Essays on Financial Analysis of Ramelius Resource Limited and Doray Minerals Limited for 2016 Case Study

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The paper 'Financial Analysis of Ramelius Resource Limited and Doray Minerals Limited for 2016" is a good example of a finance and accounting case study. This paper looks at analyzing the financial report of Doray Minerals Limited and Ramelius Resources Limited for the year 2016. The report looks to carry out both a vertical and horizontal analysis for both Doray Minerals Limited and Ramelius Resources Limited. This is then followed by a ratio analysis for both the organization. The analysis is done with the perspective of identifying which is a better company to invest.

The paper then presents the financial analysis in a descriptive manner so that the user can garner useful information from it. This is then followed by identifying the limitations which financial analysis has. Thus, the paper will thereby help the user to make useful business decisions and would reduce the overall risk for the investors. Question 1 (maximum of 700 words) Financial analysis helps to compare the financial statement of a different organization so that useful interpretations can be made. The financial analysis for Doray Minerals Limited and Ramelius Resources Limited for 2016 is as follows Profitability Analysis The profitability analysis shows that Ramelius Resources Limited has a higher profit and is better placed as compared to Doray Minerals Limited.

It is seen that return on equity for Ramelius Resources Limited stands at 24.3% as compared to 10.45% for Doray Minerals Limited. This ensures that the returns for the equity shareholders are high and they are compensated properly for the risk undertaken by them (Eljelly, 2004). The gross profit margin and net profit margin is also high for Ramelius Resources Limited as compared to Doray Minerals Limited indicating that the business has been able to generate sufficient revenues.

The overall profitability shows that Ramelius Resources Limited has been able to use different resources in an effective manner. Solvency Ratio The solvency ratio shows that Ramelius Resources Limited has been able to manage the different resources in a better manner. The asset turnover ratio shows better management of asset by Ramelius Resources Limited which stands at 0.99 in comparison to 0.55 for Doray Minerals Limited. In a similar manner, the other resources are also properly managed.

Ramelius Resources Limited is able to revolve its stock better, ensure better collection from the debtors and overall effectiveness in managing the different resources (Deloof, 2003). This will thereby ensure that the business has appropriate assets which are required and will prevent the organization from having more assets than required (Lyroudi & Lazaridis, 2000). Liquidity Ratios The liquidity ratio shows that Ramelius Resources Limited has better liquidity and is better placed as compared to Doray Minerals Limited. The current ratio for Ramelius Resources Limited is 2.5 as compared to 0.86 for Doray Minerals Limited.

This ensures that the business has sufficient short term assets which will enable the business to meet the short term liabilities (Filbeck & Krueger, 2005). In a similar manner, the quick ratio is sound for Ramelius Resources Limited which would ensure that the short term obligations can be easily met even after removing inventories. In a similar manner, the cash flow ratio also highlights effectiveness on the part of Ramelius Resources Limited as it has been able to generate sufficient cash from operations to meet its short term expenses.

This reduces the chances of falling into a liquidity trap as Ramelius Resources Limited will be able to meet all the short term expenses easily.

References

(the reference list is not counted in the word count)

Antony, T. 2004. Thin Capitalization: Issues on the Gearing Ratio. Journal on Australian Taxation, 7 (1), 39-57

Deloof, M. 2003. Does Working Capital Management Affect Profitability of Belgian Firms? Journal of Business Finance & Accounting, 30 (3&4), 573-587.

Eljelly, A. 2004. “Liquidity-Profitability Tradeoff: An empirical Investigation in an Emerging Market”, International Journal of Commerce & Management, 14(2), 48 - 61

Filbeck, G., & Krueger, T. M. 2005. An analysis of working capital management results across industries. Mid-American Journal of Business, 20(2), 10-17.

Lyroudi, K., & Lazaridis, Y. 2000. The Cash Conversion Cycle and Liquidity Analysis of the Food Industry in Greece [Electronic Version]. EFMA 2000 Athens

Padachi, K. 2006. Trends in working capital management and its impact on firms’ performance: an analysis of Mauritian small manufacturing firms. International Review of Business Research Papers, 2(2), 45-58.

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