Analysis of Australian Public Listed Companies

Question: Choose from the year 2011-2014 and select three Australian Public Listed company in insolvency. Form your opinion on the performance, risk and continuity of these companies by applying your knowledge of analytical procedures you developed in 1) above. Compare and contrast your opinion you developed in 2) above with the auditors Answer: Selection of Companies First of all, in order to carry out the effective analysis of the individual companys performance, risk related factors and continuity of the business procedures, selecting or identifying a company according to the requirement is considered as a necessary and major stage. The rest of the analysis procedure will be performed on the selected company and the method for doing that will be chosen on the basis of nature of analysis (Champlain, 2003). In this case, the selection criteria are known to be an Australian Public Company listed in the ASX between the time periods of 2011 2014. Integrating to the initial criteria, the company selected in this portion is named as, Metlifecare Ltd. Also, it is worth to mention that the company of Metlife is going through the process of facing the insolvency risk. Analysis of Performance, Risk and Continuity This portion will deal with the performance, risk and continuity of the selected company and the discussion will be delivered by considering the appropriate analytical procedures as the part of company auditing process (Harms and Rosen, 2002). The different financial statements of the mentioned company will be evaluated in order to perform the analysis on the specifically mentioned areas. In this specific context, the entire process of analysis can be done easily and smoothly on the basis of calculating the ratios of different operations by the company as the generated value can suggest the overall picture regarding the major areas. Considering the financial performance the things that should need to notice are the amount of assets and liabilities of the particular company. This particular process as part of the auditing delivers the significant overview of the companys financial position. In this case, current ratio is considered as the major indicator and commonly used measuring process that assess the ability of the company to meet its short-term obligations (Cull, et al., 2006). The current ratio too low indicates the risk of insolvency and too high indicates the unnecessary build-up of cash, inventory or receivables. The comparison of current ratio should be done by relating to the companys past performances. In case of Metlife Ltd, it has the lack of business performance and the fact can be generated by looking at the calculated current ratio of the company. The value of current ratio for the company in the three different financial years (2012, 2013 2014) are not looking strong as they never crossed the benchmark of one (Knell, 2006). Therefore, the company has not been able to utilize its assets to cover up the debts. This above factor proves that the company is more open to the risks of being insolvent in the near future if it continues to give the same picture. As a matter of concern, the trend of the current ratio is constantly shows the downward picture as 0.03, 0.08 and 0.74 in the three respective financial years (Mulford and Comiskey, 2005). Also, the health of the company can be acknowledged by the total non-current assets and liabilities of the company. The total non-current assets of the company in 2014 is AUD1996 million where the total liabilities stand as AUD2010 million. It clearly suggests that the total amount of liabilities crossed total amount of non-current assets. Therefore, the company can be facing with the potential risk of being insolvent in the near future. In an addition, the continuity of the company depends on its profitability and growth in the market. From the perspective of an investor, the growth rate is measured by the compounded annualized rate of growth in earnings, dividends and revenues of a company. In this case, the growth of the company can be referred by the net income and revenue of the company (Steffan, 2008). According to the comparative analysis, the growth of the company cannot be observed as huge reduction of revenue can be observed in the income statement of the company for the current financial year as compared to the previous two years. Also the net income earning capability of the company did not suggest any good picture as it is constantly deteriorating. Therefore, the continuity of the company cannot be observed on a smooth basis in the upcoming financial years. Comparison and Contrast of Opinion In this portion, the effective comparison and contrast of the three previously discussed areas of these the selected company will be discussed in order to reach an effective auditing conclusion (Stallings et al., 2008). In the areas of performance, the analysis report of the company suggests that Metlifecare Ltd is weak in terms of financial and a systematic connection can be made with the risk factors associated with the company. By analysing the financial health of the company, both the financial performance and chances of risks are identified. The fact is established that the company is vulnerable to the insolvency factor. Considering the diminishing trend of the current ratio declares that Metlifecare Ltd is not been able to manage the business effectively and the reflection can be further proven in the section of companys continuity analysis (Taylor, 2006). The growth of the company depends on the net income earning capabilities by the way of maximizing the revenues. Therefore, due to the weak financial performance, Metlifecare Ltd cannot able to meet the desired level and is opened to the threat References Cull, R., DemirguÃÅ'ˆcÃÅ'Â §-Kunt, A. and Morduch, J. (2006).Financial performance and outreach. Washington, D.C.: World Bank, Development Research Group, Finance Team. Mulford, C. and Comiskey, E. (2005).Creative cash flow reporting. Hoboken, N.J.: J. Wiley. Steffan, B. (2008).Essential management accounting. London: Kogan Page. Champlain, J. (2003).Auditing information systems. Hoboken, N.J.: John Wiley. Harms, D. and Rosen, E. (2002).The impact of Enron. New York: Practising Law Institute. Knell, A. (2006).Corporate governance. Amsterdam: Elsevier/CIMA. Stallings, W., Brown, L., Bauer, M. and Howard, M. (2008).Computer security. Upper Saddle River, N.J.: Prentice Hall. Taylor, E. (2006).The effects of in-group bias and decision aids on auditors' evidence evaluation. [Tampa, Fla]: University of South Florida.