Financial Statement Of Health Scope Limitedâ€Myassignmenthelp.Com

Question: Discuss About The Financial Statement Of Health Scope Limited? Answer: Introducation The company that has been considered in the study is Health Scope Limited. The company is operating the hospitals, pathology labs and medical centre throughout the World. It has been incorporated in the year of nineteen hundred and eighty five and since then the company has the remarkable history in the medical industry Company also have the clinics for mental patients and have rehabilitation centre. Gordon Ballantyne is the current Chief Executive Officer of the company appointed on the 15th day of May, 2017 and has succeeded Robert Cooke. The home office of the company is located at Level1, 312 Street Kilda Road Melbourne Australia, and VIC 3001. The company working offices is located at Australia, New Zealand, Singapore, Vietnam and Malaysia. The main geographic location is Australia and New Zealand. The company has prepared the financial statements for the year ending on 30th of June 2016. The books of accounts of the company have been audited by Deloitte Touche Tohmatsu by givin g the authentication through the audit partner of the audit firm - T Imbesi. In the auditor report it has been mentioned that the financial statements have been prepared and presented as per the rules and regulations of the Corporations Act 2001. The auditor has further stated that the company has complied with the Australian Accounting Standards and the other accounting Standards. The third statement that the auditors have made is that the financial statement of the company represents the clear and fair picture of the working position as on 30th of June 2016 and working performance for the year ended on that date (Company Official Website, 2017). The market price of company stock as on 8th of September 2017 is 1.64 AUD and dividend per share is 0.0700 AUD (SMH Official Website, (2017). The analysis has been made further with the help of marketingreport and financial ratios. Industry Situation And Plans Of Company The company is working under the health care equipment and service industry and in this heading, the situation of the industry has been discussed and the plans of the company for the future growth of the company have been detailed. Industry Outlook Health Care Industry in Australia has been valued at sixth rank among the different countries across the globe. Australia has very strong system of health care providing value added facilities at each stage but at the same time the company is facing the situation of extreme pressure. The pressure is in the form of financial terms in the face of the heavy expenditure which has led the wiping out of the economy of the country. The similar challenges are being faced by the health care industry of different countries which have strong health care system. An industry which is planning to have the economic growth shall include the exports of the products or services as the major segment of the business and the introduction of the foreign investment and more importantly the privatization of the different sectors. It will add towards the enhancement of the economy of the country in the positive direction (Bartlet, 2016). The same objective of expansion is the todays necessity in the concerne d industry. Companys Future Plans One of the strategic actions of the company is to complete the seven projects which are in pipeline by the end of the financial year ending 2019. These projects are in New South Wales, Queensland and Victoria. Second strategic action is to have the delivering performance of the forty five hospitals operating as on date. The company has forecasted that the company will do other projects in the future in alignment with the Government of NSW. Currently the company is working on the project of the hospital at the Northern Beaches under the public private partnership with the Government of NSW with 450 bed facilities and will be marked as the first and foremost major investment in the northern beaches. Another strategic action that the company will take in the next year is to sell or dispose off or divest the operations of the medical centre only. It is because of the non performance of the said segment and the company has even decided to sell out its operation for AUD50 million to Fuller ton Health Care PTY Limited which is subject to the forecast and the certain adjustments. This will make the company to emphasize on the major area which is Hospitals (Company Official Website, 2017) Financial Performance And Position The financial statements consist of the Balance sheet and profit and loss statement. The former tells about the financial health of the company as on that date and the latter tells about the financial results of the company. The financial statements for the last four years ending on 30th of June 2014, 30th of June 2015, 30th of June 3016 and 30th of June 2017 have been considered for the analysis of the financial performance, financial position and cash flows (Company Official Website, 2017; Company Official Website, 2016; Company Official Website, 2015). Statement Of Financial Performance The table has provided the amount of gross profit, operating income and the net income that the company has earned during last consecutive four years. After that the trend analysis has been conducted considering the year of 2014 as the base year (Taylor, 2010; White, Sondh, and Fried, 2005). STATEMENT OF FINANCIAL PERFORMANCE WITH TREND ANALYSIS ($ Million) S. NO. PARTICULARS 2017 2016 2015 2014 1 GROSS PROFIT Revenue 2318 2233 2157 2038 Less Cost of Sales 515 491 479 449 Gross Profit 1803 1742 1678 1589 2 OPERATING INCOME Gross Profit 1803 1742 1678 1589 Less Operating Expense 1524 1453 1389 1382 Operating Income 279 290 289 207 3 NET INCOME Net Income 111 181 141 (183) 4 TREND ANALYSIS Trend with 2014 as base year (In Percentage) a) Gross Profit 113 110 106 100 b) Operating Income 134 140 140 100 c) Net Income (61) (99) (77) 100 d) Revenue 114 110 106 100 As per Notes to the financial statements of the annual report for the year ending 30th of June 2017, the following accounting policy has been taken into consideration: Revenue - Revenue has been recognized at the fair value of the amount received from the patient and is recognized on the date it is provided to the patient. It has been mentioned that the applicability of AASB 15 Revenue from Contracts with customers and AASB 16 Leases will be checked and applied for the year ending 30th of June 2019 and 2020 respectively. Operating Lease The lease payments are recognized over the term of the lease on the straight line basis. The company has not assumed any type of risk associated with the assets so leased. As per the current market situation, the health care equipment industry has been in upward trend by 7.57% but the company has been receiving the negative trend from the last two year. Statement Of Financial Position The table has provided the amount of assets, liabilities and equity for the last consecutive four years. After that the trend analysis has been conducted considering the year of 2014 as the base year. STATEMENT SHOWING FINANCIAL POSITION AND TREND ANALYSIS S. NO. YEARS ASSETS LIABILITIES STOCKHOLDERS EQUITY TREND ANALYSIS (2014 AS BASE YEAR) 1 2017 4701 2333 2368 128 72 525 2 2016 4445 2072 2373 121 64 527 3 2015 3981 1675 2306 108 52 512 4 2014 3677 3226 451 100 100 100 As per the annual report of the company for the year ending 30th June 2017, following are the accounting policies: Property Plant and Equipment has been valued at the cost less the amount pertaining to the depreciation of assets and impairment losses. The company makes the estimates and judgments regarding the assumptions for the amount of cash flows which will be generated in future and discount rates. Goodwill is recognized at cost of acquisition less impairment. Other intangibles are recognized at cost less depreciation if it has the finite lives otherwise at the cost less impairment if any. Statement Of Cash Flows STATEMENT SHOWING CASH FLOWS AND ANALYSIS ($Million) S. NO. PARTICULARS 2017 2016 2015 2014 1 Operating Cash Flows 331 324 301 158 2 Net Income 111 181 141 (183) 3 Investing Cash Flows (562) (492) (342) (153) 4 Financing Cash Flows 149 229 128 46 5 Net Increase / (Decrease) (83) 61 87 51 Till the year of 2016, the operating cash flows have direct relationship with the net income but after that there has been the reverse relationship. Yes, the company has been expanding in Investing Activities in terms of higher revenue but contracting in terms of net income. The major source of finance for the company in the year 2017 is the proceeds from the project of Northern beaches in collaboration with Government of New South Wales. Over the past four years the cash and cash equivalents total of AUD116 million has been increased. Ratio Anaysis The ratios have been calculated as per the following table (Lan, 2012; Drake and Fabozzi, 2010; Olugbenga and Atanda., 2014.): STATEMENT SHOWING THE RATIO ANALYSIS S. No. PARTICULARS 2017 2016 2015 2014 1 Liquidity Ratios a Current Assets 491 500 522 335 Less Current Liabilities 403 389 407 3110 Working Capital 88 111 115 (2775) b Current Ratio 1.22 1.29 1.28 0.11 c Debtors 166 146 96 108 Revenue 2318 2233 2157 2038 Debtors Turnover Ratio 13.97 15.29 22.46 18.87 d Average Debtors 156 121 102 108 Revenue 2318 2233 2157 2038 Average days sales uncollected 25 20 17 19 e Inventory 55 58 53 50 Revenue 2318 2233 2157 2038 Inventory Turnover Ratio 42.15 38.50 40.69 40.75 f Average Inventory 57 56 52 50 Revenue 2318 2233 2157 2038 Average Days Inventory on Hand 8.90 9.07 8.72 8.96 a EBIT 278 290 288 209 Revenue 2318 2233 2157 2038 Net Profit Magin 11.99 12.99 13.35 10.26 b Assets 4701 4445 3981 3677 Average Assets 4573 4213 3829 3677 Revenue 2318 2233 2157 2038 Asset Turnover Ratio 50.69 53.00 56.32 55.41 c EBIT 278 290 288 209 Average Assets 4573 4213 3829 3677 ROA 6.08 6.88 7.52 5.68 d PAT 111 181 141 (183) Equity 2368 2373 2306 451 Average Equity 2371 2340 1379 451 ROE 4.68 7.74 10.22 (40.61) 3 Long Term Solvency Ratios a Debt 2333 2072 1675 3226 Equity 2368 2373 2306 451 Debt to Equity 98.52 87.32 72.64 715.30 b EBIT 278 290 288 209 Interest 53 44 70 407 Interest Coverage Ratio 5.25 6.59 4.11 0.51 4 Cash Flow Adequacy Ratios (Dechow, Richardson, and Sloan, 2008) a Cash 196 279 218 138 Current Liabilities 403 389 407 3110 Cash Flow Yield 0.49 0.72 0.54 0.04 b Cash Flow from Operating Activities 331 324 301 158 Sales 2318 2233 2157 2038 Cash Flow to Sales 0.14 0.15 0.14 0.08 c Cash Flow 331 324 301 158 Assets 4701 4445 3981 3677 Cash Flow to Assets 0.07 0.07 0.08 0.04 5 Market Strength Ratios a Earnings Per Share 6.4 10.4 8.6 (11) All the above ratios have been facing the decreasing trend over the past four years. This is majorly because of the health of the industry in Australia as the company is required to spend more on the facilities and industry is currently under the pressure (Delen, 2013). Conclusion To conclude with the report, the company has been growing over the past five years and has been in the wave of expansion of the company. The synergies have arisen in the revenue but the net income has been decreasing year on year basis. It is recommended that the company shall take care of its financial part seriously as the company will soon face the problem of liquidity if the same situation prevails. Based on the analysis, the company is the strong performer since its inception. The reason for the above decision is based on the financial performance of the company in the year 2014-15 as the company has overcome the loss of AUD183 million in 2014 to the profit of AUD141 million in 2015. References Bartlet C, (2016), Australias Health Care System: An Opportunity for Economic Growth available at https://www.strategyand.pwc.com/reports/australias-healthcare-system accessed on 09/09/2017. Company Official Website, (2015), Annual Report 2015, available at https://www.healthscope.com.au accessed on 09/09/2017. Company Official Website, (2016), Annual Report 2016, available at https://www.healthscope.com.au accessed on 09/09/2017. Company Official Website, (2017), Annual Report 2017, available at https://www.healthscope.com.au accessed on 09/09/2017. Dechow, P.M., Richardson, S.A. and Sloan, R.G., 2008. The persistence and pricing of the cash component of earnings.Journal of Accounting Research,46(3), pp.537-566. Delen, D., 2013. Measuring firm performance using financial ratios: A decision tree approach.Expert Systems with Applications,40(10), pp.3970-3983. Drake, P.P. and Fabozzi, F.J., 2010. Financial ratio analysis.Handbook of Finance. Lan J, (2012), 16 Financial Ratios for Analyzing Companys Strength and Weaknesses available at https://www.aaii.com/journal/article/16-financial-ratios-for-analyzing-a-companys-strengths-and-weaknesses.touch accessed on 10/09/2017. Olugbenga, A.A. and Atanda, O.A., 2014. Value relevance of financial accounting information of quoted companies in Nigeria: A trend analysis.Research Journal of Finance and Accounting,5(8), pp.86-93. SMH Official Website, (2017), HSO Health Scope Limited Share Prices, Company News and Announcements, available at https://www.smh.com.au/business/markets/quotes/dividends/HSO/healthscope-limited accessed on 09/09/2017. Taylor, M., 2010. Financial statement analysis. White, G.L., Sondh, A.C. and Fried, D., 2005. Analysis of Financial Statement.Analysis.