Report Analysis for A2M Company

Introduction

A2M is a company that produces milk products, i.e., those that contain A2 beta-casein protein type only. The company is passionate about inspiring people to lead healthy lives by encouraging the consumption of natural products as well as pioneering the understanding of A2 beta-casein protein type products. A2M provides A1 protein-free dairy-based products consistently in high quality. A2M has predominately continued to diversify its generic Australian fresh milk to include complex dairy products (e.g., infant formula) to offer to different markets compared to the time of its early years. The diversification strateg22y has ensured the A2M company gets a bedrock (foundation for) of dairy products determined to foster growth as well as increase its core competencies. The following is the analysis of trends, liquidity, efficiency, profitability, gearing, and investment for the A2M company.

Company Analysis

Analysis of ratios and trends is a valuable tool for A2M as far as decisions on investments are concerned. Profitability employs several scenarios to view the company’s productivity from different angles. In the A2M company, the profit margin of the years 2017, 2018, and 2019 reflect an increase in profitability. The profitability margin from the book of accounts is given as 25.23%, 30.47%, and 31.55% in 2017, 2018, and 2019 respectively. A2M company became more profitable in recent years due to an increase in sales, i.e., from 549247 to 922354 (2017-2018) and from 922354 to 1304336 (2018-2019).

Liquidity ratios reflect the ability A2M company to repay its debts. The quick ratio of the last three years, 2017, 2018, 2019, has been more than 1 (1.89, 2.49, and 2.52), which shows that the company is in a better position to repay its debts. The company’s efficiency is high, considering that all their sales have increased, and they have scaled up successfully through diversification.

Lastly, the A2M company has a good gearing ratio. The gearing ratio compares the company’s debts to the rest significant metrics. A2M has the following debt to assets ratio: 29.79% (2017), 22.41% (2018), and 20.70% (2019). This debt to assets ratio shows the company’s equity exceeds the funding from lenders.

Cash flow Analysis

Cash flow analysis is the examination of a company based on its cash inflows and cash outflows. Cashflows are categorized into operating, financing, and investing activities. Cashflows focus on the source of income, ways the company generates revenue, and how the income means to the company. The cash flow analysis helps businesses, shareholders, and potential investors to determine the significant activities of a company.

Operating activities

Payment to suppliers and employees

One of the operating activities that took place in the company is the payment of supplies and employees. During the year 2019, supplies were paid for the quantity they gave to the company, and the employees were paid for the work they performed. The total amount paid was 899,238, which we can categorize as cash outflow of the company. This was an increase compared to the amount spent by the company in paying suppliers and employees in 2018.

Taxes paid

Taxes paid by the company are categorized as cash outflows. It is a requirement that the company should pay taxes to the company. Taxes paid have a negative impact on the cash flow of the company because the company is paying out cash to the government. The company paid more taxes in 2019 as compared to the amount of taxes it paid in 2018.

Investing

Payment for property plant and equipment

Amounts of property plant and equipment are associated with the purchase of property plant and equipment. The activity affected the cashflow negatively because cash is paid because of the acquisition of physical assets for the company. Payment for the assets means the company is paying out cash and hence a cash outflow. The investing amount for the activity increased in 2019 as compared to the amount invested in 2018.

Financing

Proceeds from issue of equity share

This activity affects the cash flow of the company positively. This is one of the methods that a company can use to generate income from investors. The company issued a share to the public, and in return, cash is paid. It’s part of cash inflows for the company. During the year 2019, the company realized $2,929 as a result of the issue of shares to investors. However, the proceeds decreased by a large percentage when compared to the proceeds in 2018.

References

Aithal, P. S. (2017). Company Analysis–The Beginning Step for Scholarly Research. International Journal of Case Studies in Business, IT, and Education (IJCSBE), 1(1), 1-18.

Andreas, A. (2017). Analysis of operating cash flow to detect real activity manipulation and its effect on market performance. International Journal of Economics and Financial Issues, 7(1).