to 2016. In 2013 was the least with 0.81, then on 2014 it 1.04 and finally on 2016 it was 1.01. By completed evaluation, it has been observed that a company's capacity of turning its cash into assets has been an effective approach, is not met properly the company needs to put concentration of the utilization of the resources. Particulars 2014 2015 2016 Debt to equity ratio 0.55 0.42 0.42 The Debt to equity ratio is calculated by dividing the total liabilities by the total equities. The debt to equity ratio of the company has decreased consecutively. In the year 2016 and 2015, the ratio was 0.42 and for the year 2014 it was 0.55. This would lead to the increase in the dividend payout ratio to the shareholders. The capital structure has been changing and the company has been borrowing fewer funds to finance its capital and this has contributed to the increase in the dividend payment and altering the capital structure. The fall in the debt equity ratio is because the company has revised the target which would provide support for the growth of the business. The ratio calculated falls within the established range (Dorfman Cather, 2012). Particulars 2014 2015 2016 Return on assets 0.16 0.17 0.20 The return on assets is calculated by dividing the net income by the average total assets and it indicates the return generated in return to the investment made by the company (Titman et al., 2015). This ratio is more or less stable and changes only by fewer points. In the year 2014, the ratio stood at 0.16 and this increased to 0.17 in the year 2015, and then further increased to 0.20 in the year 2016. The rise in the ratio shows that the company is efficient in generating the revenue from its assets. The assets and the investment made by the company are efficient in generating the sufficient returns. The assets of the company are utilized properly (Finkler et al., 2016). Liquidity and Short-Term Financial Management The liquidity position of the company can be closely analyzed by observing the trend of the cash flow of the company. It has been observed that company it is generating most of its revenue from the operating expenses of the company all the other expenses is reflecting the negative balance of the company. For measuring the short term financial management, it has been observed that company has sound short term financial objective for meeting the working capital requirement of the company. Further it has been observed that company do not have sufficient amount of short term investment in the company. This is depicted as the companies do not want to invest in the short term investment because the company is planning for long term investments. Even that company has sufficient amount of cash level for meeting the daily expenses of the company. Short term finance of the company will be explained by interest bearing facilities and derivation of the financial instrument mentioned in the finan cial report of the company in the last three-year financial statement of the company (Fphcare.com.2016). Financial Structure and Status The total value of the equity in the capital structure of the company is increasing which depicts that the shareholders would get a better return and the company is relying more on the equity rather than debt. While analyzing the section it has been analyzed that company is investing most of the amount in equity section. The cash generated from the investing activities and the financing is negative which shows that the company is not effectively making use of the investing and the financial assets. However, the net cash flow from the operating activities is increasing year by year. The net income of the company also increased consecutively. It has been further observed that company is generating most of its income from the operating structure of the cash flow. Further it has observed that companies operating margin is more than the profit margin. The company also does not have long term investment; it means that company does not have security in the future. Company should also increa se its liability in the preference stock and option warrants. All these features will help the company in getting more growth and profit in the near future. (Fphcare.com.2016). Therefore, it can be concluded that current ratio is showing a decreasing trend current ratio is even decreasing. Debt to equity has also decreased, but there is a varied change in the return on the assets increased tremendously. On the section of liquidity and short term financial perspective the company is not getting investment in the short term investment. Finally to analyze the financial structure it can be said that company has been analyzed that company is investing most of the amount in equity section and not in the debt section of the company. On the overall analysis it can be concluded that in the year 2015 company had excellent position in terms of the entire ratio. Reference List Arnold, G. (2014).Corporate financial management. Pearson Higher Ed. Brigham, E. F., Daves, P. R. (2012).Intermediate financial management. Nelson Education. Brigham, E. F., Ehrhardt, M. C. (2013).Financial management: Theory practice. Cengage Learning. Brigham, E. F., Houston, J. F. (2012).Fundamentals of financial management. Cengage Learning. Dorfman, M. S., Cather, D. A. (2012).Introduction to risk management and insurance. Pearson Higher Ed. Finkler, S. A., Smith, D. L., Calabrese, T. D., Purtell, R. M. (2016).Financial management for public, health, and not-for-profit organizations. CQ Press. Gateway | Fisher Paykel Healthcare. (2016).Fphcare.com. Retrieved 16 October 2016, from https://www.fphcare.com/gateway/ Titman, S., Keown, A. J., Martin, J. D. (2015).Financial management: Principles and applications. Pearson.