I need the answer to the questions below

Here is the link to the annual report -https://www.thea2milkcompany.com/wp-content/uploads/2015/09/A2ML00022_a2_REPORT_Spreads_vLR.pdf

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http://www.nzherald.co.nz/businessews/article.cfm?c_id=3&objectid=11599487

http://www.nzherald.co.nz/businessews/article.cfm?c_id=3&objectid=11600214 )

I HAVE ATTACHED THE RATIO ANSWERS TO QUESTION 1 IN THE DOCUMENT BELOW WHICH SHOWS THE THE FOLLOWING RATIOS

• Liquidity
• Capital structure
• Asset management efficiency
• Profitability
• Market value

Answer the following questions

2) Assume you are a banker evaluating a loan request from a2 milk Company for $ 150 million. What would be your concerns when making a decision regarding approval or denial of the loan request? Justify.

(Maximum 750 words excluding appendices)

3)Assume you are an investor in the shares of a2 milk Company and rely on receipt of regular cash dividends as part of your return on investment. You have $ 200,000 available for investment which is currently deposited in a term-deposit at an interest rate of 5.2% per annum which you would like to utilise to buy additional shares in a2 milk Company. The company?s shares are trading at an average price of $1.80 per share. What would your decision be? Justify.

(Maximum 750 words excluding appendices)

No Plagiarism please

Thanks

Using the consolidated accounting information, Compute all the ratios that fall under the following categories for the year ended 30/6/15 and for the previous year: A. Liquidity B. Capital structure C. Asset management efficiency D. Profitability E. Market value Liquidity Ratios Current ratio Quick Ratio Average collection period Accounts receivable turnover Inventory turnover A) Workings 2014 Workings 2015 51,137,000 17,875,000 51,137,000 5,583,000 17,875,000 27,358,000 110,621,000/365 2.86 times 2.55 times 60,533,000 28,952,000 60,533,000 - 4,846,000 28,952,000 39,944,000 154,803,000/365 2.09 times 1.92 times 90 days 94 days 110,621,000 27,358,000 4.04 times 154,803,000 39,944,000 3.86 times 70,802,000 5,583,000 12.68 times 100,387,000 4,846,000 20.72 times B) Capital Structure Ratios Debt ratio Interest coverage ratio Workings 17,999,000 76,643,000 720,000 2014 23.48% Workings 2015 30,238,000 88,867,000 1,281,000 34.03% Workings 2015 C) Asset Workings management efficiency ratios Total asset 110,621,000 turnover 76,643,000 2014 1.44 times 154,803,000 88,867,000 1.74 times Fixed asset 12.07 times 154,803,000 16.64 times 110,621,000 turnover 9,163,000 9,301,000 D) Profitability ratios Gross profit margin Operating profit margin Workings 70,802,000 110,621,000 720,000 110,621,000 2014 64% 6.51% Workings 2015 100,387,000 154,803,000 1,281,000 154,803,000 64.85% 8.27% Net profit margin 10,000 110,621,000 0.01% 2,091,000 154,803,000 1.35% Return on assets Return on equity 720,000 76,643,000 10,000 58,644,000 0.94% 1,281,000 88,867,000 2,091,000 58,629,000 1.44% 0.02% 3.57% E) Market value ratios Price - earnings ratio Market-tobook ratio Workings 2014 Workings 2015 QUESTION 3: FINANCIAL STATEMENT ANALAYSIS (36 MARKS) Using the annual report of a2 milk Company, for 2014-2015, (https://www.thea2milkcompany.com/wpcontent/uploads/2015/09/A2ML00022_a2_REPORT_Spreads_vLR.pdf) answer the following questions. (Refer also to the press coverage documents attached in Blackboard - AUTonline) Required: 1. Using the consolidated accounting information, Compute all the ratios that fall under the following categories for the year ended 30/6/15 and for the previous year: a. Liquidity b. Capital structure c. Asset management efficiency d. Profitability e. Market value (8 marks) 2. Based on the ratios computed above, write a comprehensive report 1 to the management of a2 milk Company, evaluating the overall financial health of the company in comparison to the prior year. (Your report should synthesise all information obtained from the ratios and arrive at an overall conclusion reflecting industry knowledge rather than interpret each category of ratios independently. You report, in addition to the evaluation of financial health of the firm should also cover the following: i. The company's ability to generate cash flows in the future ii. Its future external financing needs (Maximum 1000 words excluding appendices) (10 marks) 3. Assume you are a banker evaluating a loan request from a2 milk Company for $ 150 million. What would be your concerns when making a decision regarding approval or denial of the loan request? Justify. (Maximum 750 words excluding appendices) (10 marks) 4. Assume you are an investor in the shares of a2 milk Company and rely on receipt of regular cash dividends as part of your return on investment. You have $ 200,000 available for investment which is currently deposited in a term-deposit at an interest rate of 5.2% per annum which you would like to utilise to buy additional shares in a2 milk Company. The company's shares are trading at an average price of $1.80 per share. What would your decision be? Justify. (Maximum 750 words excluding appendices) (8 marks) 1 The report should be prepared in professional format with the following features: (a) Title of the report; (b) from whom to whom; (c) nature of the report; (d) terms of references; (e) executive summary; (f) discussion on findings; (g) conclusion; (h) references. Running head: FINANCE 1 Finance Name Institution Running head: FINANCE 2 Question 1 Loan application and appraisal is done after considering four fundamental characteristics mainly borrowers, character, collateral, history of cash flow, and borrower credit history. Credit history Before a commercial loan is advanced, there is the review of the credit report for the period and in most cases, it is five years. One can get the free business information report (BIR) from Dun & Bradstreet (D&B). If D&B happens not to have the information, one can voluntarily, get the listing after providing them with necessary information. Most lenders expect a minimum of five or four trade experiences documented on the business report for an enterprise to be considered creditworthy (Dayananda, 2002). If the firm has been operating using personal equity or without debt financing, then the company can consider using credit purchase with the aim of establishing the enterprise credit history. It is a wise decision to get a credit report before application for credit facilities. When one discovers any problems or inaccuracies, they can be amended before any serious damage happens during loan application. If possible, find out the reporting company the lender uses to request the report from them. Cash flow The cash flow for the organization operation is a significant consideration in determining the credit to be advanced to the business. The cash flow cycle is derived from the inventory purchase by the collection of the firm account receivables. This is regarded as one the most significant factor to be considered when obtaining debt financing. The lender is interested in daily operation cash flows that determine the ability of the organization to repay the loan. The Running head: FINANCE 3 cash flow information gives the bank institution an insight into the venture management competence, business cycles, market demand, and significant business changes over time. The lender may decide to analyze the business cash flow ratio, and the banks are aware that cash flow is the most prevalent problem that affects most business and uses both projected and historical cash flow statements. The lender may require the business cash flow to indicate their source of income that can be analyzed by sales/expense that is different from specific industries (Dayananda, 2002). This ratio helps in calculation of the proportion of the cost of realistic revenues that are prerequisites to generate the projection of sales revenues. Cash flow of business should include cash flow from financial or investment activities such as leases, capital changes, purchase or sales of machinery, insurance, long-term contracts, dividends, and interests. However, the most significant component to the creditor did whether the venture collections and ongoing sales represent a regular and sufficient source of repayment of the loan. Collateral Primarily, it is referred to as property or asset that secures debts and loans and therefore the property can be seized upon the loan default (Bhattacharyya, 2011). As lenders require collateral for the even secured loan, they seek to minimize the associated risk of extending credit.To ensures the guarantee provides the necessary security, the lender matches the type of security and the type of loan. Since the creditors aim in having the priority claim on the collateral, the creditor searches all public records to ensure that prior claims are not associated with security especially real estate properties. Therefore, the organization prepares a report revealing pre-existing recorded title Running head: FINANCE 4 defects. When a debt is secured by the business property, then a U.C.C search on public records is undertaken to show any previous claim. However, U.C.C is included in application loan cost. Character Individual style varies between lending officers and lending institution, and there are certain aspects considered by the lender. These include business experience, referrals by community members, past relationship between the company and the bank, and professional reference. An additional and important factor is the amount of investment the business is committing to the firm alongside the credit. Many financiers prefer that the company finances 25% to 50% for the new project or start up business. At this stage, the lender should strive to find the actual and real character of the creditors to avoid masquerading characters. However, it is noted that banks appear to be uncomfortable when it comes to personal character evaluation (Bhattacharyya, 2011). The authenticity of the creditor's characters is based on the degree of confidence or trust in the documentation or information provided. The creditor character can be analyzed from simple issues such as overstated expenses and underreported income such disclosures indicate dishonesty that may hinder the loan applicant credibility through impairment of confidence and trust between prospective borrower and the banker. Question 3 I would invest half of the saving that is 100,000 in the shares while still maintaining 100,000 in the fixed deposit. This is referred to as portfolio diversification since both shares, and fixed deposits have various advantages and disadvantages hence able to cover each other weakness. This is because stock investment is characterized by some significant advantages such as easy liquidity, flexibility, regulatory framework, maximum interest, business taste, and sole Running head: FINANCE 5 proprietorship. On the other hand, fixed deposit is characterized by disadvantages such as guaranteed return and easy withdrawal. Investment in share Easy liquidity Shares are liquid such that they can easily be converted into cash and therefore alongside fixed deposit and can be at liberty to convert the shares into cash, unlike fixed deposit that is hard (Beenhakker, 2006). Shares are traded in the stock market which is regarded as a massive auction house where daily trading of shares that is selling and buying of shares takes place which makes the shares a liquid asset. The stock is easy and quick to convert to cash while other forms are much difficult to convert. For example, if you invest in property it takes several months to turn to money while share takes a day. Flexibility Shares are quite flexible such that the stock price keeps oscillating up and down in each trade session. Therefore, stock price moves with flexibility and rapidity, and this helps since the investor can decide to offset the shares at their peak and realize some profit. High returns Shares are risky assets, and this implies that their returns are not guaranteed therefore there is the possibility of losing some money, however, in the long-run the share price trend is undeniably upward (Pike and Neale, 2006). Therefore, as an investor who depends on the dividend, this is the best investment avenue since share investment is characterized by high return in the long-run. According to a recent report by the federal reserve, the stock market has experienced continuous growth in over 10% of the past few decades and during the same periods Running head: FINANCE 6 treasury bill, and bond has grown to approximately 5% per year. Therefore, if an investor can stomach market swings, then they will realize the highest return on their investment. Delayed taxation Investment in share is characterized with the delayed tax on the share gain, for example, the stock price is currently 1.8, then if the price increases there is no taxation on the profit realized from the increase. On the other hand, if one looses on a purchase of other shares the loss can be used to reduce taxes on gains of other stocks. On the contrary, earning from other investment avenues such as fixed deposits and bond, the interest earned from such investment is subjected to withholding tax. Information The stock market is monitored by the business investors across the world, and therefore, any corporation that wants to trade their stock publicly have to release their financial statements to show their operation, and Performance, The US securities and exchanges commission, performs the review on these reports to ensure their information is accurate and precise. Moreover, financial reporters give highlights of the stock performance throughout therefore there is the current update on the share Performance. This enhances research on the stock investments. However, some stock does not have information that inhibits decision making (Beenhakker, 2006). Therefore, the investor should be in the position to decide whether additional shares is worth investment. Investment in fixed deposit As a diversification of portfolio strategy investment of half of the savings in the fixed deposits is one of the wise decision because it helps in a diversification of risks. This is attributed Running head: FINANCE 7 to the fact that fixed deposit is associated with some benefits such as flexibility, easy withdrawal, guaranteed returns, and high yields. Guaranteed returns Unlike investment in the share and commodity market where dividend are uncertain, the fixed is a guaranteed and certain income stream (Pike and Neale, 2006). However, the FDI is less risky and is not dependent on market rates fluctuation. Therefore, the investor is assured of safety of their investment and will be receiving a guaranteed and specific amount at the end of the saving tenure Easy withdrawal The invested amount can be withdrawn albeit at the small penalty. Therefore, regarding the financial emergency to cater for needs such as sickness or business loss. The fixed deposit can be withdrawn with the loss of forfeiting the interest income. In conclusion, diversification of the portfolio into share investment and fixed deposit would make the wisest decision for an investor to make this will help him have a steady income flow while at the same time have a chance of getting higher returns by risking in share investment. Running head: FINANCE 8 Reference Beenhakker, H. L. (2006). Investment decision-making in the private and public sectors. Westport, Conn: Quorum Books. Bhattacharyya, H. (2011). Banking strategy, credit appraisal, and lending decisions: A riskreturn framework. Oxford: Oxford University Press. Dayananda, D. (2002). Capital Budgeting: Financial Appraisal of Investment Projects. Cambridge [u.a.: Cambridge Univ. Press. Pike, R., & Neale, B. (2006). Corporate finance and investment: Decisions & strategies. Harlow [u.a.: Financial Times/Prentice Hall