Financial analysis of Commonwealth Bank of Australia Group Essay

Executive Summary

Australia has a strong and comfortable hereafter, which will be underpinned by an efficient, stable, secure, adaptable and resilient fiscal system.

The Commonwealth Bank of Australia Group ( Commonwealth Bank ) welcomes the chance of the Financial System Inquiry ( FSI ) to prosecute in timely consideration of policy, ordinance and pattern reform necessary for the continued growing of the Australian economic system and its planetary function, and the chances this creates for persons, concerns and communities to accomplish their ends.

In this procedure, all stakeholders have a duty to put in solutions that address the wide national involvement. Government has a critical function to play in presenting a regulative and policy model to present these ends, and enable investors and endeavor to endorse their thoughts, and procure their ain prosperity. System participants must recognize their place as critical enablers of economic and societal well-being.

Australia has much to be proud of in its Global Financial Crisis ( GFC ) and post-GFC experience. Australia benefitted from sound regulative scenes, ongoing competition and international integrating reforms that helped it avoid the prostrations experienced in other developed economic systems. The Australian post-GFC scenes must advance invention and fix for the hereafter, because whatever challenges the industry necessarily faces will probably originate from causes that may non hold been anticipated.

A post-GFC reform response must besides enable and advance evidence-based determination devising,

supported by a model that confidently uses Australia’s long-standing responsible prudential behavior as a competitory advantage, in a to a great extent competitory planetary market.

A post-GFC reform response must besides enable and advance evidence-based determination devising,

supported by a model that confidently uses Australia’s long-standing responsible prudential behavior as a competitory advantage, in a to a great extent competitory planetary market.

Meanwhile, hiking the fiscal literacy and assurance of Australia’s citizens and clients will, over clip, cut down the regulative jussive moods of authorities on its finance system.

Commonwealth Bank advocates these places pulling on its alone heritage over more than a century and on behalf of its Australian-based stockholders, consisting about 800,000

families who own Commonwealth Bank portions straight and 1000000s more who own them through their pension financess.

Commonwealth Bank is confident the information and proposals this entry provides are consistent with the Australian Government’s aims to turn the economic system, make its

markets freer, accelerate investing in productive substructure, and construct resiliency to future economic dazes, wherever they may emerge.

The information and proposals besides strengthen Australia’s capacity to set downward force per unit area on the cost of life and build pick, chance and sustainability in incomes for an aging population.

Contentss

Executive Summary… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … …1

Three-Year Comparison Reports… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … 7

Balance Sheet – Three-Year Comparison… … … … … … … … … … … … … … … … … … … … … … … … … .7

Statement of Income – Three-Year Comparison… … … … … … … … … … … … … … … … … … … … … … .8

Ratio Analysis – Three-Year Comparison… … … … … … … … … … … … … … … … … … … … … … … … … ..9

Detailed Ratio Analysis – Three-Year Comparison… … … … … … … … … … … … … … … … … … … … … 11

Appendixs… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … .67

A- Liquidity Ratios… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … 69

B- Activity Ratios… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … 69

C- Profitability Ratios… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … ..69

D- Coverage Ratios… … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … .69

CommonwealthBank

Balance Sheet – Three-Year Comparison

As at 30 June 2013

2013

2012

2011

$ M

$ M

$ M

Assetss

Cash and liquid assets

Receivabless due from other fiscal establishments

Assetss at just value through Income Statement:

Trading

Insurance

Other

Derivative assets

Available-for-sale investings

Loans, measures discounted and other receivables

Bank credences of clients

Shares in and loans to command entities

Property, works and equipment

Investing in associates and joint ventures

Intangible assets

Deferred revenue enhancement assets

Other assets

18,030

6,998

18,398

718

45,203

125,941

502,349

6,059

63,017

1,558

1,607

4,713

1,063

5,091

17,952

10,482

12,071

980

39,691

116,567

407,122

9,715

75,006

1,376

1,401

4,123

899

5,872

10,979

10,123

17,765

300

30,731

75,699

387,888

10,734

47,357

1,526

1,343

3,726

1,112

4,917

Assetss held for sale

800,745

8

703,257

14

604,200

33

Entire assets

800,753

703,271

604,233

Liabilitiess

Deposits and other public adoptions

Payabless due to other fiscal establishments

Liabilitiess at just value through Income Statement

Derivative liabilities

Bank credences

Due to command entities

Current revenue enhancement liabilities

Deferred revenue enhancement liabilities

Other commissariats

Insurance policy liabilities

Debt issues

Managed financess units on issue

Bills collectible and other liabilities

425,276

25,166

3,332

40,229

6,059

113,868

1,440

992

115,291

13,679

362,813

21,457

3,181

39,856

9,715

101,053

1,523

902

102,312

9,377

332,964

15,686

4,700

32,817

10,734

52,353

1,133

957

94,385

9,348

Loan capital

745,332

10,437

652,189

10,223

555,077

11,808

Entire liabilities

755,769

662,412

566,885

Net assets

44,984

40,859

37,348

Stockholders ‘ Equity

Share capital:

Ordinary portion capital

Other equity instruments

Militias

Retained net incomes

26,619

1,895

2,641

13,829

25,498

1,895

2,732

10,734

23,896

1,895

1,964

9,593

Stockholders ‘ equity attributable to Equity holders of the Bank

Non-controlling involvements

44,984

40,859

37,348

Entire Shareholders ‘ equity

44,984

40,859

37,348

CommonwealthBank

Income Statment – Three-Year Comparison

For the twelvemonth ended 30 June 2013

2013

2012

2011

$ M

$ M

$ M

Interest income

Interest disbursal

35,707

( 23,541 )

34,761

( 24,510 )

33,153

( 23,268 )

Net involvement income

Other banking income

12,166

5,627

10,251

5,466

9,885

5,514

Net banking runing income

Fundss direction income

Investing gross

Claims and policyholder liability disbursal

17,793

15,717

15,399

Net financess direction runing income

Premiums from insurance contracts

Investing gross

Claims and policyholder liability disbursal from insurance contracts

Net insurance runing income

Entire net runing income before damage and operating disbursals

Loan damage disbursal

Operating disbursals

17,793

( 1,042 )

( 7,236 )

15,717

( 988 )

( 6,338 )

15,399

( 1,080 )

( 6,113 )

Net net income before income revenue enhancement

Corporate revenue enhancement disbursal

Policy holder revenue enhancement disbursal

9,515

( 2,223 )

8,391

( 1,930 )

8,206

( 1,726 )

Net net income after income revenue enhancement

Non-controlling involvements

7,292

6,461

6,480

Net net income attributable to Equity holders of the Bank

7,292

6,461

6,480

CommonwealthBank

Ratio Analysis – Three-Year Comparison

2013

2012

2011

$ M

$ M

$ M

Liquidity Ratios

Current Ratio

Quick Ratio

Histories Receivable to Working Capital

Long-run Liabilitiess to Working Capital

Activity Ratios

Histories Receivable Employee turnover

Dayss Gross saless in Receivables

Inventory Employee turnover

Dayss Cost of Gross saless in Inventory

Histories Collectible Employee turnover

Dayss Cost of Gross saless in Payabless

Operating Cycle Days

Gross saless to Assetss

Gross saless to Net Fixed Assets

Percent Depreciation Expense to Fixed Assetss

Percentage Accumulated Depreciation to Fixed Assetss

Net Fixed Assets to Equity

Profitability Ratios

Percent Gross Net income

Percent Profit Margin on Gross saless

Percentage Rate of Return on Assetss

Percentage Rate of Return on Equity

Price Net incomes Ratio

Net incomes Per Share

Coverage Ratios

Debt to Total Assetss

Percentage Owners ‘ Equity

Equity Multiplier

Debt to Equity

Cash Flow to Current Maturities Long-Term Debt

Timess Interest Earned

Book Value Per Share

Expense to Gross saless Ratios

Percentage Depreciation to Gross saless

Percentage Owners ‘ Compensation to Gross saless

CommonwealthBank

Detailed Ratio Analysis – Three-Year Comparison

Liquidity Ratios

Liquidity ratios step a company’s ability to run into its maturating short-run duties. In other words, can a company rapidly change over its assets to hard currency without a loss in value if necessary to run into its short-run duties? Favorable liquidness ratios are critical to a company and its creditors within a

concern or industry that does non supply a steady and predictable hard currency flow. They are besides a cardinal forecaster of a company’s ability to do timely payments to creditors and to go on to run into duties to loaners when faced with an unanticipated event.

Current Ratio

Current Assets / Current Liabilitiess

This ratio reflects the figure of times short-run assets cover short-run liabilities and is a reasonably accurate indicant of a company ‘s ability to serve its current duties. A higher figure is preferred because it indicates a strong ability to serve short-run duties. The composing of current assets is a cardinal factor in the rating of this ratio. Depending on the type of concern or industry, current assets may include slow-moving stock lists that could potentially impact analysis of a company ‘s liquidness how long could it potentially take to change over natural stuffs and stock list into finished merchandises? ( For this ground, the speedy ratio may be preferred to the current ratio because it eliminates stock list and prepaid disbursals from this ratio for a more accurate gage of a company ‘s liquidness and ability to run into short-run duties. )

The current ratio for Liberty Medical Group is 0.74, which compared to the baseline of 0.72 indicates the company ‘s ability to serve short-run duties is satisfactory. However the value of the speedy ratio will supply a clearer indicant of the company ‘s success in this country.

Quick Ratio

( Cash + Marketable Securities + Trade Accounts Receivable ) / Current Liabilitiess

This ratio, besides known as the acerb trial ratio, steps immediate liquidness – the figure of times hard currency,

histories receivable, and marketable securities cover short-run duties. A higher figure is preferred because it suggests a company has a strong ability to serve short-run duties. This

ratio is a more dependable fluctuation of the Current ratio because stock list, prepaid disbursals, and other

less liquid current assets are removed from the computation.

The speedy ratio for Liberty Medical Group is 0.60, which compared to the baseline of 0.58 indicates the company ‘s ability to serve short-run duties is favourable.

Histories Receivable to Working Capital

Trade Accounts Receivable / ( Current Assets – Current Liabilities )

This ratio measures the dependence of working capital on the aggregation of receivables. A lower figure for this ratio is preferred, bespeaking that a company has a satisfactory degree of working capital and histories receivable makes up an appropriate part of current assets.

The histories receivable to working capital ratio for Liberty Medical Group is -0.67, which compared to the baseline of -0.59 indicates that the company ‘s public presentation is sufficient in this country.

Long Term Liabilities to Working Capital

Long Term Liabilities / ( Current Assets – Current Liabilities )

This ratio measures the grade to which a company ‘s long-run debt has been used to refill working capital versus fixed plus acquisition.

The long-run liabilities to working capital ratio for Liberty Medical Group is -1.67, which compared to the baseline of -1.39 indicates the value of this ratio is run intoing the company ‘s outlooks.