Financial Statement Analysis – Whitehaven Coal GPFS
Contents
Executive Summary
The assignment’s main purpose is to analyze the financial statement of the chosen company, Whitehaven Coal. The report will be examining the financial position of the company for the financial year of 2020. Further, the report will be analyzing the profitability of the business, asset efficiency of the firm, liquidity, capital structure, and its market performances for the year. Therefore, with the help of the financial report for the chosen company, the report will be ending up with a conclusion, which will tell about the overall condition or situation of the firm.
Capital Structure
As per the review of the financial report of Whitehaven Coal, it has been identified that the company has delivered a less impressive return on equity, which is 15.08 % over the past year as compared to the return created by the company, which is 17.04%. An investor might feature a lower return on equity to a comparatively incompetent performance and at the same time as this can often be the case, keeping in mind that the nuts and bolts of the return on equity calculation may change that perspective and give you a deeper insight into the company’s past performance. The company’s main aim is to anticipate their customer nations to capitalize on their developed and intended power generation of coal-fired to strengthen their financial revivals when the threat of the pandemic is moreover got ridden of or could be sustainability managed (Wsj.com, 2020).
Figure 4: Capital Structure of Whitehaven Coal
Sources: ()
As per the overall review of the company’s financial report, the calculation of capital structure indicates that in the financial year 2020, the current liability is lower than that of the financial year 2019. The total amount for the year 2020 is $81,553, and for the year 2019 was 81, 720, which is more than that of the current year. It has been identified that there has been a decrease in current liabilities. It means that the decrease in the current liabilities is the utilization of funding, and it represents cash outflows in the business firm. On the other side, the non-current liabilities are showing more amount, i.e., $943,008 for the financial year 2020 and $333,529 for the financial year 2019. Therefore, there has been an increase in non-current liabilities in recent years (oreilly.com, 2020).
However, as per the overall review, there has been a change in the business’s overall capital structure in the financial year 2020. In comparison, the company’s capital structure for the previous financial years has indicated that there was a positive improvement of the firm, and the overall structure has shown a positive figure compared to 2020.
Market Performance
The provided financial report of the business of Whitehaven Coal shows that the company’s overall market performance has declined in the financial year of 2020 because of the massive losses and financial crisis faced by the company. The company’s shareholder has stated in the financial report that the financial year 2020 was not a year for them to improve or maximize their entire profitability. There has been an identification that the company has been facing a tough time lately because of the pandemic situation that occurred in the entire globe. Thus, the company has not been immune to the challenges brought by the recent pandemic condition. However, at a certain level, the firm’s overseas market responded well through the ongoing pandemic, which has been the only positive thing about the firm in the current year (Whitehavencoal.com.au, 2020).
Throughout the cyclical lows that the company has faced recently towards the end of the financial year, 2020 might hint the firm for the price improvement in the future financial years, significant uncertainly regarding the recovery of the universal economy and related changes in the market condition remains. However, it has been identified that through the second half of the financial year 2020, their coal remained well sold in most of their key markets. It also provides a positive hope to the firm for improvement in the future.
As a whole, it can be said that the market performance of the firm has gone down poorly because of the loss and financial crisis faced by the firm and a massive downfall in the operational level of the firm. However, as per the statement of the shareholders and CEO of the firm, it can be assumed that the firm is looking forward to covering up the losses in the firm in a positive manner and is focusing on the opportunities that they could get in the future and use them in an efficient way to recover very soon (Whitehavencoal.com.au, 2020).
Figure 5: Market Performance of Whitehaven Coal
Source: (In.wallmine.com, 2020)
Conclusion
To conclude, it can be said that the overall financial report of Whitehaven for the financial year 2020 indicates that the firm has been facing a lot of downfalls in its business as well as in the financial sector. The overall assignment has analyzed the entire financial report for the FY 2020 and has identified that there has been a reduction in the level of profitability in the business, and the overall capital structure of the firm has changed with a certain level of loss faced by the business. Therefore, the decline in the level of business in Whitehaven Coal is because of the impact of the COVID 19 pandemic, which has affected the business’s operational structure with which there has been a financial crisis at a massive level. In comparison, the financial report of the previous year, i.e., 2017, 2018, and 2019 has indicated that the company had been progressing positively, and the firm’s overall scenario was indicating that there is no crisis of finance. However, as soon as the outbreak of coronavirus was spread all over the world, there has been an immediate decline in every aspect of the business, such as market performance, asset efficiency, profitability, and capital structure of the firm.
Recommendation
After reviewing the financial report of Whitehaven Coal for the financial year 2020, there has been a massive level of financial loss because of the recent pandemic. Therefore, there are a few recommendations that can be used in the company, which are as follows:
- Do on Procrastinate: In the case of a financial crisis in the business organization, it is necessary for the firm to ensure that there is no wastage of time and money. Staying away from the financial crisis and keeping themselves busy does not help them to overcome stress.
- Stop Using Credit Cards: In order to overcome the financial crisis in the business, there should be a proper track of expenses in the firm. With this, the firm is supposed to ensure that there are no extra expenses that can stop the firm from overcoming the crisis. Hence, the firm should stop using credit cards.
- Get a Quick Loan: At the time of a financial crisis in the business, it will be impossible for the firm to pay its daily expenses. Therefore, for this purpose, the firm should always look up to quick loans. It is necessary because non-payment of daily wages will disable the firm to cover up its financial loss.
- Ensure monthly payment: If the firm gets a quick loan, the monthly or daily payments should be immediately done or met to avoid an additional financial crisis. Hence, there should be proper planning of the cash outflows and inflows to control or manage the business’s overall financial situation (finsmes.com, 2020).
References
In.wallmine.com, 2020. Whitehaven Coal (WHC) Stock Analysis (November 2020) – Wallmine.Com. [online] In.wallmine.com. Available at: <https://in.wallmine.com/asx/whc> [Accessed 18 November 2020].
oreilly.com, 2020. Crash Course In Accounting And Financial Statement Analysis, Second Edition. [online] O’Reilly Online Learning. Available at: <https://www.oreilly.com/library/view/crash-course-in/9780470047019/9780470047019_ch07lev2sec14.html#:~:text=Any%20decrease%20in%20liabilities%20is,what%20it%20owes%20to%20suppliers.> [Accessed 18 November 2020].
Whitehavencoal.com.au, 2020. Full Year Results FY20 – Whitehaven Coal. [online] Whitehavencoal.com.au. Available at: <https://whitehavencoal.com.au/full-year-results-fy20/> [Accessed 18 November 2020].
finsmes.com, 2020. 6 Quick Tips To Help You Get Out Of A Financial Crisis |Finsmes. [online] FinSMEs. Available at: <https://www.finsmes.com/2017/08/6-quick-tips-to-help-you-get-out-of-a-financial-crisis.html> [Accessed 18 November 2020].
Whitehavencoal.com.au, 2020. Half Year Results FY2020 – Whitehaven Coal. [online] Whitehavencoal.com.au. Available at: <https://whitehavencoal.com.au/half-year-results-fy2020/> [Accessed 18 November 2020].
Wsj.com, 2020. WHC.AU | Whitehaven Coal Ltd. Financial Statements – WSJ. [online] Wsj.com. Available at: <https://www.wsj.com/market-data/quotes/AU/WHC/financials> [Accessed 18 November 2020].