ACCY801 Accounting and Financial Management Report 2 Sample
Subject learning outcome assessed
1) Apply accounting and financial management principles in the planning and control of resources.
2) Analyse the accounting and financial environment of various organizations in order to assist with key financial decision making ethically.
3) Evaluate the implications of both short- and long-term investment decisions incorporating ethical judgement.
4) Interpret both internal and external financial reports for financial decision making.
5) Examine and summarize the key issues relating to accounting and financial management and recommend appropriate solutions to a variety of audiences.
Style and format
1) Reports must be typed with Times New Roman font size 12, double-spaced, justified texts. (A printed copy is not required as this is an online submission)
2) Pages are to be consecutively numbered.
3) You must be able to provide a duplicate of your submission if requested. Always back up your work.
4) Your assignment must be submitted by the due time and date in order not to incur a penalty. Reports submitted late will be penalised by the deduction of 10 per cent of the maximum possible mark of the assessment per working day. Please refer to the student handbook for further details.
5) Referencing style must follow the Harvard style, available on the UOW library website.
6) Whenever the Annual Report is cited, you must provide a page reference to the Annual Report so that your work can be easily verified.
7) Use tables, graphics, and charts when possible (optional but recommended).
8) Do not plagiarise your work. Plagiarism is the unacknowledged work of another person. Plagiarism can result in zero marks or possible expulsion from the university.
You are encouraged to submit drafts of your report to Turnitin before the due date. There is no limit to the number of submissions before the due date. This will allow you to check any issues with referencing before submission of the final version. However, if you submit your report to the Turnitin system more than once, please make sure that the same file name is used for each submission. A similarity score of less than 15% is acceptable. If your similarity score is above 15%, you should first check the followings:
(i) Quotation marks (“...”) are used around every quote and the source is cited,
(ii) you are not over-using quotations, and
(iii) your own words are not too similar to the original text (paraphrase if your words are similar to the original).
If your similarity score is still too high, try to reduce the similarity score by deducting the total scores of the following items from your total similarity score.
(a) any technical words/phrases or answers that have been identified by Turnitin as similar and
(b) 1% or 2% matches in the similarity score.
In case your similarity score is high, you must provide a written explanation about the reasons for highly similarity level with a recalculated score considering (a) and (b) above. Please note that you are not required to submit a copy of the similarity report together with your report. Please also note that the similarity score you get at the point of submission is subject to change if a file with a similar content is submitted to Turnitin system after your submission. Assignments may be penalised for failing to meet any of these requirements.
Solution
1. Introduction
The report is based on the financial performance of Ramsay healthcare. To conduct the research, the annual report of 2021 and 2022 has been selected. University Assignment Help, The report initiates with the introduction of the health care industry followed by the Ramsay healthcare profile. The report discusses regarding the investment decision, the ethical standards and the sustainability. Further, the report discusses the financial performance through the conduct of ratio analysis. For ratio analysis various ratio computations has been undertaken which provided a comparison between 2021 and 2022.Lastly, the operating cycle of the company is studied and conclusion is drafted considering the overall performance of the company.
2. Introduction to health care industry
The healthcare industry in Australia is a significant contributor to the economy of the nation as it provides essential services to the nation. There are a variety of players in the sector, including hospitals, clinics, pharmaceutical companies, manufacturers of medical devices, and health insurers (Ramsay Healthcare 2022). There are a lot of big players in the market, so there is a lot of competition in the industry. A portion of the central members in the medical services area in Australia incorporate Ramsay Medical care, Healthscope, Sonic Medical services, and CSL Restricted.
In terms of performance at the moment, the healthcare sector in Australia has resisted economic difficulties and shifting consumer demand. The industry has continued to expand as a result of developments in healthcare technology, an aging population, and an increase in the prevalence of chronic diseases. Australia's healthcare sector is likely to face both opportunities and threats in the future (Ramsay Healthcare 2022). On the one hand, the population's advancing age and rising prevalence of chronic diseases present a significant growth opportunity, particularly in aged care and preventative health services. In addition, new opportunities for innovation and expansion are likely to emerge as a result of ongoing advancements in medical technology and the growing emphasis on digital health.
Healthcare costs are on the rise, there is a shortage of workers, and there is more and more pressure to cut costs while simultaneously raising care quality. The COVID-19 pandemic has also shown how important it is to invest more in healthcare infrastructure and be ready for future pandemics and health crises
3. Introduction to Ramsay health care
Ramsay Healthcare is a major player in the private hospital industry in Australia and a number of other nations. In addition to managing and operating public hospitals and rehabilitation facilities, the company's primary activities include day surgery and private hospital services.
Ramsay Healthcare's strong financial performance was due to the high demand for private health services in and around Australia. However, the net profit in 2022 declined 39% to $274 million which was due to the reduced level of activity followed by the higher costs (Lawler 2022). The estimated influence of COVID on EBIT was $264 million.
Ramsay Healthcare has laid out strategies for future growth and investment in brand-new healthcare facilities and services. Primary care services, mental health services, and home care services are just a few of the areas where the company has identified potential growth opportunities. The COVID-19 pandemic's ongoing impact on the company's operations, rising healthcare costs, and growing competition in the private healthcare sector are all obstacles the company must overcome (Ramsay Healthcare 2022).
In spite of these obstacles, it is anticipated that the healthcare industry in Australia will continue to expand in the years to come. This growth will be fuelled by demographic trends like an aging population and an increasing demand for healthcare services. Ramsay Healthcare, as a market leader, is well-positioned to profit from these trends and maintain its strong financial performance in the future.
4. Investment and Financing Decisions made by Ramsay health care
In the past year, Ramsay Healthcare made a number of significant decisions regarding investments and financing. One of the key ventures was the procurement of Capio Stomach muscle, a main medical services supplier in Scandinavia, for AUD 1.2 billion. Ramsay was able to expand its presence in the Scandinavian market and its presence in Europe thanks to this acquisition (Ramsay Healthcare 2022).
One more speculation choice made by Ramsay was the development of another confidential emergency clinic in the city of Perth, Western Australia, which is set to open in 2023. It is anticipated that this investment will enable Ramsay to meet the growing demand for private healthcare services in the region and establish a substantial presence in the market for Western Australia. Ramsay successfully completed a AUD 1.4 billion equity raise in 2021 to fund the acquisition of Capio AB and other growth opportunities in terms of financing decisions. Additionally, Ramsay's oversubscription of a EUR 750 million ($879 million) 10-year Eurobond in October 2021 indicates a strong investor demand for the company's debt securities (Ramsay Healthcare 2022).
5. Corporate Governance of Ramsay health care
Ramsay Healthcare has implemented a Code of Conduct, a Policy on Whistleblowers, and a Diversity and Inclusion Policy for supporting the corporate conduct. Through its annual report, investor presentations, and stakeholder engagement activities, the company also regularly communicates with its stakeholders (Ramsay 2022 Corporate governance).
Ramsay Healthcare has implemented policies and procedures to ensure that it fulfills its obligations and responsibilities to its stakeholders and is committed to upholding the highest standards of corporate governance. The company's approach to corporate governance is designed to encourage honesty, accountability, and moral behavior and is in line with the main recommendations of the ASX CGC.
6. Ethics and ethical judgements
Ramsay Healthcare undertook various steps for ensuring that the practises of the business are guided by high standards of ethics as well as moral judgement. The most significant measures comprises of:
Conduct Standards: The ethical principles and values that all employees are expected to uphold in their business dealings are outlined in the company's code of conduct.
Ethics Education: Ramsay conducts regular ethics training for its employees to ensure that they are aware of the significance of ethical behavior and possess the knowledge and skills necessary to make ethical decisions (Ramsay 2022 Corporate governance).
Measures Against Corruption: To ensure that its business operations are free of bribery and corruption, Ramsay has implemented anti-corruption measures (Ramsay 2022 Corporate governance).
Corporate Social Responsibility and Sustainability: To guarantee the performance of the business in an ethical manner, Ramsay incorporated sustainability as well as CSR into the operations.
7. Corporate Social Responsibility
As a leading multinational healthcare company, Ramsay is committed to implementation of sustainable practices in its operations and recognizes the significance of corporate social responsibility (CSR). In 2022, Ramsay's CSR endeavours focussed on natural stewardship, social obligation, and partner commitment.
In 2022, environmental stewardship was Ramsay's top priority. The company aims to promote environmentally friendly energy practices and reduce its carbon footprint. Ramsay will concentrate on minimizing waste, reducing energy and water consumption, and utilizing environmentally friendly materials whenever possible to accomplish this. To lessen its reliance on non-renewable energy sources, Ramsay made investments in renewable energy projects like wind and solar power (Ramsay 2022 Corporate governance).
In 2022, Ramsay even dedicated to social responsibility. The company understands how crucial it is to improve both the well-being of its workers and the communities in which it operates. To this end, Ramsay made investments in employee training and development to make sure that its workers have the knowledge and skills they need to give patients high-quality care. Ramsay also help the community where it lives by making charitable donations and participating in community engagement activities like volunteering programs and forming partnerships with organizations in the area (Ramsay 2022 Corporate governance).
Lastly, one of the most important aspects of Ramsay's CSR efforts in 2022 is engaging stakeholders. The business acknowledges that achieving its sustainability objectives necessitates interaction with its stakeholders, which include customers, investors, staff, and suppliers (Ramsay 2022 Corporate governance).
8. Investors
Financial performance is one of the most important aspects that investors take into account when evaluating a company (Carlon 2019). To determine a company's financial health, investors will look at things like revenue growth, profitability, and cash flow. As a result, Ramsay must guarantee strong financial performance and the ability to effectively convey this to investors. Investor events, regular financial reports, and digital interactions with investors are all examples of this. Investors look at a company's sustainability and social responsibility practices as well as its financial performance (Davydov 2016). Financial backers likewise focus on the initiative and the executives of an organization. Ramsay ought to have assembled an effective management team that is capable of articulating a concise vision for the business and achieving its strategic objectives. The executive team's experience and track record, as well as the diversity and inclusion of the company's leadership, will be examined by investors (Davydov 2016).
9. Ratio Analysis
9.1 Liquidity
In 2021 and 2022, Ramsay's liquidity ratios suggest that the company is less able to meet its short-term obligations. The company's current ratio decreased from 1.44 in 2021 to 0.88 in 2022, indicating that its current assets did not cover its current liabilities. Additionally, the quick ratio decreased from 1.33 in 2021 to 0.78 in 2022, indicating that the business's liquid assets, excluding its inventories, were insufficient to meet its short-term obligations.
Concerns about the company's ability to manage its short-term cash flow requirements and its financial health may be raised by the decrease in liquidity ratios. A company's inability to obtain short-term financing to meet its obligations may also be indicated by a lower liquidity ratio (Sherman 2015). Ramsay must keep a close eye on its liquidity position and take the necessary steps to improve it.
Non-current Asset management efficiency
Ramsay's asset turnover ratio increased slightly to 0.707 in 2022, indicating that, in comparison to the ratio of 0.689 in the previous year, the business is generating more revenue per dollar of assets. Be that as it may, this improvement isn't critical, and the organization might have to find further ways to work on its proficiency in dealing with its non-current resources.
Ramsay's fixed asset turnover ratio decreased from 0.954 in 2021 to 0.851 in 2022, indicating a decrease in revenue per dollar of fixed assets. This could be because of a rise in the firm's fixed assets or a fall in revenue. Ramsay may need to conduct additional research on this ratio in order to determine the root cause of the decline and implement the necessary changes to boost its effectiveness in managing fixed assets (Sherman 2015).
9.2 Capital Structure
The capital structure ratios for Ramsay in 2021 and 2022 suggest that the company has a high level of debt in comparison to equity. The debt-to-equity ratio increased from 3.25 in 2021 to 3.30 in 2022, indicating that the company's debt levels increased in relation to its equity. This suggests that Ramsay may have relied more heavily on debt financing to support its operations.
The debt ratio, which is the ratio of total debt to total assets, also increased from 0.76 in 2021 to 0.77 in 2022. This indicates that a significant portion of the company's assets is financed by debt, which may increase the company's financial risk and make it more vulnerable to fluctuations in interest rates and credit markets (LaFrenz 2021).
A high level of debt may also affect Ramsay's credit rating, as lenders may perceive the company as having a higher risk of default (Pucheta-Martiinez & Garcia-Meca 2019). It is important for Ramsay to carefully manage its debt levels and ensure that it has sufficient cash flows to meet its debt obligations.
9.3 Profitability
Ramsay's profitability ratios for 2021 and 2022 witnessed a decline. The company's net profit ratio decreased from 4 percent in 2021 to 3 percent in 2022, indicating a lower profit per dollar of sales. There are various causes for this decline in profitability which includes higher costs, lower sales revenue, or increased competition.
The return on equity (ROE) fell from 12 percent in 2021 to 8 percent in 2022. The company's profitability is measured by the ROE in relation to the equity invested by shareholders. The company's 2022 profit may have been lower than the amount of shareholder equity invested in it due to the decline in ROE.
Ramsay may be experiencing difficulties with cost management, pricing strategies, or product differentiation due to the lower profitability ratios. To increase profitability, the business may need to conduct a thorough operation review and implement cost-cutting measures. It might also think about looking into brand-new business opportunities or expanding its operations to make more money (Tosun 2019).
9.4 Market Value
Ramsay's market value ratios for 2021 and 2022 signified a decline in the business's value. In 2022, earnings per share (EPS) decreased to 116.3 from 193.20 in 2021. This diminishing in EPS proposes that the organization's benefit might have declined, which can antagonistically affect its fairly estimated worth.
In 2022, the price-to-earnings (PE) ratio decreased from 0.331 to 0.614. The price that investors are willing to pay for each dollar of earnings is measured by the PE ratio. Investors may be less optimistic about the company's earnings potential if the PE ratio is lower. This could be because of worries about the profitability of the business or external factors that affect the industry.
The impact of broader market conditions, such as shifts in interest rates, economic conditions, or investor sentiment, may also be reflected in the decline in market value ratios (Tosun 2019).
Overall performance, financial status, and cash flow
Based on the financial statements provided, Ramsay's overall performance in 2022 appears to have declined compared to 2021. The liquidity ratios indicate that the company's ability to meet short-term financial obligations has decreased, as evidenced by a lower current ratio and quick ratio in 2022 compared to 2021.
Additionally, Ramsay's capital structure ratios suggest that the company's debt levels have increased relative to equity. The debt to equity ratio and debt ratio both increased in 2022, which may indicate that the company is relying more heavily on debt financing to support its operations.
Furthermore, the profitability ratios suggest a decline in Ramsay's profitability in 2022 compared to 2021, with a lower net profit ratio and return on equity. This may be due to a variety of factors, such as increased operating costs, declining sales, or increased competition.
Finally, the market value ratios indicate a decline in the company's market value, as reflected in a lower EPS and PE ratio in 2022 compared to 2021. This may reflect a decrease in investor confidence in the company's future earnings potential or concerns about broader industry trends.
The cash flow statement of Ramsay shows that the company generated a positive net cash flow from operating activities in both 2021 and 2022. This projects that the operations of the company are generating sufficient cash flows to cover its operating expenses, investments in assets, and debt obligations.
9.5 Suggestions to improve based on the ratio analysis
Ramsay could take into consideration a number of suggestions to enhance its financial performance based on the ratio analysis. To improve cash flow, the business could, for instance, think about reducing its inventory, negotiating better payment terms with suppliers, or looking into short-term financing options.
The business might want to think about making an investment in marketing and advertising to boost sales, boosting operational efficiency to cut costs, or looking into opportunities for strategic partnerships or mergers and acquisitions to grow its business (Carlon 2019).
10. Working Capital Management
The company's inventory turnover increased from 27.48 to 30.28 based on the data provided, indicating that it sold its inventory more frequently during that time. This suggests that the business is effectively managing its inventory, lowering the likelihood of obsolescence or overstocking, and freeing up cash for other purposes. The inventory period, on the other hand, increased from 12.05 to 13.28, indicating that the business is taking longer to sell its inventory. This could indicate problems with the supply chain or a difficult market for the business. A shift in the business's strategy, such as a focus on custom or more expensive products that take longer to sell, could also be the cause of the longer inventory period (Davydov 2016).
The company is collecting its receivables more quickly, as evidenced by the rise in the receivable turnover ratio from 6.65 to 7.16. This indicates that the business is effectively managing its credit policies, lowering the likelihood of defaulting on debts, and freeing up cash for other uses. However, the company is taking longer to collect on its receivables, as evidenced by the fact that the accounts receivable turnover period decreased from 54.86 to 51.01. This could indicate that the business is competing in a difficult market or that its clients are having credit issues.
Overall, the company's operating cash cycle increased from 66.91 to 64.56, indicating that resources are being converted into cash more slowly. This suggests that the management of the company's working capital could be improved, particularly by shortening the time it takes to turn over accounts receivable and inventory (Ramsay Healthcare 2022).
11. Conclusion
In conclusion, Ramsay's CSR efforts in 2022 focused on environmental stewardship, social responsibility, and stakeholder engagement. The company made investments in renewable energy projects, minimized waste, reduced energy and water consumption, and utilized environmentally friendly materials to reduce its carbon footprint. The current ratio, quick ratio, and cash ratio all show a decrease in liquidity, indicating that the company may struggle to meet its short-term financial obligations. Additionally, the debt-to-equity ratio and interest coverage ratio reveal a significant increase in the company's debt burden, which could potentially lead to financial distress. The inventory turnover ratio also suggests that the company may be holding too much inventory, which could tie up cash and negatively impact profitability. Finally, the return on assets and return on equity ratios indicate a decline in the company's overall profitability. These issues highlight the need for the company to implement strategic financial management measures to improve its financial performance and ensure long-term sustainability.
12. References
Carlon, S., 2019, Financial accounting: reporting, analysis and decision making. 6th ed. Milton, QLD John Wiley and Sons Australia, Ltd
Davydov, D 2016, Debt structure and corporate performance in emerging markets. Research in International Business and Finance, vol. 38,pp. 299-311.
LaFrenz, C 2021, Ramsay refinances $1.5b of debt with a sustainability slant, viewed 18 March 2022 https://www.afr.com/companies/healthcare-and-fitness/ramsay-refinances-1-5b-of-debt-with-a-sustainability-slant-20210618-p5824o
Lawler, M 2022, Ramsay Health share price bleeds as profits plunge, viewed 18 March 2022 https://www.fool.com.au/2022/04/29/ramsay-health-share-price-bleeds-as-profits-plunge/
Pucheta-Martiinez, M. & Garcia-Meca, E 2019, Monitoring, corporate performance and institutional directors. Australian Accounting Review, vol. 29, no. 1, pp. 208-219. doi:10.1111/auar.12262
Ramsay 2022 Corporate governance, Corporate governance 2022, viewed 18 March 2022, https://www.ramsayhealth.com/globalassets/global/policies/corporate-governance-statement-2022.pdf
Ramsay Healthcare 2022, Ramsay healthcare 2022 annual report, viewed 18 March 2022, https://www.ramsayhealth.com/globalassets/global/investor-centre/investor-centre-pdfs/ramsay-health-care-annual-report-2021_27092021.pdf
Ramsay Healthcare Sustainability report 2022, Sustainability report 2022, viewed 18 March 2022 https://www.ramsayhealth.com/globalassets/global/sustainability/ramsay-cares-global-strategy-may-2022.pdf
Sherman, E 2015, A manager's guide to financial analysis : Powerful tools for analyzing the numbers and making the best decisions for your business, Ama Self-Study
Tosun, O 2019, Why do large shareholders adopt a short-term versus a long-term investment horizon in different firms? Financial Review, vol. 53, no. 4, pp. 763-800.
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