Profitability Ratio:

Return on capital employed measures the return earned on the money invested in the business. Every investor needs a return on their investment for the risk they take to invest in the company. Therefore, investors use ROCE when making investment and financing decisions.

Table. 1 Return on Capital Employed 2017 2018 2019 2020 2021 2022 EBIT 455,400,000.00 678,200,000.00 659,600,000.00 336,800,000.00 -217,700,000.00 -65,600,000.00 Total Assets 9,313,600,000.00 9,510,300,000.00 9,543,700,000.00 9,202,000,000.00 7,584,400,000.00 4,400,900,000.00 Total Current Liabilities 1,468,300,000.00 995,200,000.00 3,684,800,000.00 4,666,900,000.00 3,220,400,000.00 2,503,400,000.00 ROCE 5.80% 7.96% 11.26% 7.43% -5.00% -3.46%.

Boral Limited saw 5.8 % since the cost of capital was lower than the return generated by borrowing money. As a result, the ROCE in 2018, 2019 and 2020 remained almost identical, ranging from 7.9%, 11.2% and 7.4%, respectively. However, from the financial year 2021, Boral Limited saw a negative in ROCE and as low as -4.9% and -3.4%, which shows that ROCE is below the cost of capital and Boral Limited company needs to use invested capital effectively.

Return on Equity & Net Profit Margin Table. 1.1 Particulars 2018 2019 2020 2021 2022 Revenue 5,798,400,000.00 5,839,400,000.00 5,741,100,000.00 2,952,500,000.00 2,976,700,000.00 Expenses 5,629,160,300.00 5,699,787,600.00 7,208,800,000.00 3,269,447,000.00 3,229,330,000.00 Net Income 169,239,700.00 139,612,400.00 -1,467,700,000.00 -316,947,000.00 -252,630,000.00 Share Holder Equity 5,730,800,000.00 5,858,900,000.00 4,535,100,000.00 4,364,000,000.00 1,897,500,000.00 Return on Equity % (RoE) 2.953160117 2.382911468 -32.36312319 -7.26276352 -13.31383399 Net Profit Margin % 2.92 2.39 -25.56 -10.73 -8.49 Sources: Annual Report, Boral Limited, FY 2018 to FY 2022 ROE provides a return on the capital employed by the company's owners. In 2017 and 2018, Boral Limited provided a return on equity at minimal rates of 2.95% and 2.38%, respectively. This means that Boral Limited's shareholder is profiting from their equity, and Boral Limited is doing well. However, Boral Limited saw a drastic change in the ROE from the financial year 2020 onwards. Boral Limited saw as low as -32.36% in ROE in 2020. The return on equity is determined by how much revenue a company generates and how well it can cover up its expenses to give profits to its equity holders. Regardless, Boral Limited experienced huge costs and a net loss of $ 1.47 billion and could not cover its expenses; thus, it could not generate profit for its equity shareholders. As a result, Boral Limited continued to experience negative ROE in the years 2021 and 2022. Therefore, Boral Limited cannot generate profits/return to its equity as it cannot cover its expenses. As a result, the company is running into loss and would highly discourage future investors. Net profit margin explains the percentage/margin earned by Boral Limited about the revenue generated in that financial year. The net profit margin and return on equity go hand in hand. If the company cannot create a return on equities, it cannot generate profit. The net profit margin reduced from the financial year 2018 and observed the highest loss, with -25.56% in 2020. It means that for every dollar of loss incurred by the company, there is a -25.56% loss. The negative net profit margin is due to the high expenses of Boral Limited in the year 2020, with $7.2 billion. However, it made equivalent revenue of $5.74 billion, similar to 2018 and 2019. In this case, Boral Limited could not control its expenses which exceeded its revenue. Similarly, although Boral Limited can reduce expenses by almost $ 4 billion in 2021 and 2022, it cannot generate enough revenue to cover up even the $3.2 billion loss, thus negative net profit. Therefore, Boral Limited Company may only sometimes be insolvent as it may need help to cover the variable or operating costs of the company.

LIQUIDITY RATIO ANALYSIS.

Liquidity in business refers to the potentiality of a firm to generate cash flow to fulfil the short-term expenditure requirements. The firm's liquidity position is determined with the help of the liquidity ratio analysis. Also, liquidity calculation is essential to know the company's financial obligations during difficult economic periods (Lalithchandra & Rajendhiran, 2021). There are two types of ratio analyses to find out the liquidity position, the current ratio and the quick ratio, also known as the acid-test ratio:

Current Ratio: The current ratio is also known as the working capital ratio. The current ratio can be assessed by dividing the total assets by current liabilities. The formula for calculating the current ratio is: Current Ratio = Current Assets/Current Liabilities (CR = CA/CL) The standing rule of thumb is that while calculating the firm's financial health, the current ratio must be $1.5 of existing assets against every $ 1 of current liabilities. The balance, either higher or lower than this calculation standard, is deemed an unhealthy financial position of the entity (Birt et al., 2023). Table. 1.2 Current Assets Ratio Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 Total Current Assets 1,763,700,000.00 1,738,300,000.00 1,811,800,000.00 2,375,200,000.00 5,269,700,000.00 1,940,400,000.00 Total Current Liabilities 1,468,300,000.00 995,200,000.00 1,392,200,000.00 1,046,000,000.00 1,280,400,000.00 1,307,500,000.00 Current Ratio: 1.20 1.75 1.30 2.27 4.11 1.48

Quick Ratio/Acid-Test Ratio: The quick, acid-test ratio enables ascertaining the firm's liquidity proposition. The purpose of calculating liquidity in terms of the quick ratio is that a specific category of items in current assets cannot be converted into immediate cash flow. In such cases, the company's liquidity can be calculated by excluding inventory from the existing assets (Lalithchandra & Rajendhiran, 2021). The formula for calculating the acid test ratio is: Table. 1.3 Quick Ratio/Acid-Test Ratio Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 Total Current Assets 1,763,700,000.00 1,738,300,000.00 1,811,800,000.00 2,375,200,000.00 5,269,700,000.00 1,940,400,000.00 Total Current Liabilities 1,468,300,000.00 995,200,000.00 1,392,200,000.00 1,046,000,000.00 1,280,400,000.00 1,307,500,000.00 Total Current Inventories 606,600,000.00 613,800,000.00 683,800,000.00 523,900,000.00 213,500,000.00 222,500,000.00 Quick Ratio: 0.79 1.13 0.81 1.77 3.95 1.31 Sources: Annual Report, Boral Limited, FY 2018 to FY 2022 Quick Ratio = (Current Assets-Inventory)/Current Liabilities QR = (CA-Inventory)/CL Unlike the current ratio, the quick ratio takes $ 0.8 of existing assets (excluding inventory) for every $ 1 of current liabilities. From the above Fig. 1.1, the current ratio was relatively low in 2017, indicating that Boral may have had difficulty meeting its short-term obligations with its existing assets alone. However, the ratio improved in subsequent years, reaching a peak of 4.11 in 2021. This suggests that the company had significantly more current assets to cover its current liabilities that year. Similarly, In Fig.1.2, the quick ratio was relatively low in 2017 and 2019, indicating that Boral may have needed help meeting its short-term obligations with its most liquid assets alone. However, the ratio improved in subsequent years, reaching a peak of 3.95 in 2021. Overall, Boral Limited's current ratio has been volatile, and investors should monitor the company's liquidity position and ability to meet its short-term obligations. It is also essential to compare the company's current ratio to its historical performance and the industry average to understand its financial health better. In comparing the quick overall ratio of boral limited with the industry, we can observe that the company have performed better and have good liquidity compared to other companies. Moreover, different year-on-year basis, the company also improved. As a result, the Quick ratio, which was only 0.79 in 2017, will rise to stability of 1.31 by the year 2022.

BORAL LIMITED SOLVENCY ANALYSIS

The solvency of a company is measured through solvency ratios. These ratios measure the financial risk of a firm, which translates to the probability that a firm will not be able to pay its debts. The more obligations a business has, i.e., non-owner-supplied funds, the higher the financial risk. (Goel,2016) We shall analyze the following solvency ratios for Boral Limited: 1. Debt ratio 2. Net interest cover ratio Debt Ratio According to Birt J et al. (2020), the debt ratio tells us how many liabilities exist per dollar of assets, calculated by the formulae below. = Total liabilities Total assets Table Summary YEAR BORAL LIMITED DEBT RATIO 2017 0.42 2018 0.4 2019 0.39 2020 0.51 2021 0.42 2022 0.57 A debt ratio > 1 means a company has more debt than assets A debt ratio < 1 means a company has more assets than debt Boral Limited has maintained a good debt ratio through the period by recording a debt ratio that is less than one translating to more assets than debts. As interpreted above, a higher debt ratio indicates that a company is highly leveraged and that the borrowed monies are above what it can pay back with ease. Debt ratio is significant since it does form the basis for accountants' and investors' assessment of whether a business is at risk of defaulting on its obligations once they mature. (Devolder, 2018) A 0.3 to 0.6 ratio is generally considered ideal. The pie chart represents the debt ratios showing 2022 being the riskiest and 2019 least risky. The debt ratio shows the proportion of total assets financed by non-owner-supplied funds. The higher the percentage, the higher the financial risk. (Goel, 2016) YEAR BORAL LIMITED DEBT RATIO 2017 42% supplied by non-owners 2018 40% provided by non-owners 2019 39% provided by non-owners 2020 51% supplied by non-owners 2021 42% supplied by non-owners 2022 57% provided by non-owners The table summary showing debt ratios for Boral Limited from 2017 through 2022 shows that Boral determined funded every 1 dollar of assets with 42 cents, 40 cents,39 cents,51 cents, 42 cents, and 57 cents of debt in the years 2017,2018,2019,2020,2021,2022 respectively. This reflects a medium reliance on debt and, thus, the conclusion that its financial risk is low. Industry Debt Ratio Summary YEAR 2017 2018 2019 2020 2021 2022 CSR LIMITED 0.42 0.40 0.38 0.53 0.47 0.61 BRICKWORKS LIMITED 0.28 0.28 0.30 0.37 0.38 0.42 ADBRI LIMITED 0.38 0.40 0.44 0.42 0.44 0.48 BORAL LIMITED 0.42 0.40 0.39 0.51 0.42 0.57 INDUSTRY AVERAGE 0.38 0.37 0.38 0.46 0.43 0.52 The Boral debt ratio is slightly higher than its peers in the industry. This can mean that since it has a higher debt ratio, it may be more expensive to do borrowing and probably fall in a crunch if the circumstances alter in comparison to other companies in the industry. NET INTEREST COVER RATIO This ratio checks the ease at which a firm can pay the interest on its outstanding debt. Net interest cover ratio = Earnings before interest and taxes (Ross & Jaffe, 2013) Interest expense This helps measure the number of times the companys EBIT covers net finance costs and shows the level of comfort an entity has in making good interest commitments from earnings. (Carlon,2022) Below are Boral limited calculations for the net interest cover ratios. Boral Limited Net Interest Cover Ratio Summary YEAR BORAL LIMITED NET INTEREST COVER RATIO 2017 8.98 2018 6.50 2019 6.40 2020 2.66 2021 -1.77 2022 -0.84 A higher Coverage ratio is generally ideal. Net interest cover ratio < 1.5 Undesirable Net interest cover ratio > 1.5 Desirable It is interpreted that the lower the ratio, the more the debt expenses to the company and, therefore, the less capital it can utilize in other ways. When the balance falls to 1.5 or below, the ability of a company to make good the interest expenses remain questionable. (Masosa, 2021) Boral is recording a downward trend in the interest cover ratio. This is worrying, and as a company, it is at risk of bankruptcy. Majorly this is due to lesser operating profits available to offset interest payments. This exposes Boral to higher interest rates. As a result, the company will be straining to make good its interest expense. Boral Limited EBIT does not adequately cover its net interest expense, indicating interest-bearing debt under financial strain. In addition, the higher interest costs and higher EBIT throughout the period have declined the net interest cover from 8.98 times in 2017 to -1.77 in 2021 and -0.84 times in 2022. As a result, Boral Limited EBIT cannot cover its interest expense cost and thus represents an inadequate margin. Industry Net Interest Cover Summary YEAR 2017 2018 2019 2020 2021 2022 CSR LIMITED 32.52 32.71 33.53 12.65 20.42 20.58 BRICKWORKS LIMITED 20.15 19.28 13.67 7.89 18.09 31.20 ADBRI LIMITED 21.65 18.81 8.86 8.64 9.51 7.63 BORAL LIMITED 8.98 6.50 6.40 2.66 - 1.77 - 0.84 INDUSTRY AVERAGE 20.82 17.78 12.94 7.45 10.98 14.47 Boral Limited Net interest cover has declined in the five years, eventually becoming negative. This is a terrible trend and a sign to the company. Boral Limited, as of 2021, indicates incredible difficulties in meeting the debt interest expense. This differs from other companies across the industry that have recorded desirable ratios. It means the company has recorded losses which is a worrying trend for investors. A company needs to maintain a positive EBIT and enough to cover the interest expense to survive in an industry. This explains the aspect of its solvency. (Ramlall, 2018)