SCHOOL OF

GROUP ASSIGNMENT COVER SHEET

STUDENT DETAILS

Student name: Pamela Samaha Student ID number: 22061883

Student name: Yuchen Zhang Student ID number: 20627537

Student name: Abeir El Dadoun Student ID number: 20760449

Student name: Ester Gaolo Student ID number: 19062596

Student name: Student ID number:

UNIT AND TUTORIAL DETAILS

Unit name: Financing Enterprises Unit number: BUSM1010

Tutorial/Lecture: Class day and time:
Lecturer or Tutor name: Dr Gulay Avsar

ASSIGNMENT DETAILS

Title: Financing Enterprises Assessment 2

Length: 12 pages Due date: 26/05/2023 Date submitted: 26/05/2023
Home campus (where you are enrolled): Parramatta City Campus

DECLARATION
I hold a copy of this assignment if the original is lost or damaged.
I hereby certify that no part of this assignment or product has been copied from any other student’s work or from
any other source except where due acknowledgement is made in the assignment.
I hereby certify that no part of this assignment or product has been submitted by me in another (previous or
current) assessment, except where appropriately referenced, and with prior permission from the Lecturer /
Tutor / Unit Coordinator for this unit.
No part of the assignment/product has been written/produced for me by any other person except where
collaboration has been authorised by the Lecturer / Tutor /Unit Coordinator concerned.
I am aware that this work will be reproduced and submitted to plagiarism detection software programs for the
purpose of detecting possible plagiarism (which may retain a copy on its database for future plagiarism
checking).

Student’s signature: Pamela

Student’s signature: Yuchen

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 Student’s signature: Abeir
Student’s signature: Ester
Student’s signature:
Note: An examiner or lecturer / tutor has the right to not mark this assignment if the above declaration has not been
signed.

Financing Enterprises Assessment 2

Q1.
The sales profit ratio of Ridley Corporation Limited is 4.17% by 2021 and 6.61% by
2022. The company's operating income increases, and the sales profit rate will be
affected by the cost of sales, which indicates that the company's cost of sales has
decreased to a certain extent. The company's cost margin was 4.3% in 2021 and
7.0% in 2022. And you can see that the price that the company must pay to make a
profit is smaller, which means that the control of costs is stronger, the ability to
manage expenses goes up, and the ability to control costs goes up. The company's
net profit margin was 2.68% in 2021 and 4.04% in 2022. This indicates that the
company's profitability is higher and the cost and resources it invests are more
efficiently converted into compensation. From the data, the company's net interest
expense was 4509,000 in year 21 and 2,849,000 in year 22. This means that the
expense of interest has been greatly reduced, so the cost is also reduced. As a
result of this, the company's ability to control costs improved from 2021 to 2022.
Interest expense was lowered, and cost margins increased.
 
Accent Group Limited recorded 11.41 percent profit margin in 2021 and 4.82 percent
in 2022. This means that the cost of the enterprise's products may increase, and the
proportion of products with low profit margin in the product mix will increase, and the
sales profit margin will decrease. The company's cost margin was 12.83% in 2021
and 5.04% in 2022. This means that the company's cost control is not good,
profitability is not strong, and the cost increases. The net profit of the company was
7.77% in 2021 and 2.79% in 2022. The decline of net profit margin indicates that the
company's profitability is not strong, the conversion rate of costs and resources is not
high. It can also be seen from the data that the company's various expenses have

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increased in 2022 years. The above shows that the company is well positioned to
control costs through 2021, with cost margins in the upper 10% range. But in 2022
its ability to control costs went down and costs went up a lot.

 Q2.
After calculating the Cash Conversion Cycle for both companies, the cash
conversion cycle for Ridley Corporation (RIC) in 2021 was calculated to 6 days (see
appendix 1a). This figure then increased in 2022 to 10.1 days (see appendix 1b). As
shown below the cash conversion cycle increased in 2022, Ridley Corporations
overall cash conversion in both 2021 and 2022 would be considered a good
conversion for the company, as it indicates RIC is able to purchase inventory and
receive sales/ profits from their customers in a short period of time. This allows
Ridleys Corporation a considerable time to pay their suppliers for the material, in
which was originally purchased. This also indicated that they could negotiate an
extended time of credit.

The Cash Conversion Cycle for Accent Group Limited (AX1) in 2021 was 76 days
(see appendix 1c). This then increased in 2022 to 86.5 days (see appendix 1d).
Accent Group Limited’s overall Cash Conversion Cycle indicates the period in which
they purchase material from their supplies to when they sell and gain profits from
their customers would be a long period of time, which can affect how they purchase
materials from their suppliers and their current credit. 

Q3.
Accent group limited (AX1) and Ridley corporation (RIC) will be analysed using these
two sources of finances, the debt ratio and interest coverage ratio, for the year’s
2022 and 2021. 
 
Ridley Corporation Limited debt ratio has decreased 5.12% from 2021 to 2022. In
2021 they had a debt ratio of 53.1% whereas in 2022 it was 48%. This shows that
the firm was able to lower overall liabilities and increase assets putting them in a
financially stable position to be able to repay liabilities. This indicates RIC has relied
less on debt financing and more on their profits and assets to lower liabilities. The

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interest coverage ratio has decreased 9.54 times in 2021 to 25.35 in 2022 indicating
the firm is more capable of meeting interest demands. RIC has relied less on debt
financing which has resulted in an increase in its interest coverage ratio.
 
Accent group limited debt ratio is increased in the year 2022 by 2.36% indicating the
firm is relying more on debt financing to fund the company’s expenses. This
indicates the firm is less capable of repaying debts and incurring more debts. The
interest coverage ratio for AX1 has decreased from 8.52 times in 2021 to 4.25 times
in 2022. This indicates the company is less capable of meeting interest demands
without using debt financing which will also raise the debt ratio higher. This puts the
company at a higher risk of filing bankruptcy. AX1 has relied more on debt financing
in 2022 which we can conclude resulted in a decrease in its interest coverage ratio. 
 

Q4.
A company's capacity to allocate capital profitably to projects or investments is
assessed using the profitability of invested capital. Ridley Corporations Limited (RIC)
and Accent Group Limited (AX1) both exhibit changes in profitability for the years
2021 and 2022. Using the return on assets (ROA) formula for Ridley Corporation and
Accent Group, the following calculations can be identified. 

In 2021, Ridley Corporation’s return on assets was 7.05%. For the year 2022, it was
11.89%. From 2021, to 2022 the percentage has increased by 4.84%. This increase
creates a larger turnover for RIC. Accent Group’s return on assets in 2021, was
11.42% and decreased by 5.66% in 2022, leading it to be 5.76% in 2022. Although
AX1’s return on assets has decreased, 5.76% still puts this company at a stable
financial position to receive enough turnover. 

Based on the previous calculations, reasons as to why the profitability for both
companies over the years 2021 and 2022 may have fluctuated due to the number of
production units, direct and transport costs, costs rising due to inflation, value per
unit and overhead costs. The demand for certain products also plays a significant
role within these two companies. It is evident that RIC has a higher turnover
compared to AX1 who’s ROA is declining, this also means they might have over-
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invested in assets that have failed to produce revenue growth. This can be improved
by creating better management controls, using resources more efficiently, effective
marketing and improved pricing. 

Q5.
Overall, it has been decided that the Ridley Corporation Limited loan should be
approved, whereas Accent Group Limited would not be eligible for a loan. 

From 2021 to 2022, Ridley Corporation Limited's sales profit margin, cost profit
margin and net profit margin have all been improved, indicating that the company
has stronger cost control ability, more profits and better ability to repay loans. Accent
Group Limited's three profit margins have dropped significantly, which means that
the company may not be able to repay the loan, because it has very low-cost control
ability, low profitability, and low profit. Ridley corporation Limited has also displayed
a shorter length of time in their cash conversion cycle, which indicates their capability
to repay any loan given in a short period of time. Due to Accent Group Limited
having a longer time length of their cash conversion cycle, it will be more difficult for
them to repay a loan given to them as it will take longer for them to repay the bank.

Based on the debt ratio and interest coverage ratio RIC is more capable of repaying
its loan to the bank than AX1. The debt coverage ratio for RIC has lower by 5.12% in
2022 than 2021 whereas AX1 has increased by 2.36%. This indicates RIC is more
reliant on assets than debt financing and can meet loan demands by using said
assets whereas AX1 does not have the assets for such funds and relies on debt
financing to meet loan demands. Furthermore, the interest coverage ratio has
increased for RIC by 9.54 times than the previous year of 2021, whereas it has
decreased for AX1 by 8.52 times showing the firm is unable to meet interest
demands. These two ratios indicate RIC is capable of meeting loan demands
whereas AX1 is more likely to file for bankruptcy than meet loan demands. RIC
should be given the loan whereas AX1 should not.

Furthermore, the return on assets for both companies indicates that it is appropriate
for the loan for RIC to be approved. With the ROA increasing throughout the years, it
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is evident that they have substantial funds and a larger turnover. Comparatively,
Accent Group Limited, should not be entitled to this loan as their ROA is significantly
decreasing, and if it continues to decrease, they will not be able to repay balances
for their loan.

To conclude, the loan for Ridley Corporation Limited should be approved and the
loan for Accent Group Limited should be disapproved due to the previous reasons
stated.

Reference list

Uws.edu.au. (2023). DatAnalysis Premium Home. [online] Available at:

https://datanalysis-morningstar-com-au.ezproxy.uws.edu.au/af/dathome?xtm-
licensee=datpremium  [Accessed 20 May 2023].

Bakry, W (ed.) 2020, Financing enterprises, 2nd edn, Pearson, Melbourne, Australia.

[ISBN 9780655702269]

Appendix

1: Cash Conversion Cycle

CCC= Inventory Days + Accounts Receivable Days - Accounts Payable Days.

1a: Ridley Corporation Limited (RIC) 2021 

RIC 2021

Sales (Operating Revenue) $927,719,000.00

Costs of Goods sold  $848,694,000.00

Accounts Receivable $111,316,000.00

Inventory $81,947,000.00

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 RIC 2021

Accounts payable  $169,752,000.00

Average Daily Average Daily $848,694,000.00365

Sale  $927,719,000.00365 COGS =2325189.041
= 2541695.89 =2325189.0
=2541695.9

RIC 2021

Inventory days:  $81,947,000.002325189.0

InventoryAverage Daily cost of Goods Sold (or sales) =35.2431
=35.2

Accounts Receivable Days: $111,316,000.002541695.9

Accounts receivable Average daily sales (usually a =43.7959
yr= 365 days) =43.8

Accounts Payable: $169,752,000.002325189.0

Accounts payable Average daily cost of Goods sold. =73.0056
=73.0

CCC= Inventory Days + Accounts Receivable Days - 35.2 + 43.8 - 73.0

Accounts Payable Days.
TOTAL  = 6

1b: Ridley Corporation Limited (RIC) 2022 

RIC 2022

Sales (Operating Revenue) $1,049,086,000.00

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Costs of Goods sold  $949,523,000.00

Accounts Receivable $127,889,000.00

Inventory $117131,000.00

Accounts payable  $206,626,000.00

Average Daily Average Daily $949,523,000.00365

Sale  $1,049,086,000.00365 COGS =2601432.877
= 2874208.219 =2601432.88
= 2874208.22

RIC 2022

Inventory days:  $117,131,000.002601432.88

InventoryAverage Daily cost of Goods Sold (or =45.0255
sales) =45.0

Accounts Receivable Days: $127,889,000.002874208.22

Accounts receivable Average daily sales (usually a =44.4953
yr= 365 days) =44.5

Accounts Payable: $206,626,000.002601432.88

Accounts payable Average daily cost of Goods =79.4277
sold. =79.4

CCC= Inventory Days + Accounts Receivable Days 45.0 + 44.5 - 79.4

- Accounts Payable Days.
TOTAL = 10.1

1c: Accent Group Limited (AX1) 2021

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 AX1 2021

sales $990,607,000.00

Costs of Goods sold  $425,079,000.00

Accounts $49,032,000.00
Receivable

Inventory $216,881,000.00

Accounts payable  $149,446,000.00

Average Daily Average Daily $425,079,000.00365

Sale  $990,607,000.00365 COGS  =1164600
=2713991.781
=2713991.8

AX1 2021

Inventory days:  $216,881,000.001164600

InventoryAverage Daily cost of Goods Sold (or sales) =186.2278
=186.2

Accounts Receivable Days: $49,032,000.002713991.

Accounts receivable Average daily sales (usually a yr= 8
365 days) =18.0663
=18.1

Accounts Payable: $149,446,000.001164600

Accounts payable Average daily cost of Goods sold. =128.3238
=128.3

CCC= Inventory Days + Accounts Receivable Days - 186.2 + 18.1 -128.3

Accounts Payable Days.

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 TOTAL = 76

1d: Accent Group Limited (AX1) 2022

AX1 2022

sales $1,127,475,000.00

Costs of Goods sold  $504,992,000.00

Accounts $47,303,000.00
Receivable

Inventory $241,631,000.00

Accounts payable  $143,148,000.00

Average Daily Average Daily $504,992,000.00365

Sale  $1,127,475,000.00365 COGS  =1383539.726
=3088972.603 =1383539.73
=3088972.6

AX1 2022

Inventory days:  $241,631,000.001383539.73

InventoryAverage Daily cost of Goods Sold (or =174.6469
sales) =174.7

Accounts Receivable Days: $47,303,000.003088972.6

Accounts receivable Average daily sales (usually a =15.3135
yr= 365 days) =15.3

Accounts Payable: $143,148,000.001383539.73

Accounts payable Average daily cost of Goods =103.4650

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 sold. =103.5

CCC= Inventory Days + Accounts Receivable Days 174.7 + 15.3 - 103.5

- Accounts Payable Days.
TOTAL =86.5

Q4: Return on assets formula 

RIC 2021
EBIT = 4319500.00
TOTAL ASSETS = 613061000.00
ROA = 43195000/613061000 =0.705…
x100 for decimal
= 7.05% (2dp)

RIC 2022
EBIT = 72236000
TOTAL ASSETS = 60736600
ROA = 72236000/60736600
x100
= 11.89%
11.89 – 7.05
= 4.84
Increase of 4.84%

AX1 2021
EBIT = 126984000
TOTAL ASSETS = 1112176000
ROA = 126984000/1112176000
x100
= 11.42%

AX1 2022

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EBIT = 70026000
TOTAL ASSETS = 1215834000
ROA = 70026000/1215834000
x100
= 5.76%

11.42 – 5.76
= 5.66
Decrease of 5.66%

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