Financial Analysis Of Amcor Limited From 2015 To 2017

Profit and loss statement

Figure 1: Depicting the profit and loss statement of Amcor Limited from 2015 to 2017
(Source: Amcor.com 2018)

The income statement of the organization is mainly presented in the above figure from 2017 to 2015, which in turn helps in identifying the overall pattern of income and expenses conducted by the organization during the fiscal years. Revenue from sales of goods has been declining since 2015, which is indicating the loss in demand from consumers. Following the decrease in revenue the overall cost of sales of the organization also declined due to low purchases conducted during the fiscal years. Moreover, the decline in revenue and cost of sales as mainly reduce the overall gross profit in curd by the organization during the three fiscal years. The gross profit as mainly declined from the levels of 1994.8 million in 2016 to 1911.8 million in 2017 (Amcor.com 2018). However, from 2015 to 2016 the overall gross profit of the organization mainly increased due to low cost of sales.

Moreover, the administrative expenses of Amcor Limited can be identified from the income statement, which has a relatively increased over the period of 3 fiscal year. Profit from operations mainly declined during 2016 due to excessive general and administrative expenses incurred by the organization. This excess expenditure be reduced the overall net profit of the organization to 273.6 million in 2016 which directly declined its financial performance (Amcor.com 2018). However, in 2017 the administrative expenses were controlled by Amcor Limited which helped in boosting the net profit to 614 million. This directly indicates the high control of expenses that is maintained by the management of Amcor Limited. The finance cost remained same during the three fiscal years with the brief change in value, while the finance income declined exponentially from 2015 to 2016.

Figure 2: Depicting the Cash Flow statement of Amcor Limited from 2015 to 2017
(Source: Amcor.com 2018)

The above figure really represents the cash flow statement for Amcor Limited from 2015 to 2016. this identification of the cash flow mainly helps in detecting the actual financial position of the company to support its day-to-day operations. The cash position of the organization is identified from the above figure where relevant operating activities investing activities and financing activities are evaluated to identify the net increase or decrease in cash held by the organization. In comparison from 2015 to 2017 the net cash flow from operating activities has mainly inclined, while the comparison from 2016 to 2017 it is a relatively declined. This mainly indicates that during 2016 the overall net cash flow from operating activities mainly improved (Amcor.com 2018).

Cash flow statement

The cash flow from financing activities also improved due to less investments conducted by the company on property and acquisition during 2017. However, the evaluation indicates that during 2016 the company has invested more on investing activities by increasing its expenses in Venezuela exposure (Amcor.com 2018). This relatively increased the financing activities cash outflow conducted by the organization. The net cash flow from investing activities has increased exponentially since 2015, as the organization has increased its investing activities to improve their production.

Lastly, the cash flow from financing activities is mainly declined over the three-fiscal year, which indicates that the company is adequately repaying all its borrowings conducted during the fiscal year. the net cash flow from financing activities may be increased during 2017 as compared to 2016 due to decline in proceeds from borrowings conducted by the organization (Kanapickiene and Grundiene 2015). The overall cash and cash equivalents at the end of the financial period mainly in climbed over the two fiscal years, as in 2015 the cash equivalents were relatively higher.

Figure 3: Depicting the Balance sheet statement of Amcor Limited from 2015 to 2017]

(Source: Amcor.com 2018)

Evaluation of the financial statement mainly helps in detecting the overall Assets and liabilities that is maintained by the organization during the fiscal years.  relevant improvement in total assets can be seen over the 3 fiscal years, which was mainly conducted due to rising noncurrent assets of the organization.  the current assets of the company mainly declined over the period of 3 years indicating a low accumulation of adequate fund to supported short term obligations. the reduction in cash and cash equivalents of the organization from 2015 to 2017 has mainly reduced its current assets and hampered liquidity position of the company (Amcor.com 2018). The non-current attributes of the balance sheet many rose due to the improvement in property, plant, equipment, and intangible assets of the organization. The total assets of the organization mainly inclined indicating a positive financial position of the company in the past fiscal years.

Relevant total liabilities of the organization can also be detected from the above figure, which comprises of both noncurrent and current liabilities. The current liabilities of the organization have inclined adequately in 3-year period, while the overall noncurrent liabilities have declined. However, the total liabilities of the organization have increased adequately over the three years, which is due to the rising current liabilities. The increment in current liabilities was mainly conducted due to rising payables and interest-bearing liabilities of the organization. The company acquired high payable and interest-bearing liabilities during the fiscal years, which increased its overall current liabilities (Amcor.com 2018). Though, reduction in retirement benefit obligation mainly reduced the overall noncurrent liabilities of the company during 2017. Nevertheless, this increment in current liabilities and decline in non-current liabilities increased the overall total liabilities of the company.

Balance sheet statement

Net assets of Amcor Limited are also identified from the evaluation of the balance sheet, which is seen to be declining over the three-fiscal year. This increment in net assets is mainly conducted due to the accumulation of high total Assets of the organization. the total equity can also be identified from the evaluation of annual report, which is relatively same as net assets and has been decreasing over the period of 3 fiscal years. due to the increment in negative reserves the overall contribution of equity is reduced, which is in town helping the total equity to match net assets of your organization (Amcor.com 2018).

Particulars	2017	2016	2015
Net Profit	614	273.6	707.9
Interest	139.44	140.84	137.55
Total assets	9083.3	8682.1	8547.1
Profitability ratio	(Net Profit + Interest) / Average total assets
Profitability ratio	(614+139.44)/((9083.3+8682.1)/2)	(273.6+140.84)/((8682.1+8547.1)/2)	(707.9+137.55)/((8547.1+9133.9)/2)
Profitability ratio	8.48%	4.81%	9.56%

Table 1: Mentioning the probability ratio of Amcor Limited from 2015-2017

(Source: As created by the author)

The above table mainly focuses on deriving the profitability ratio of Amcor Limited from 2015 to 2017. The profitability ratio has many declined from the levels of 9.56% in 2015 to 8.48% in 2017, which is mainly conducted due to the reduced net profitability accumulated by the company in the current fiscal year. However, during 2016 the profitability level of the organization declined, which resulted in the downfall of profitability ratio to the levels of 4.81%. This decline in profit was mainly conducted due to aggressive administrative expenses conducted by the company during the fiscal year of 2016. Nevertheless, the organization controlled its administrative expenses, which helped in increasing the profitability ratio in 2017 from 4.81% to 8.48%. This directly indicates the overall control of the organization on its cost and expenditure level. Lastly, the net profit of the organization is still in a decline stage in comparison to the 2015 net profit level (Meriç, Kam??l? and Temizel 2017).

Particulars	2017	2016	2015
Cost of goods sold	7189.2	7426.5	7679.6
Inventory	1305.5	1244.14	1213.9
Efficiency ratio	Cost of goods sold / Average Inventory
Efficiency ratio	7189.2 / 1305.5	7426.5 / 1244.14	7679.6 / 1213.9
Efficiency ratio	5.64	6.04	6.04

Table 2: Mentioning the Efficiency ratio of Amcor Limited from 2015-2017

(Source: As created by the author)

The focus of the above calculations is on deriving the overall efficiency ratio for Amcor Limited from 2015 to 2017. The overall efficiency of the organization has declined over the period of 3 fiscal years, which indicates the accumulation of inventory conducted by the organization. From the valuation it could be understood that during 2015 and 2016 the company was able to maintain its efficiency ratio to the levels of 6.04. However, during 2017 the accumulation of inventory mainly reduced the efficiency level to 5.64, which indicates higher cost incurred by the organization during the fiscal year. The accumulation of inventory, while cost of goods sold declined and inclined adequately during 2015 and 2016, which allowed the management to maintain its efficiency ratio at 6.04. Nevertheless, the company was not able to maintain its efficiency ratio, which indicated lack of sales conducted by the company during the fiscal year (Paul and Mitra 2017).

Particulars	2017	2016	2015
Current Assets	3286.5	3193.1	3413
Current Liabilities	4012.4	3645.2	3674.4
Liquidity ratio	Current Assets / Current Liabilities
Liquidity ratio	3286.5 / 4012.4	3193.1 / 3645.2	3413 / 3674.4
Liquidity ratio	0.82	0.88	0.93

Ratio Analysis

Table 3: Mentioning the Liquidity ratio of Amcor Limited from 2015-2017

(Source: As created by the author)

Liquidity ratio of Amcor Limited from 2015 to 2017 can be identified from the above calculations conducted in the table. The liquidity ratio of the organization has relative the decline of the period of 3 fiscal year, which is mainly conducted due to low current assets acquired by the organization. On the other hand, the company accumulated high current liabilities while reducing the current asset accumulation during the past fiscal years. The liquidity ratio is mainly calculated by dividing the current assets with current liabilities, where is in this case the reduction in current assets and inclination in current liabilities mainly declined the overall ratio. the liquidity ratio mainly needs to be around 2, which is a standard rule for all the organization. However, this value of 0.82 indicates low accumulation of adequate assets to support it short term liabilities.  the company will not be able to support its obligations by selling the current assets (Lukason, Laitinen and Suvas 2015).

Particulars	2017	2016	2015
Net Profit	614	273.6	707.9
Ordinary shares	1157.2	1162.2	1202.6
Rate of Return	Net Profit / Ordinary Shares
Rate of Return	614 / 1157.2	273.6 / 1162.2	707.9 / 1202.6
Rate of return	53.06%	23.54%	58.86%

Table 4: Mentioning the Rate of return of Amcor Limited from 2015-2017

(Source: As created by the author)

The return of the organization is mainly calculated by dividing the net profit with weighted average of the ordinary shares present currently within the organization. This overall formula mainly helps in identifying the rate of return, which is earnings per share of the organization. The identification of earnings per share mainly allows the investors to detect the financial viability of the organization to adequately support its operations (Wong and Joshi 2015). The company’s overall return has been declined for the period of 3 fiscal year, where in 2015 58.6% rate of return was provided by the company. This directly declined to 53.06% in 2017, which indicates Allu net profit and curd by the company during the fiscal year.

From 2015 to 2017 both net profit and online shares of Amcor Limited has declined, where is net profit in comparison to the a delicious at the client more, which reduced its overall rate of return. However, during 2016 the rate of return declined to 23.54%, which was due to low net profit incurred during the year. Nevertheless, rate of return increased exponentially from 23.54% in 2016 to 53.06% in 2017 due to the increment in profits in curd by the organization.

The directors report mainly includes all the relevant statutory matters which is conducted by the company during the fiscal year. Relevant measures conducted by the organization are also depicted where the company adequately follows APES 110 code of ethics for it professional accountants, which mainly indicates that all the relevant and preparation of financial report are conducted ethically (Amcor.com 2018). The director directly states that the company follows all the relevant ethical measures in their operation, which helps in supporting their financial requirements. Therefore, the prepared annual report of the organization is drafted ethically and portrays the actual financial position of the organization. The company also follows corporate governance statement which is depicted in the director’s report where the board is committed in demonstrating the highest standard of corporate governance in their operations (Ferrer and Tang 2016).

Conclusion

This relevant compliance of the organization with the standards and ethical code mainly indicate the overall positive attributes of the company. These positive attributes are depicting the financial strength of the organization in maintaining corporate governance in their activities. Hence, use of ethical code is directly depicted in director’s report, which indicates that the organization is relatively following all the ethical laws laid down by the government. The annual report complies with all the relevant ethical values, which indicates the viable values represented in the financial report (Amcor.com 2018).

After the valuation of financial statement, ratios and ethical consideration of Amcor Limited, it could be identified that the company has a viable investment opportunity. The investment opportunity could really help in improving the rate of return from the investment for an investor. however, the liquidity ratio of the organization is relatively not adequate, which might increase concern for the investor. On the other hand, both the rate of return and profitability ratio of the organization is relatively adequate and is depicting high returns generated by the organization (Giordani et al. 2014). The evaluation of the annual report also indicates that relevant increment in profitability has it been identified, which could allow investors in improving the return from investment. The EPS of the organization has relatively increased due to high profits incurred by the company during the fiscal year (Amcor.com 2018). Therefore, it could be estimated that the company will provide higher returns in future, which will allow the investor to increase their return generation capacity.

Thus, the investor could use All the above information for adequately evaluating the financial performance of the organization and making relevant decision for the Investments. Improvements in the financial performance indicate that investors can increase their investments in Amcor Limited to raise the level of return.

Reference:

Amcor.com. (2018). [online] Available at: https://www.amcor.com/CorporateSite/media/Annual-reports/Amcor_Annual_Report_2017.pdf [Accessed 27 Jan. 2018].

Ferrer, R.C. and Tang, A., 2016. An empirical investigation of the impact of financial ratios and business combination on stock price among the service firms in the Philippines. Academy of Accounting and Financial Studies Journal, 20(2), p.104.

Giordani, P., Jacobson, T., Von Schedvin, E. and Villani, M., 2014. Taking the twists into account: Predicting firm bankruptcy risk with splines of financial ratios. Journal of Financial and Quantitative Analysis, 49(4), pp.1071-1099.

Kanapickien?, R. and Grundien?, Ž., 2015. The model of fraud detection in financial statements by means of financial ratios. Procedia-Social and Behavioral Sciences, 213, pp.321-327.

Lukason, O., Laitinen, E.K. and Suvas, A., 2015. Growth patterns of small manufacturing firms before failure: interconnections with financial ratios and nonfinancial variables. International Journal of Industrial Engineering and Management, 6(2), pp.59-66.

Meriç, E., Kam??l?, M. and Temizel, F., 2017. Interactions among Stock Price and Financial Ratios: The Case of Turkish Banking Sector. Applied Economics and Finance, 4(6), pp.107-115.

Paul, S. and Mitra, G., 2017. Impact of Financial Ratios on Stock Price: A Comparative Study with Hang Seng and Nifty Data. Research Bulletin, 43(2), pp.64-71.

Wong, K. and Joshi, M., 2015. The impact of lease capitalisation on financial statements and key ratios: Evidence from Australia. Australasian Accounting Business & Finance Journal, 9(3), p.27.