Michael Hill International Ltd Using the annual report of “Michael Hill Internat
ID: 411658 • Letter: M
Question
Michael Hill International Ltd Using the annual report of “Michael Hill International Ltd” for the financial year ending 2017, answer the following questions.
Required:
1. Using the financial statements “Michael Hill International Ltd” for the years 2016 and 2017, prepare common-size balance sheets and income statements.
2. Evaluate the sales, operating expenses, gross margin, net-profit margin asset, debt and equity structure, of Michael Hill International Ltd” and explain trends and changes found using the common-size financial statements.
3. Using relevant ratios, and other associated information available in the public domain, assess the financial health of “Michael Hill International Ltd” based from the point of view of an investor in share capital.
4. Assume you are a banker evaluating a loan request from “Michael Hill International Ltd” for $ 50 million. What would be your concerns when making a decision regarding approval or denial of the loan request? Justify
Is there a way I can send the Financial Statement into an email please? Its a PDF file.
Explanation / Answer
Here's Michael Hill Balance Sheet Information
Common Size Balance Sheet: Here are the few divisions of the common size balance sheet
Current Assets: 29,052
Cash:
Accounts Receivables:
Inventory:
Total Current Assets : 238,581
Total Assets: 389,122
Total Fixed Assets" The group has fixed assets of around 461,000$ that is the total set of assets" as of date of 2016
Inventory : The Inventory is the cost associated with direct labour, direct held toi maturity investments, and loans and receivables available for sale investments. Durante Holdings company is also a subsidary of Michael Hill. Michael Hill has various assets, and various jewellery business under their portfolio. They allow other jewellers to be part of the group.
The variables that can be assessed include:
1. Sales (Operating Revenue) : $ 583m ; Revnue collected from Professional Care Plan: 39.7 mn$
2. Operating Expen ses
3. Gross Margin
4. Net Profit Margin Asset : $ 32.86M
5. Debt and Equity Structure : Net Debt at 30 June was $39.1 Mn
6. Earnings before Income and Tax: $ 48.1M
What is the financial health of " Michael Hill International Limited" for an investor in share capital
Here are the key financial ratios for Michael Hill International:
1. Return on Average Shareholder funds: 16.8%
2. Gross Profit: 63.5%
3. Interest Expenses over Time: 15.2
4. Equity Ratio: 52%
5. Gearing Ratio: 19.5%
6. Current Ratio: 3.0: 1
7. Basic Earnings Per Share: 8.46c
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Based on the basic financial ratios,. its clearly understood that the financial health of " Michael Hill International Limited" is in the blue. Assuming you are banker, and if you need to evaluate a loan request from Michael Hill International Limited, the banker would evaluate the position of the company.
The company position would be evaluated as follows:
High Shareholder Returns. If we divide the company total revenue by the shareholder equity (The Return on Equity) the signs are positive. The company is giving very high shareholder returns.
The average return on Shareholder Equity
1. The financial services sector will have a different share holder return . The average ROE is 7.1%
2. The Oil and Drilling company has return on equity of around 9.1%
3. The average ROE of this company is as high as 16.8%. Thats overall high indicator
4. Usually companies with negative return on equity are really bad investments.
If I am a banker and I am evaluating a loan request from "Michael Hill International Limited" for $ 50 Million -the concerns regarding the approval or denial of the loan request would be as follows:
a) Business Environment Risks
b) Company's ability to pay and financial stucture
c) Principals Financial History
d) Security : Debt Financing has always to be secured against company assets.
There is always a way in which financial statement can be sent in an email.