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PLEASE ONLY ANSWER QUESTION 3 WITH AS MUCH DETAIL AND ANALISIS AS POSSIBLE

You are part of a team of financial analysts who have been hired by Eden Waldorf, Chief Loans Officer (CLO) at Bastion Banking Corporation. The bank has received loan applications from the abovementioned companies. Accordingly, the CLO of the bank requires your team to analyse the financial position and performance of the above assigned companies for the two stated financial years (2019 and 2020), to determine whether the companies are eligible for a loan from the bank. Your task involves answering the following 5 questions in your own words QUESTION 1: Calculate the Cash Conversion Cycle (CCC) for each of two companies in 2019 and 2020. Using your answer, analyse the efficiency of each of the two companies in managing their working capital in 2020 as compared to 2019. Note: ensure that you analyse in this question, not just describe the CCC values. (3 marks) QUESTION 2: Analyse the sources of finance for each of the two companies in 2020 as compared to 2019. Use two capital structure ratios to support your answer and provide an explanation regarding the changes in the composition of the sources of finance for each enterprise. Note: ensure that you analyse in this question, not just describe the ratio values. (2 marks) QUESTION 3: Analyse the ability of management to manage their fixed assets and total assets for each of the two companies in 2020 as compared to 2019. Use two Asset Management efficiency ratios to support your answer and explain any change in each companies' ability to use their assets to generate sales. Note: ensure that you analyse in this question, not just describe the ratio values. (2 marks) QUESTION 4: Analyse the profitability of invested capital (assets) for each of the two companies in 2020 as compared to 2019. Based on your calculations, explain the main reason(s) for the change in the profitability for each company over the two years. Note: ensure that you analyse in this question, not just describe the ratio values. (3 marks) QUESTION 5: Given your answers and analysis in Questions 1 to 4, what is your final recommendation to the CLO of Bastion Banking Corporation: an approval or denial of the loan to each and/or both firms? Discuss the basis for your recommendation. Ensure you base your recommendation only on the change in the ratios for the two stated financial years (.e., 2019 and 2020). (4 marks) In questions 1-4, an analysis is required and not just a description of the ratio. That means you need to explain how the ratio changed over time and what are the main reason(s) for that change, and how that will impact the company's financial position. The aim of the assignment is to examine and analyse the change in the firm's financial position and performance based only on your calculated ratios. Each company must be compared to itself over the 2019 and 2020 period. Do not compare the companies to each other or to the industry in which they operate SM1 PROFIT AND LOSS STATEMENT (Smillions) 207/19 07/20 Operating Revenue Other Revenue Total Revenue Excluding Interest Operating Expenses 980.29 0.86 981.15 1,209.84 0.38 1,210.21 -837.30 -1,051.07 EBITDA 143.85 159.14 Depreciation Amortisation Depreciation and Amortisation -24.59 -1.86 -26.45 -41.72 -2.93 -44.66 EBIT 117.39 114.48 Interest Revenue Interest Expense 1.18 -8.44 0.12 -18.38 Net Interest Expense -7.26 -18.25 Pre Tax Profit 110.13 96.23 Tax Expense Net Profit after Tax Before Abnormals -31.43 78.71 -24.80 71.43 -1.54 Abnormals Abnormals Tax Net Abnormals 0.00 0.00 0.00 0.00 -1.54 Reported NPAT After Abnormals 78.71 69.88 0.00 179.22 179.21 0.00 179.31 179.28 Outside Equity Interests Shares Outstanding at Period End Weighted Average Number Of Shares EPS Adjusted (cents/share) EPS After Abnormals (cents/share) 43.92 43.92 39.75 38.89 AUSTAL LIMITED ASB PROFIT AND LOSS 2019-2020 ($millions) 4 06/19 06/20 Operating Revenue Other Revenue Total Revenue Excluding Interest 1,851.02 2,086.00 17.64 15.17 1,868.66 2,101.17 Operating Expenses -1,732.46 -1,925.03 EBITDA 136.20 176.14 Depreciation Amortisation Depreciation and Amortisation -39.90 -2.30 -42.21 -42.91 -2.83 -45.74 EBIT 94.00 130.40 Interest Revenue Interest Expense 1.05 -8.28 1.38 -8.27 Net Interest Expense -7.23 -6.88 Pre Tax Profit 86.76 123.51 Tax Expense Net Profit after Tax Before Abnormals -24.18 62.58 -34.54 88.98 Abnormals Abnormals Tax Net Abnormals - 1.20 0.00 -1.20 0.00 0.00 0.00 Reported NPAT After Abnormals 61.38 88.98 Outside Equity Interests Shares Outstanding at Period End Weighted Average Number Of Shares EPS Adjusted (cents/share) 0.00 352.68 349.60 0.00 356.05 356.24 SM1 BALANCE SHEET (Smillions) 07/19 07/20 Current Assets Cash Receivables Prepaid Expenses Inventories Investments NCA Held Sale Other Total Current Assets 15.32 59.27 9.14 157.77 2.26 0.00 26.68 270.43 5.47 58.59 11.53 250.31 20.93 0.00 12.20 359.03 Non-Current Assets Receivables Inventories Investments PP&E Intangibles(ExGW) Goodwill Future Tax Benefit Other Total NCA 0.00 0.00 0.00 0.00 0.15 13.22 808.88 913.96 15.72 39.49 3.49 60.90 0.00 0.00 0.00 0.00 828.24 1,027.57 Total Assets 1,098.67 1,386.61 Current Liabilities Account Payable Short-Term Debt Provisions NCL Held Sale Other Total Curr. Liabilities 206.74 95.35 54.72 0.00 0.00 356.81 221.86 99.66 35.97 0.00 0.00 357.50 Non-Current Liabilities Account Payable Long-Term Debt Provisions Other Total NCL 0.00 238.76 31.90 0.00 270.67 0.00 410.33 55.24 0.00 465.57 Total Liabilities 627.47 823.06 Shareholders Equity Share Capital Reserves Retained Earnings Other Equity Convertible Equity SE Held Sale Outside Equity Total Equity 256.55 249.53 -23.44 12.97 238.08 301.04 0.00 0.00 0.00 0.00 0.00 0.00 471.20 563.54 AUSTAL LIMITED BALANCE SHEET ($millions) D206/19 06/19 06/20 Current Assets Cash Receivables Prepaid Expenses Inventories Investments NCA Held Sale Other Total Current Assets 275.66 225.27 9.48 167.04 1.93 0.00 1.70 681.09 396.67 144.22 11.44 143.80 1.22 0.00 0.00 697.34 Non-Current Assets Receivables Inventories Investments PP&E Intangibles(ExGW) Goodwill Future Tax Benefit Other Total NCA 0.55 0.00 1.99 588.38 7.95 12.80 8.40 26.15 646.21 0.25 0.00 2.92 619.94 9.29 12.90 4.76 20.72 670.76 Total Assets 1,327.30 1,368.11 Current Liabilities Account Payable Short-Term Debt Provisions NCL Held Sale Other Total Curr. Liabilities 202.31 51.21 94.30 0.00 126.85 156.91 11.35 83.74 0.00 97.73 349.73 474.66 Non-Current Liabilities Account Payable Long-Term Debt Provisions Other Total NCL 0.00 122.54 43.10 56.21 221.86 0.00 163.91 51.68 54.05 269.63 Total Liabilities 696.52 619.36 Shareholders Equity Share Capital Reserves Retained Earnings Other Equity Convertible Equity SE Held Sale Outside Equity Total Equity 130.57 189.52 310.69 0.00 0.00 0.00 135.34 235.12 378.28 0.00 0.00 0.00 630.78 748.74 managing their working capital in 2020 as compared to 2019. Note: ensure that you analyse in this question, not just describe the CCC values. (3 marks) QUESTION 2: Analyse the sources of finance for each of the two companies in 2020 as compared to 2019. Use two capital structure ratios to support your answer and provide an explanation regarding the changes in the composition of the sources of finance for each enterprise. Note: ensure that you analyse in this question, not just describe the ratio values. (2 marks) QUESTION 3: Analyse the ability of management to manage their fixed assets and total assets for each of the two companies in 2020 as compared to 2019. Use two Asset Management efficiency ratios to support your answer and explain any change in each companies' ability to use their assets to generate sales. Note: ensure that you analyse in this question, not just describe the ratio values. (2 marks) QUESTION You are part of a team of financial analysts who have been hired by Eden Waldorf, Chief Loans Officer (CLO) at Bastion Banking Corporation. The bank has received loan applications from the abovementioned companies. Accordingly, the CLO of the bank requires your team to analyse the financial position and performance of the above assigned companies for the two stated financial years (2019 and 2020), to determine whether the companies are eligible for a loan from the bank. Your task involves answering the following 5 questions in your own words QUESTION 1: Calculate the Cash Conversion Cycle (CCC) for each of two companies in 2019 and 2020. Using your answer, analyse the efficiency of each of the two companies in managing their working capital in 2020 as compared to 2019. Note: ensure that you analyse in this question, not just describe the CCC values. (3 marks) QUESTION 2: Analyse the sources of finance for each of the two companies in 2020 as compared to 2019. Use two capital structure ratios to support your answer and provide an explanation regarding the changes in the composition of the sources of finance for each enterprise. Note: ensure that you analyse in this question, not just describe the ratio values. (2 marks) QUESTION 3: Analyse the ability of management to manage their fixed assets and total assets for each of the two companies in 2020 as compared to 2019. Use two Asset Management efficiency ratios to support your answer and explain any change in each companies' ability to use their assets to generate sales. Note: ensure that you analyse in this question, not just describe the ratio values. (2 marks) QUESTION 4: Analyse the profitability of invested capital (assets) for each of the two companies in 2020 as compared to 2019. Based on your calculations, explain the main reason(s) for the change in the profitability for each company over the two years. Note: ensure that you analyse in this question, not just describe the ratio values. (3 marks) QUESTION 5: Given your answers and analysis in Questions 1 to 4, what is your final recommendation to the CLO of Bastion Banking Corporation: an approval or denial of the loan to each and/or both firms? Discuss the basis for your recommendation. Ensure you base your recommendation only on the change in the ratios for the two stated financial years (.e., 2019 and 2020). (4 marks) In questions 1-4, an analysis is required and not just a description of the ratio. That means you need to explain how the ratio changed over time and what are the main reason(s) for that change, and how that will impact the company's financial position. The aim of the assignment is to examine and analyse the change in the firm's financial position and performance based only on your calculated ratios. Each company must be compared to itself over the 2019 and 2020 period. Do not compare the companies to each other or to the industry in which they operate SM1 PROFIT AND LOSS STATEMENT (Smillions) 207/19 07/20 Operating Revenue Other Revenue Total Revenue Excluding Interest Operating Expenses 980.29 0.86 981.15 1,209.84 0.38 1,210.21 -837.30 -1,051.07 EBITDA 143.85 159.14 Depreciation Amortisation Depreciation and Amortisation -24.59 -1.86 -26.45 -41.72 -2.93 -44.66 EBIT 117.39 114.48 Interest Revenue Interest Expense 1.18 -8.44 0.12 -18.38 Net Interest Expense -7.26 -18.25 Pre Tax Profit 110.13 96.23 Tax Expense Net Profit after Tax Before Abnormals -31.43 78.71 -24.80 71.43 -1.54 Abnormals Abnormals Tax Net Abnormals 0.00 0.00 0.00 0.00 -1.54 Reported NPAT After Abnormals 78.71 69.88 0.00 179.22 179.21 0.00 179.31 179.28 Outside Equity Interests Shares Outstanding at Period End Weighted Average Number Of Shares EPS Adjusted (cents/share) EPS After Abnormals (cents/share) 43.92 43.92 39.75 38.89 AUSTAL LIMITED ASB PROFIT AND LOSS 2019-2020 ($millions) 4 06/19 06/20 Operating Revenue Other Revenue Total Revenue Excluding Interest 1,851.02 2,086.00 17.64 15.17 1,868.66 2,101.17 Operating Expenses -1,732.46 -1,925.03 EBITDA 136.20 176.14 Depreciation Amortisation Depreciation and Amortisation -39.90 -2.30 -42.21 -42.91 -2.83 -45.74 EBIT 94.00 130.40 Interest Revenue Interest Expense 1.05 -8.28 1.38 -8.27 Net Interest Expense -7.23 -6.88 Pre Tax Profit 86.76 123.51 Tax Expense Net Profit after Tax Before Abnormals -24.18 62.58 -34.54 88.98 Abnormals Abnormals Tax Net Abnormals - 1.20 0.00 -1.20 0.00 0.00 0.00 Reported NPAT After Abnormals 61.38 88.98 Outside Equity Interests Shares Outstanding at Period End Weighted Average Number Of Shares EPS Adjusted (cents/share) 0.00 352.68 349.60 0.00 356.05 356.24 SM1 BALANCE SHEET (Smillions) 07/19 07/20 Current Assets Cash Receivables Prepaid Expenses Inventories Investments NCA Held Sale Other Total Current Assets 15.32 59.27 9.14 157.77 2.26 0.00 26.68 270.43 5.47 58.59 11.53 250.31 20.93 0.00 12.20 359.03 Non-Current Assets Receivables Inventories Investments PP&E Intangibles(ExGW) Goodwill Future Tax Benefit Other Total NCA 0.00 0.00 0.00 0.00 0.15 13.22 808.88 913.96 15.72 39.49 3.49 60.90 0.00 0.00 0.00 0.00 828.24 1,027.57 Total Assets 1,098.67 1,386.61 Current Liabilities Account Payable Short-Term Debt Provisions NCL Held Sale Other Total Curr. Liabilities 206.74 95.35 54.72 0.00 0.00 356.81 221.86 99.66 35.97 0.00 0.00 357.50 Non-Current Liabilities Account Payable Long-Term Debt Provisions Other Total NCL 0.00 238.76 31.90 0.00 270.67 0.00 410.33 55.24 0.00 465.57 Total Liabilities 627.47 823.06 Shareholders Equity Share Capital Reserves Retained Earnings Other Equity Convertible Equity SE Held Sale Outside Equity Total Equity 256.55 249.53 -23.44 12.97 238.08 301.04 0.00 0.00 0.00 0.00 0.00 0.00 471.20 563.54 AUSTAL LIMITED BALANCE SHEET ($millions) D206/19 06/19 06/20 Current Assets Cash Receivables Prepaid Expenses Inventories Investments NCA Held Sale Other Total Current Assets 275.66 225.27 9.48 167.04 1.93 0.00 1.70 681.09 396.67 144.22 11.44 143.80 1.22 0.00 0.00 697.34 Non-Current Assets Receivables Inventories Investments PP&E Intangibles(ExGW) Goodwill Future Tax Benefit Other Total NCA 0.55 0.00 1.99 588.38 7.95 12.80 8.40 26.15 646.21 0.25 0.00 2.92 619.94 9.29 12.90 4.76 20.72 670.76 Total Assets 1,327.30 1,368.11 Current Liabilities Account Payable Short-Term Debt Provisions NCL Held Sale Other Total Curr. Liabilities 202.31 51.21 94.30 0.00 126.85 156.91 11.35 83.74 0.00 97.73 349.73 474.66 Non-Current Liabilities Account Payable Long-Term Debt Provisions Other Total NCL 0.00 122.54 43.10 56.21 221.86 0.00 163.91 51.68 54.05 269.63 Total Liabilities 696.52 619.36 Shareholders Equity Share Capital Reserves Retained Earnings Other Equity Convertible Equity SE Held Sale Outside Equity Total Equity 130.57 189.52 310.69 0.00 0.00 0.00 135.34 235.12 378.28 0.00 0.00 0.00 630.78 748.74 managing their working capital in 2020 as compared to 2019. Note: ensure that you analyse in this question, not just describe the CCC values. (3 marks) QUESTION 2: Analyse the sources of finance for each of the two companies in 2020 as compared to 2019. Use two capital structure ratios to support your answer and provide an explanation regarding the changes in the composition of the sources of finance for each enterprise. Note: ensure that you analyse in this question, not just describe the ratio values. (2 marks) QUESTION 3: Analyse the ability of management to manage their fixed assets and total assets for each of the two companies in 2020 as compared to 2019. Use two Asset Management efficiency ratios to support your answer and explain any change in each companies' ability to use their assets to generate sales. Note: ensure that you analyse in this question, not just describe the ratio values. (2 marks)