Financial Management - Level 8
Qualitative and Quantitative Performance Analysis of
BlueScope Steel Limited
Word count: 2,746
This report seeks to conduct both a qualitative and quantitative analysis of the financial position of BlueScope Steel Limited (BSL) for the past three years. This involves reviewing the industry that the operates in, as well as a brief background discussion of BSL in order to gain context for the analysis to come.
During the quantitative analysis of BSL financial position, a review of both the profit and loss statement and the balance sheet will allow for some assessments to be made on whether the performance has led to a net positive or negative gain / loss to the business. These assessments reveal that Woolworths has been under-performing in the last financial year. This can be attributed to the slide in first quarter sales across the business as reported to the Australian Stock Exchange (ASX) in October of 2015.
Following this, an investigation into the performance of key growth ratios is conducted. This evaluation centres on the current ratio, net profit margin, return on assets (ROA), debt ratio, interest cover ratio, and price-earnings ratio. These reviews find that there has been a mixed bag of results over the three-year period, culminating in some improve in the 2015 financial year as losses attributed to both the Masters joint venture and increased competition in the core food and liquor business start to take hold.
Finally, a recommendation can be realised that is in favour of buying BSL shares. However, this is dependent on either the sale of or winding up of the Masters joint venture and the company recouping some of the invested funds. After ending the unproductive investment, the share price could be expected to progressively increase.
Table of contents
1. Introduction 4
1.1 Company background 4
1.2 Recent share price trend analysis 7
2. Performance analysis 6
2.1 Liquidity 6
2.2 Profitability 7
2.3 Capital structure 7
2.4 Market value 7
3. Stock valuation 13
4. Recommendations and Conclusions 13
Reference list 4
Appendix 1 – BlueScope Steel Limited : Financials 17
Appendix 2 – BlueScope Steel Limited : Growth and Ratios 19
Appendix 3 – BlueScope Steel Limited : Industry Average 19
Appendix 4 – Price-earnings Ratio Calculation 19
Appendix 5 – Stock Valuation Calculation 19
Finance is defined as the study of how individuals and businesses evaluate and raise capital to fund them (Titman et al 2016). For that reason financial management is vital, as it is at the heart of running a successful business which intimately woven into every aspect of the business, from managing cash flow and tracking business performance to developing plans that ensure maximisation of profit and shareholders wealth. Consequently, as an investor, it is fundamental to understand how a business financial management is done and the principles that guide financial...