Mgb305 Accounting And Finance Assignment Answers

Your report should be 1000 words and cover the following areas:
Assume that for the 2016 year the firm APO.AU has a Beta of 1.3, that return on the ASX market was 7%, and that the yield on Australian Government bonds was 2.4%.
Using data from the firm's 2016 annual report:
Categorise the firm's current capital structure into debt and equity.
Calculate the firm's after-tax Weighted Average Cost of Capital.
Compare the firm's capital structure with at least one other firm operating within their industry.
Critically analyse other key financial ratios for APN.
Outline any significant changes to have occurred to the firm's capital structure during the past three years.
Critically evaluate the extent to which the firm has been successful in maximising wealth for shareholders in the past three years.
Discuss why it is important for the firm to minimise their cost of capital.
Recommend possible ways in which the firm could adopt an alternative capital structure and lower their cost of capital.

Introduction:

The report directly indicates that relevant financial condition of APN Outdoor Group by evaluating the financial ratios and WACC of the organisation. Furthermore, the report aims in providing in-depth financial condition of the organisation and its overall capital structure.

Depicting the APN’s capital structure:

The evaluation of the overall financial report of APN mainly indicates that the company is more focused on acquiring equity capital and then debt. This could eventually be identified from the capital structure of the company, which indicates its WACC. The current WACC of the organisation is mainly at 6.67%, as the company has intention to decrease the overall cost of capital for adding more and more projects at less cost (Investors.apnoutdoorcorporate.com, 2017). This reduction in cost of equity could help in achieving optimal capital structure, which could directly improve financial stability of the organisation. Moreover, it could be identified in reduction in cost of capital could only be obtained if the organisation increases cheap debt accumulation to support its capital needs. However, it is seen that the organisation has many reduced the interest bearing capital with more equity, which has directly increased the overall WACC of the organisation.

Calculating the Depiction of After-Tax WACC:

The overall financial ratios of the organisation are mainly identified by detecting liquidity ratios such as current ratio and quick ratio. The organisation’s overall current ratio has remained same at 1.90 from 2015 to 2016 indicating a no sudden change in its current structure. Furthermore, the quick ratio the organisation has a lead to increase from 2015 to 2016 and is currently situated at 1.78 from 1.6. This only indicates that the company has been focusing its financial expenditure wisely with adequate currency is been accommodated and increment in the efficiency of the inventory can be identified (Lueg, Punda & Burkert, 2014). Moreover the profitability ratio of the organisation indicates an increment from 13.67% to 14.66% in 2016 (Investors.apnoutdoorcorporate.com, 2017). This financial ratios directly they keep overall financial stability of the organisation and its current financial position.

The overall total long term debt to Assets of the organisation is mainly at 0.23 while interest coverage ratio stands at 25.96. This mainly indicates that the overall financial stability of the organisation is adequate where more debt could be accommodated as APN could pay adequate interest on loans.

Identifying the performance of competitor’s:

Current competitors APN are mainly Ooh Media, who has adequate capital structure, which is directly supporting moral operation and capability. The companies on capital structure are balance between both debt and equity, which is directly organisation to decrease the chance of insolvency. However, APN is more focused in acquiring more equity and reducing the debt exposure (Troy, 2013). Comparison of the overall capital structure mainly indicates that Ooh Media has adequate Capital structure where it has a mixture of both debt and equity. Furthermore, evaluation of the annual report of APN mainly indicated that the organisation referring equity financing over debt finance, which is why from 2015 to 2016 the company has reduced overall loan requirements and has not acquired any new loans or financial obligation.

Depicting the Capital structure of APN:

The evaluation of the annual report of APN Group mainly indicated that the company's current capital structure is distributed between debt and equities, which has helped in supporting its operational capability and financing needs. Furthermore, viability of the capital structure of the organisation can only be identified with the help of WACC, which is relatively higher as the management indicated to review its cost of capital (Investors.apnoutdoorcorporate.com, 2017). Moreover, any kind of decisions that is taken by appropriate authorities is directly reflected on the overall capital structure organisation.  Hence, APN Group management mainly wants the overall cost of capital of your organisation to reduce, as it might help in starting new projects to generate higher returns from investment.

The overall aim of APN Group is to reduce the cost of capital, which is directly achieved by reducing your on equity funding and acquiring low cost debt funding.  This accumulation of low debt funding could eventually allow APN Group to reduce the overall cost of capital and achieve all the relevant measures that was taken by the management. The acquiring of low cost debt is one of the methods that is used by organisation. The other method is mainly to reduce the equity capital, which could directly help in reducing cost of capital. The use of bonds, bank loans, overdraft, and other financial obligations are directly used by organisation to increase debt exposure (Ferrer & Tang, 2016).

Conclusion:

The evaluation of the overall report indicates that the current financial condition of the organisation is relatively adequate. In addition, the financial ratios portray a positive financial condition of the organisation which directly states that future progress and sustainability that could be obtained by the organisation. The overall return that is provided by the organisation is also adequate and supports management decisions.

References and Bibliography:

Abdul-Baki, Z., Uthman, A. B., & Sannia, M. (2014). Financial ratios as performance measure: A comparison of IFRS and Nigerian GAAP. Accounting and Management Information Systems, 13(1), 82.

Ferrer, R. C., & Tang, A. (2016). An Empirical Investigation of the Impact of Financial Ratios and Business Combination on Stock Price among the Service Firms in the Philippines. Academy of Accounting and Financial Studies Journal, 20(2), 104.

Investors.apnoutdoorcorporate.com. (2017). APN Outdoor | Investor Centre. [online] Available at: https://investors.apnoutdoorcorporate.com/Investor-Centre/?page=Annual-Reports [Accessed 19 Sep. 2017].

Le, M. H. N., Nguyen, T. M., Nguyen, T. T. T., Ho, S. Q. D., & Tran, N. Q. H. (2015). Impact of financial market ratios to individual investors decision in Vietnam (Doctoral dissertation, FUG HCM).

Lueg, R., Punda, P., & Burkert, M. (2014). Does transition to IFRS substantially affect key financial ratios in shareholder-oriented common law regimes? Evidence from the UK. Advances in Accounting, 30(1), 241-250.

Pech, C. O. T., Noguera, M., & White, S. (2015). Financial ratios used by equity analysts in Mexico and stock returns. Contaduría y Administración, 60(3), 578-592.

Thim, C. K., Choong, Y. V., Fie, Y. G., & Har, L. W. (2014). Assessing Financial Performance of Malaysian Islamic and Conventional Commercial Banks Using Financial Ratios. Journal of Modern Accounting and Auditing, 10(4).

Troy, L. (2013). 2014 Almanac of Business and Industrial Financial Ratios. Prentice-Hall.