Essays on Billabong International Ltd Performance Case Study

Download full paperFile format: .doc, available for editing

The paper "Billabong International Ltd Performance" is a wonderful example of a case study on finance and accounting. Billabong International Ltd has been successful as retail players who deal with products like surf, skates, and snow apparel and accessories. Their market has grown which is reflected by the growth in sales. There is even scope for the company to move further as this sector is showing improvement. The financial analysis also highlights some important facts related to liquidity and capital structure. The liquidity shows soundness with current assets being 3 times with respect to current liabilities.

Even the ratio after removing stocks shows soundness. The capital ratio shows an equal mix of equity and debt. This is supported by 50% debt being financed by assets. The turnover ratios show soundness as the company has a better policy in managing credit. The company recovers money from is a debtor in 77 days and pays in 104 days thereby enabling them to have sufficient liquidity for daily operations. The profits and return on equity support it as the company has posted a profit 0f over 18% after all expenses.

This has enabled the company to distribute dividends which have helped the share price soar up resulting in better earnings. The analysis shows that Billabong International Ltd's performance has improved drastically in 2009. It still needs to work on certain areas to stay ahead of other competitors as the company has shown stability so that it is able to withstand competition and capture a bigger market. Introduction Billabong International Ltd is a wholesaler and retailer in surf, skates and snow apparel and accessories. The company has a huge presence in Australia.

The fact that the company deals in so many products and huge reach have given a wide market. The company has a presence in other countries like New Zealand, South Africa, and others which have given them a huge market to cater to. A look at the operations shows that that the company performs in the retail segment and employs more than 1750 employees. The company started in 1973 and has consolidated its operations since 2000. The company has been able to grow due to a better geographic location and sells to more than 2600 stores thereby enabling them to grow. Financial Analysis Financial analysis is very important for all businesses.

Analyzing the statement helps in “ planning, budgeting, monitoring, forecasting and improving the financial performance by taking a vital decision” . (Micro Strategy, 2011) The following is the ratios for Billabong International Ltd Profitability Ratios The profitability ratios are as follows Gross Profit Margin: It is calculated as “ Gross Profit / Sales X 100” . (Kennon, 2010) The graph for the ratio looks as The ratio indicates a dip in profits from 55.11% in 2008 to 53.39% in 2009.

A decrease in profits shows an increase in indirect expenses. The company needs to improve its performance so that it is able to get a better return on investment. Profit Margin: It is calculated as “ Earnings before Interest and taxes (EBIT) / Sales X 100” . (Kennon, 2010) The graph for the ratios is as Net profit has seen a dip in 2009. This is a worrying factor and reflects very high indirect expenses. The company needs to look at ways to reduce indirect expenses

References

Financial Modelling Guide, 2010, “Liquidity ratios”, retrieved on January 14, 2011 from http://www.financialmodelingguide.com/financial-ratios/liquidity-ratios/

Joshua K, 2010, “Analyzing an income statement: Return on Assets”, about.com guide, The New York Times Company retrieved on January 14, 2011 from http://beginnersinvest.about.com/od/incomestatementanalysis/a/return-on-assets-roa-income-statement.htm

Joshua K, 2010, “Analyzing an income statement: Return on Equity”, about.com guide, The New York Times Company retrieved on January 14, 2011 from http://beginnersinvest.about.com/od/incomestatementanalysis/a/understanding-return-on-equity.htm

Joshua K, 2010, “Analyzing an income statement: Inventory Turnover”, about.com guide, The New York Times Company retrieved on January 14, 2011 from http://beginnersinvest.about.com/od/analyzingabalancesheet/a/inventory-turns.htm

Kennon J, 2010, “Analyzing an income statement: Gross Profit”, about.com guide, The New York Times Company retrieved on January 14, 2011 from http://beginnersinvest.about.com/od/incomestatementanalysis/a/gross-profit.htm

Kennon J, 2010, “Analyzing an income statement: Net Profit Margin”, about.com guide, The New York Times Company retrieved on January 14, 2011 from http://beginnersinvest.about.com/od/incomestatementanalysis/a/net-profit-margin.htm

Kennon J, 2010, “Analyzing an income statement: Receivable Turnover”, about.com guide, The New York Times Company retrieved on January 14, 2011 from http://beginnersinvest.about.com/od/incomestatementanalysis/a/receivable-turnover.htm

Micro Strategy, 2011, “Financial Analysis”, retrieved on January 14, 2011 from http://www.microstrategy.com/financial-analysis/

Transtutor, 2010, “Capital Structure Ratios”, retrieved on January 14, 2011 from http://www.transtutors.com/finance-homework-help/dividend-decisions-and-tools-of-financial-planning/Capital-Structure-Ratios.aspx

Download full paperFile format: .doc, available for editing
Contact Us