ASSESSMENT 3

Assessment 3

Step 1:

The Ratios, NPV and IRP Financial Statements for Oz Brewing Limited has been entered into the attached spreadsheet. Please find the “Oz Brewing Limited Company Spreadsheet” Attached.

What do these ratios actually tell you (or not tell you) about your firm?

These ratios tell me how profitability and sustainable Oz Brewing limited is. The efficiency ratio outlines the turnover the company has in relation to their inventories. Whereas the liquidity ratio is all about the assets they can turn into money to pay their debts off. Final is the market ratios and the reformulated financial statement ratios which relate to where the financial position of the company is at. When looking at the ratios for Oz Brewing Limited you can clearly see in 2011 the company had a profit however from 2012 to 2014 the company made a loss which was evident when looking at the profitability rations, efficiency ratios and ratios based on reformulated financial statements.

Discuss your ratios with other students in the course. How do your company’s ratios differ to the ratios of companies of other students in the course? What do your firm’s ratios tell you about how well your firm is performing?

I discussed my ratios with Matthew Barone about our company’s ratios and based on Matthew Barone’s company’s ratios my company is in deep financial trouble. Matthew Barone’s company’s ratios are increasing over the four years not decreasing which means they are building their business up and their profitability ratios is increasing significantly. These rations tell me that Oz Brewing Limited is in deep financial trouble and will be put into voluntary administration very soon as they company keeps doing backwards.

Comment on what is driving or causing your firm’s economic profit over the past four years to be at the levels it is.

The cause of Oz Brewing Limited economic loss/profit is the fact that they have no revenue coming in only when they are selling ventures which is basically once a year. They have no product that they make or sell to the consumer this is why their economic profit/loss is significantly decreasing each year.

Discuss your thoughts on what is driving your firm’s economic profit with other students.

The only similar Oz Brewing Limited has with other companies is the fact that their profit was positive in 2011 which matched Matthew Barone’s company however Oz Brewing Limited was significantly lower to Matthew Barone’s company profits for 2011. The differences between Oz Brewing Limited and other companies is that the companies had better profitability ratios and efficiency ratios then want Oz Brewing Limited had. Which means their companies are more sustainable then Oz Brewing Limited because they have a higher profitability ratio this is because their companies actual have products that they can sell to their consumers for revenue. The insight I have gained by breaking into bits of Oz Brewing Limited financial statement is knowing how to calculate the ratios to determine how profitable the company really is and whether the company is going to be sustainable in the future.

Step 2

The Ratios, NPV and IRP Financial Statements for Oz Brewing Limited has been entered into the attached spreadsheet. Please find the “Oz Brewing Limited Company Spreadsheet” Attached.

Develop Capital Investment Decision for Oz Brewing Limited

I have developed the following capital investment decision for Oz Brewing Limited.

Oz Brewing Limited is in the process of buying 333D Group Proprietary Limited in 2015. To increase Oz Brewing Limited the company can buy 3D Hubbs to expand their portfolio and then on sale the businesses later. Oz Brewing Limited is then planning to sell 333D Group Proprietary Limited to another operator in 5 years. Oz Brewing Limited will be planning to buy 3D Hubbs in 5 years and then on sale the business in 5 years.

The original cost, the estimated life, residual value and estimate future cash flows of each investment opportunity are set out in the table below.

	333D Group Proprietary Limited	3D Hubbs
Original Cost	$650 000	$1 500 000
Estimated Life	5 years	5 years
Residual Value	$1 000 000	$1 850 000
Estimated Future Cash Flows
2015	$205 000
2016	$210 000
2017	$212 000
2018	$215 000
2019	$220 000
2020		$400 000
2021		$405 000
2022		$408 000
2023		$410 000
2024		$412 000

The investment would be made on 31 December 2015. The estimated future cash flows are expected to be received on 31 December of each year.

Briefly discuss your though processes in coming to your recommendation. Discuss the strengths and weaknesses of your analysis.

My though process is that Oz Brewing Limited is in the process of buying 333D Group proprietary Limited and back Oz Brewing Limited in the past tends to buy companies. Then sell the companies in a few years at a loss I though Oz Brewing Limited can continue to follow this process but only sell the companies at a profit. Due to Oz Brewing Limited has not full acquired 333D Group Proprietary Limited yet I figured this could be one company Oz Brewing Limited could get future cash flow from. If this company is successful like it has been doing then Oz Brewing might be inclined to buy again 3D printing company and sell it at a profit. The strengths of my analysis is that it is based on figures Oz Brewing Limited is capability of meeting. The weakness of this model is that it is future cash flows and because Oz Brewing has not been in 3D printing before there is no actual figures to base these calculations on. All the figures in the analysis is selected but not based on Oz Brewing Limited’s performance.