Billabong International Ltd is one of the leading wholesale and retail companies, mainly dealing with products like surf, skate, snow and sports apparel, accessories plus hardware presently composing multiple brands as well as retail banners over three main reporting segments being Europe, America, and Asia Pacific. There are many brands of the group including Billabong, Honolua, Element, RVCA, Palmer, Kustom, Xcel, Von Zipper and Tigerlily. The groups have 407 retail stores across the different region of the world. The store is mainly situated in North America, where the group has 55 stores, in Europe, the company has 104 retail stores, in Australia the business organization has 127 retail stores and in New Zealand the groups has 29 stores. Apart from these stores, in Japan the company has 47 stores, in South Africa it has 28 retail stores which trade under different banners of the groups comprising of constraint but not to Billabong, Surf Dive ‘n’ Ski (SDS), Element, Amazon, Rush, Honolua, Two season and Quiet Flight. The group also operate in online and perform online retailing for every single key brand of the business groups.
The groups experience significant modifications in the state of affairs.
The group’s outcome for the specific period plus the past corresponding period adds definite substantial items. For providing the users extra information in respect of the continuous operation excluding the abovementioned important items plus to support understanding the impact of these events on the outcome of the groups (Appannaiah, Reddy, & Putty, 2010). The group has performed substantially in last few years and accomplish considerable growth and development during these years. In this matter, the different brand of the company supports immensely. Hence, the company can accomplish significant growth and development that help in improving the sustainability quotient of the company. The reason behind this is that the popularity of the sports apparel is increasing day by day. However, the company has increased its business operation but as per the financial reports of the company is running in loss.
Profitability ratio is being depicted to be showing the financial metrics and also it is also used for showing the appropriate access to the business ability for generating the earnings as it is being compared to the expenses and also the other relevant costs (Besley, 2016). For having the appropriate constitution of the ratios, the higher relative competitor’s ratio or the same ration is being presented for showing the explanation of the work and also the information provided is showing the proper explanation of the work. This simply represents the higher profit margin and also the same period is being undertaken by showing the explanation of the financial analysis as it is explained in this case (Welch, 2014).
|
Profitability |
2015-06 |
2016-06 |
|
Net Margin % |
0.39 |
-2.16 |
|
Return on Assets % |
0.53 |
-3.07 |
|
Return on Equity % |
1.5 |
-8.78 |
|
Return on Invested Capital % |
5.17 |
0.98 |
|
Interest Coverage |
0.41 |
0.62 |
Analysis:
The net profit margin shows profitability of Billabong. The net profit margin of company has decreased from the 0.39 to -2.16 which depicts that the profit has reduced over the time period. The return on assets of company has lessened from 0.53 to -3.07 which depicts that the company is not effectively using its assets. The management is not efficient in managing all the operation that leads to the decrease in the performance of company. The return on equity of the company has also declined from 1.5 to -8.78 (Britton, & Waterston, 2013). The negative value clearly shows that the company is not creating returns for shareholders. The increment of interest coverage ratio is seen from 0.41 to 0.62 which means the paying on the interests are not made on the company and also the expansion of the business is being seen in the form decreasing the interest rates. The company is not able to manage the operations of the company which leads to the decrease in the profits and returns on the investment. The sales revenue has decreased, and the production cost has increased. The management is responsible for the decrease in the performance of the company (Wolf, 2010).
The efficiency ratio is determined to be showing the analysis which is dependent on the company by which it uses its assets and the liabilities in an appropriate way. This simply explains the process of calculating the turnover of the receivables, convention of the equity, general exercise of the inventory, the repayment of the liabilities and the machinery (Burns, 2014). It also helps to keep track for the purpose of analyzing the expansion of the work which is being made by showing the analysis of the performance of the commercial and the investment banks.
|
Key Ratios -> Efficiency Ratios |
||
|
Efficiency |
2015-06 |
2016-06 |
|
Days Sales Outstanding |
55.24 |
55.75 |
|
Days Inventory |
135.35 |
125.4 |
|
Payables Period |
97.15 |
85.85 |
|
Cash Conversion Cycle |
93.44 |
95.3 |
|
Receivables Turnover |
6.61 |
6.55 |
|
Inventory Turnover |
2.7 |
2.91 |
|
Fixed Assets Turnover |
11.44 |
12.52 |
|
Asset Turnover |
1.35 |
1.42 |
Analysis:
The days sales outstanding show that the ratio has increased which means that the time is taken by the company to collect the owing amount as of the debtors. The day’s inventory ratio has decreased from 135.35 to 125.4 which means the purchasing and sales activities has decreased. The payable period has decreased from 97.15 to 85.85 which mean that the company is paying to the suppliers quickly (Connolly, 2007). The cash conversion cycle has increased from 93.44 to 95.3. The receivable turnover ratio has decreased from 6.61 to 6.55 which determine that the company is not effectively managing its resources. The efficiency ratio clearly illustrates a decrease in the presentation of company. The asset turnover ratio has increased slightly and the fixed asset turnover has also increased which means the company is utilizing its assets (Gitman, & Zutter, 2015). The inappropriate management of the operations are made by the management team which is clearly illustrating that the decrement of the performance is becoming formed in the form of the outputs as gained by the company. Therefore the company is required to recover the issues of the management team and also must take steps to mitigate these issues. This enhance the productivity of the company with enabling the company to present a appropriate performance as it is illustrated in this case.
The liquidity ratio is used for making the measurement of the company’s ability for paying the debt obligations and also the margin of safety is being made by showing the explanation of the computation of the metrics with including current ratio and the quick ratio with showing the cash flow operated during the period (Helbæk, Lindset, & McLellan, 2010). Therefore, the current liabilities are appropriately analyzed by evaluating the short term debts for the purpose of illustrating the liquid assets of the company. The bankruptcy forecasters and the mortgage inventors use the liquidity ratios for the purpose of evaluating the issues.
|
Liquidity/Financial Health |
2015-06 |
2016-06 |
|
Current Ratio |
2.19 |
2.35 |
|
Quick Ratio |
1.35 |
1.32 |
|
Debt/Equity |
0.92 |
1.03 |
Analysis:
The current ratio shows the capability of the corporation to reimburse the compulsions. The current ratio also states that the company is liable to pay of all the compulsions which can be illustrated from being the ratio is above one and less than one shows that the difficulties are faced by the organisation during the paying off of the compulsions (Holton, 2012). The current ratio of the company has increased from 2.19 to 2.35 which states that the company can be able to pay off the compulsions in an appropriate way. The quick ratio has reduced from 1.35 to 1.32. The debt-equity ratio of the company has also increased from 0.92 to 1.03. The ratio states the increment of the debt of the company during the year 2015 to 2016. The company is utilizing more debt sources and also not paying the due amounts appropriately.
A gearing ratio is being defined to be explaining the appropriate framework of the work which is illustrating that the company makes comparison of owner’s equity and also the borrowing of the funds (Horngren, 2014). The gearing is also illustrated as the form of the measurement of the entity’s financial leverage which is showing the demonstration of the degree which the owner’s funds a firm’s activities and also the creditor’s funds. Therefore the examples of the gearing ratio are being made by including the debt to the equity ratio and the time’s interests earned are showing the examples of this ratio.
|
Liquidity/Financial Health |
2015-06 |
2016-06 |
|
Financial Leverage |
2.86 |
2.87 |
The financial leverage ratio has increased from 2.86 to 2.87 which means that the debt level has increased over the period. The financial leverage shows a number of debts that are used by the company. The increment of the ratio is indicated during this period which states that the debts of company have also increased (KIESO, 2016).
The investment ratios are considered as the wide form of the works which is being made by elaborating the explanation and the wide array of ratios can be appropriately explained (Parrino, 2015). The inclusion of financial statements is illustrating the appropriate justification of the gross margin, EBITDA, operating cash flow and also the pro forma earnings are calculated by showing the enlistment of the work. This simply explains the enhancement of work which is showing the competition in the market.
|
2015-06 |
2016-06 |
|
|
Return on Equity % |
1.5 |
-8.78 |
|
Return on Invested Capital % |
5.17 |
0.98 |
The return on the equity has decreased from 1.5 to -8.78 which explain the negative presentation of company. The negative value of ratio clearly shows clearly explains that the company is not able to generate the returns for the shareholders and also the weakness of the company can be easily defined (Powers, & Needles, 2012). The decrement of the return on investment is explained in this case which shows that the company is not liable for generating returns as of the capital invested. The earnings per share have also declined from 0.02 to -0.12 which means that earnings on shares have declined showing the negative presentation of the company. The company need to focus on business operation in order to increase the returns.
Conclusions
In order to assess the financial performance of the business organizations the studying of the accounting and financial report of the company in important and play a vital role. The report evaluates the financial performance of the leading wholesale and retail organization Billabong International Ltd. The company mainly doing business in surf, skate, now and sports apparel, accessories plus hardware currently constituting multiple brands and the company has various brands which help the company is operating in different part of the world (Spiceland, 2010). The company has performed well and establish substantial growth in last few years. However, the financial reports state alternatively, as per the financial report the gearing ratio is increased means the liability of the company is increasing, and the profitability ratio is reducing means the company’s profit is reduced. Hence the financial performance of the company had been illustrated to be poor. It becomes the responsibility of the management team to increase the performance of the company. The profitability has decreased, and the debt level has increased which shows that the managers and employees are efficient in managing the operations (Stice, & Stice, 2014). The overall presentation of company has declined over the period. The financial ratios enable the company to establish and assess the financial health of organization. The results clearly focuses on the negative presentation which is being made by the company by illustrating the growth and also the downfall is being explained by focusing on the ratios as it is being explained in the form of the analysis. Therefore the focus on the performance is becoming the essential factor for the establishment of the appropriate environment and also the company is liable for the development of the downfall of itself.
The recommendations that can be provided in this context simply represent the appropriate analysis of the work by showing the explanation of the work. The expression simply explains the proper enhancement of the work which is being made by demonstrating the improvement of the responsibilities as it is conducted by indicating the implementation of the selection process. Since the company Billabong is facing the losses, the recommendation for the improvement can be easily suggested by showing the appropriate identification of the issues (Weil, 2017). The sorting of the issues must be made for the improvement of the areas for the company at which the company is lagging behind. The improvement of the financial issues can be easily sorted by referring to the auditing processes applied by the company and also to some extent; the process is being easily adopted by showing the audit plans as it is being mentioned by showing the reviewing of the processes. Thus it also shows the appropriate processing of the work as it is explained in this case. The organization must adopt the benchmarking capability for the betterment, and the appropriate report can be easily presented by showing the appropriate following of the professional standards. The explanations provided is supporting the changes which are essential for the company to increase the financial presentation of the company. This can be easily gained by establishing an appropriate atmosphere with providing the proper construction of the management team. the ability must be constructed in the management team by the higher authorities of the company so that the performance can be easily increased by illustrating the growth. This clearly identifies the issues present in the management team and is also identified to be liable for the downfall of the company. The company is also required to take some necessary steps for the development of the management team so that the expansion of the company could take place for the purpose of facing this competitive era.
References
Appannaiah, H., Reddy, P., & Putty, R. (2010). Financial accounting. Mumbai [India]: Himalaya Pub. House.
Besley, S. (2016). Corporate finance. [Place of publication not identified]: Cengage Learning.
Britton, A., & Waterston, C. (2013). Financial accounting. Harlow: Financial Times Prentice Hall.
Burns, P. (2014). Business Finance. Elsevier Science.
Connolly, M. (2007). International business finance. New York: Routledge.
Gitman, L., & Zutter, C. (2015). Principles of managerial finance. Harlow: Pearson Education limited.
Helbæk, M., Lindset, S., & McLellan, B. (2010). Corporate finance. Maidenhead, Berkshire: Open University Press/McGraw-Hill Education.
Holton, R. (2012). Global finance. Abingdon, Oxon: Routledge.
Horngren, C. (2014). Accounting. Toronto: Pearson Canada.
KIESO, D. (2016). INTERMEDIATE ACCOUNTING. [S.l.]: JOHN WILEY.
Parrino, R. (2015). Corporate Finance. Singapore: John Wiley & Sons.
Powers, M., & Needles, B. (2012). Financial accounting. [Mason]: South-Western, Cengage Learning.
Spiceland, J. (2010). Intermediate accounting. Toronto, ON: McGraw-Hill Ryerson.
Stice, J., & Stice, E. (2014). Intermediate accounting. Mason: South-Western/Cengage Learning.
Weil, R. (2017). Financial accounting. [Place of publication not identified]: Cengage Learning.
Welch, I. (2014). Corporate finance. Los Angeles: Ivo Welch.
Wolf, M. (2010). Fixing global finance. Baltimore, Md.: Johns Hopkins University Press.
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