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Construction Business Strategy And Finance Assignment 2 Instruction
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1. Calculations
a. Assets ratio
This indicates that debt is used to fund 72% of the assets owned by the business. A high ratio of assets means that a large number of the business's assets are funded by debt, which can raise the related danger to the business's finances (Bondinuba et al. 2022). The low ratio of assets means that the majority of the business's funds are funded by equity, which is not as risky but can restrict the company's capacity for expansion.
Figure 1: Asset Ratio
(Source: Self-Created)
The equity-based ratio is a crucial financial indicator for creditors, investors, and analysts since represented the company's risk profile and financial health. It is generally thought to be stronger financially and less dangerous if it has a lower asset ratio than one with a larger assets ratio.
b. Liability ratio
The percentage of the assets of an organization that are funded by debt is shown by the liabilities ratio. It is determined on the basis of dividing the total liabilities of the business and the total assets-based consideration (Sami Ur Rehman et al. 2022).
Figure 2: Liabilities Ratio
(Source: Self-Created)
The corporation indicated in the provided statement has total liabilities of A$286,477 for 2021 and total assets of A$592,883. Thus, the following formula can be used to determine the liability ratio. Total liabilities divided by Total Assets equals A$286,477 divided by A$592,883 equals a liability ratio of 0.48, or 48%.
c. Working capital of the company
It is a financial indicator that assesses its short-term liquidity. The financial resources of the business may be determined using the provided data by deducting its current obligations from the assets it currently owns. According to the information given, the firm has A$2,961,000 in current interest-bearing financing and loans and A$1,334,000 in non-current-bearing interest loans and borrowings. These are regarded as the financial commitments of the firm. Based on that result, the firm has total liabilities of A$274,359,000 and A$12,118,000 for immediate obligations and non-current obligations, respectively.
d. Gross profit margin
The company's profitability is measured by its profit margin, which can be calculated between sales and the reflective costs. It is computed by dividing the gross profit of an organization by the revenue.
Figure 3: Profit Margin
(Source: Self-Created)
The above figure represents the gross profit margin on the basis of the sales margin, which can be calculated for years' specification. It is more economically efficient if it can make more money from every dollar of earnings, which is shown by a bigger margin (Fu et al. 2023).
2. Business performance in terms of profits
These previous reports provide the impression that McConnell Dowell's economic performance has been fairly erratic lately, with the business reporting profits as well as losses. However, it appears that the firm is devoted to long-term growth and profitability given its focus on strengthening its financial health and completing high-margin projects. The firm declared a profit after taxes of A$23,034,000 for its revenue year that is going to end on the 30th of June 2021, an expansion increase over a deficit of A$16,494,000 reported the prior year. The rises in net sales, from A$978,574,000 to A$1,473,718,000, and the drop in operating costs, from A$975,629,000 to A$1,427,396,000, are both responsible for the rise in profit. Additionally, the company's income tax bill was reduced this year, coming in at A$2,139,000 as opposed to A$3,410,000 the year before. Overall, the business performance of the corporation has increased each year in terms of earnings.
3. Business performance in terms of growth
The information presented does not give a complete picture of the company's business performance over time. The company continues to expand its presence in the building industry in a number of nations, such as Australia, and New Zealand, according to the list of key operations and principal locations for operations for 2021 and 2020. The business has also formed joint ventures to work on various projects with other construction firms, demonstrating its readiness to cooperate and grow its commercial operations (Wu et al. 2023). However, other operational and financial information, like sales, revenue, market share, and satisfaction with consumers, need to be analyzed in order to assess the company's success over time. The information generally indicates that McConnell Dowell, with partnerships with important construction firms and a presence in several nations, has developed into a key participant in the construction business. The company's emphasis on substantial infrastructure projects and collaborations with regional partners point to a collaboration and risk-sharing strategy that has probably helped its steady expansion.
4. Requirements to maintain the business
It is clear from the facts that McConnell Dowell is an international development corporation with a significant presence in Southeast Asia, Australia, and New Zealand. The business has a number of collaborations and joint ventures with other construction companies to carry out significant building projects around the area (Sang et al. 2022). The reality that McConnell Dowell continues to keep up joint venture relationships with several construction firms in different nations for more than two years speaks to the company's consistent financial performance. The relationships imply that the business has an excellent track record in the construction sector and that its partners have faith in its ability to take on and effectively execute projects. The company's entry into fresh markets like Malaysia, Indonesia, and Hong Kong demonstrates McConnell Dowell's desire to expand its clientele and position itself as an important regional force in the construction sector. The company's partnerships and joint ventures with local businesses in various markets show that it is aware of the local environment and uses a calculated approach to grow.
5. Survival of the organization trough pandemic
According to the evidence supplied, it seems like McConnell Dowell survived the pandemic by adopting a proactive cost-control strategy while continuing to secure employment and increase income. The firm had been successful in procuring work even throughout the pandemic, as seen by the high revenue increase in Australia in FY21, which was related to work obtained in the prior fiscal year. Furthermore, the firm stated that sales in the region of Southeast Asia climbed by 30% in FY21 and that growth in work-in-hand can support future revenue growth, indicating that the organization was successful in retaining business in that area as well. Overall, it seems that McConnell Dowell survived the epidemic by juggling cost control with ongoing efforts to find business and increase income. Based on that perspective of business indicates that it was effective in overcoming the difficulties presented by the epidemic.
References
- Bondinuba, F.K., Bondinuba, C.K., Opoku, A., Owusu-Manu, D. and Mittal, M., 2022, June. Determinants of Small and Medium Construction Firms’ Financial Performance. In Proceedings of Second International Conference in Mechanical and Energy Technology: ICMET 2021, India (pp. 485-502). Singapore: Springer Nature Singapore.
- Fu, S., Chen, W., Ding, J. and Wang, D., 2023. Optimal financing strategy in a closed-loop supply chain for construction machinery remanufacturing with emissions abatement. Journal of Industrial and Management Optimization, 19(2), pp.1459-1485.
- Sami Ur Rehman, M., Shafiq, M.T. and Afzal, M., 2022. Impact of COVID-19 on project performance in the UAE construction industry. Journal of Engineering, Design and Technology, 20(1), pp.245-266.
- Sang, M., Zhang, Y., Ye, K. and Jiang, W., 2022. Moderating effects of internationalization between corporate social responsibility and financial performance: The case of construction firms. Buildings, 12(2), p.185.
- Wu, S., Irsoy, O., Lu, S., Dabravolski, V., Dredze, M., Gehrmann, S., Kambadur, P., Rosenberg, D. and Mann, G., 2023. Bloomberggpt: A large language model for finance. arXiv preprint arXiv:2303.17564.
