SWINBURNE UNIVERSITY OF TECHNOLOGY

ACCOUNTING AND
FINANCIAL DECISION
MAKING
INDIVIDUAL ANALYSIS
CHETHAN RAM NARAYAN BANDI - 100027685

(Source: Data analysis Sai-Global 2014)

SAI-Global is an Australian registered and ASX listed company information services
and solutions for managing risk, achieving compliance and business improvement.
The company has revenues (2014) of A$527.7 million and a total asset base of
A$785 Million. Revenues are derived from activities across Asia Pacific (58%),
Americas (26%) and Europe, the Middle East and Africa (14%).
SAI-Global is involved in a market engaged in solutions for risk and compliance
management and business improvement. According to the company profile, the
three service segments of the company are assurance, compliance and information
services.
A sustainable business and mission requires effective planning and financial
management. Ratio analysis is a useful management tool that will improve your
understanding of financial results and trends over time, and provide key indicators of
organizational performance. Managers will use ratio analysis to pinpoint strengths
and weaknesses from which strategies and initiatives can be formed. Funders may
use ratio analysis to measure your results against other organizations or make
judgments concerning management effectiveness and mission impact.
The profitability ratio gives an idea of how well the business organisation has been
performing over a given period of time. It also helps the investors make a judgement
whether the organisation has substantial financial resources to continue serving. On
calculating the relevant profitability ratios for SAI-Global, it was found that return on
equity dropped from 16.4% to 10.9% during the years, 2013 and 2014. During these
two years, the return on assets improved from 9.2% to 9.3%. During the years 2012
to 2014, there has been a constant reduction in the net profit margins of the
company.
The operational efficiency ratios give a sense of how well an organisation is utilizing
its assets and controlling its liabilities. These ratios are calculated to compare
performances over multiple periods of time. The inventory turnover period, average
accounts receivable and average asset turnover in days all decreased in 2014 as
compared to 2013.

The liquidity ratios give an idea as to whether the company has enough cash to meet
its operational obligations on an ongoing basis. These ratios are important indicators
of financial health. Current ratio measures the ability to meet short term obligations
with short term assets. The optimal value for this is between 1.2 and 2. Anything
above or below these values is said to have too less or excess cash respectively.
The current ratios for the years 2012-2014 of SAI-Global are found to be in the
optimum range. Quick ratio indicates whether the company has enough short term
assets to cover its immediate liabilities without having to sell its inventory. Usually a
1:1 ratio is viewed to be optimal. The quick ratios for the years 2012-2014 of SAIGlobal found to have a small deviation of 0.16, 0.32 and 0.18 respectively from the
optimum value.
SAI-Globals ability to surprise the share market in terms of earnings per share was
negative 4.7% in 2012, 4.6% in 2013 and 2.7% in 2014. The significance of these
figures is that the investors would have lost a bit of faith in 2012, but the stock prices
saw a hike in 2013 and though the surprise element dipped in 2014, there was a
gradual increase in the stock prices.
The current trends in cents per share shows that the median rate of earnings per
share in 2015 will be around 22.4, which is a growth of 5.3%, the median rate of
earnings per share in 2016 is forecasted to be around 27.3, which is a growth of
21.9%.
Based on the above analysis, a moderate buy can be recommended to the potential
shareholders and a hold can be recommended to the existing shareholders.