IntroductionBluescope Steel Limited is having its presence in “steel market and produces galvanized steel, automotive steel and other forms of steel”. (Bluescope Steel Limited, 2011) The company has been in operation since 2002 and started its operation in Australia. The company serves worldwide and has revenue of $8.9 billion in 2007. The company has profits in the tune of $2.84 billion. The company has been able to grow and employees around 17,500 people. (Bluescope Steel Limited, 2011) Onesteel Limited is also a steel giant. The company deals in “mining, manufacturing and metals distribution and has been able to build a wide market”.
(Onesteel Limited, 2011) The company has been operating since 2000 and started its operations in Sydney, Australia. The company serves worldwide and has revenue of $7.3 billion in 2009. The company has profits in the tune of 229.5 million. The company has been able to grow and employees around 11,000 people. (Onesteel Limited, 2011) Financial AnalysisFinancial analysis is very important for all business. Analyzing the statement helps in “planning, budgeting, monitoring, forecasting and improving the financial performance by taking vital decision”.
(Micro Strategy, 2010) The following is the ratios for Bluescope Steel Limited and Onesteel Limited. Liquidity RatiosThis ratio plays an important part and helps “to identify the firms ability to meet its short term obligations and plays a huge role in the performance”. (Financial Modelling Guide, 2010) The ratios for Bluescope Steel Limited and Onesteel Limited areCurrent Ratio: “It measures the ability to pay the short term liabilities out of short term assets”. (Financial Modelling Guide, 2010) It is calculated as “Current Assets / Current Liabilities”.
The graph looks as followsThe ratio shows that Bluescope Steel Limited has a better liquidity position as compared to Onesteel Limited. Onesteel Limited need to improve the ratio as it is a concern as the short term obligations are higher. This might make investors and suppliers stay away. Bluescope Steel Limited on the other hand is in a better position but still needs to take it slightly up. When we consider the two companies together it shows that Bluescope Steel Limited has better policies and strategies as compared to Onesteel Limited. They need to work more and ensure that it reaches around 2.
Quick Ratio: It is also known as acid test ratio. (Financial Modelling Guide, 2010) It is calculated as “(Current Assets – Inventories) / Current Liabilities”. The graph looks as followsThe ratio also indicates that Bluescope Steel Limited is better positioned as compared to Onesteel Limited. Onesteel Limited need to improve this as it is a concern and presenting a bleak picture. Even, Bluescope Steel Limited needs to concentrate on it and improve it. The ratio when compared to current ratio also indicates huge inventories.
Since, both the companies deal in products where the inventory has to be high so having a low ratio is predictable. Capital Structure RatioThis ratio is of prime importance and provides relevant information about the company. “It identifies how much of the firm’s assets are financed through debt and includes long term debt”. (Transtutor, 2010) The ratios which help to determine it are as