Quantitative Analysis AGL energy Limited and Genesis Energy Limited

Question: Discuss about the Quantitative Analysis for AGL energy Limited and Genesis Energy Limited. Answer: Introduction of AGL Energy Limited and Genesis Energy Limited AGL Energy Limited AGL Energy Limited established in 1837 and is the oldest company of the Australia. This company adopts new things and believes in creation of the sustainable and trustworthy energy for providing to the customer. They trust in change and do work for the community and environment. The first gas street lamp in the Sydney was established by this company, in the year 1841. Now it has the largest solar plant in Australia which was established in 2015. AGL is the largest owner of the listed ASX and does operation for generating electricity in the country. AGL is the incorporated energy company which leads in Australia. This company takes the accountability for the decline emission of greenhouse gas during the time of offering the safe and inexpensive energy to the customers. Company has been acquired the experience of 175 years and with this experiences it provided the gas, electricity, solar PV and related products and services to the customer as per their needs, in the Eastern Australia. It has the collection of various power generations like base, peaking and intermediate generation plants which are spread among the thermal generation along with the renewable sources like hydro, wind, solar, landfill gas and biomass. Genesis Energy Limited After the division of Electricity Corporation of New Zealand (ECNZ) and the reorganization of market of the New Zealand electricity, on 1 April 1999, Genesis Energy started its business while it was commenced in 1998. The company has good range of products. It offers services and provides energy solutions to its customers in a very easy and smart way. The company generates electricity with the help of number of generation assets, trade electricity and natural gas. In the New Zealand, Genesis Energy Limited is the largest retailer company of electricity and gas. It has good connection with customers. This company purchase electricity from the electricity market and sell it only in the market of New Zealand. The generators sell the electricity in the market and the retailers buy it and sell to the customers. Natural gas has been sold by the company in the North-island to the residential and commercial customers and it is also sold natural gas to the wholesalers in market to get the extra surplus. They also sold LPG to the customer, which is acquired from Kupe, in New Zealand. This company also offers the first class customer service as per the needs of customers. This company also provides electricity to all type of business even to the rural enterprises. The business team of the company supports to commercial customers. Trend analysis and Ratio analysis Analysis of trends Trend analysis represents the comparison between organizations financial data of two or more years. It shows the increment or decrement in amounts and percentage with compare to base year. Trend analysis of income statement shows increase or decrease in amount or percent of current years incomes and expenditures, on the basis of previous year. As per income statement of AGL energy limited revenue increases by 2% while expenses increases by 6% and other expenses also increases, so it directly impacts on profit of the company. The profits highly decrease by 62%. It shows that companys financial position is not good. As per income statement of Genesis energy limited revenue increases by 4.62% while expenses increases by 3.28%, so it directly impacts on profit of the company which highly increases by 113.01%. This reflects good financial position of company. Trend analysis of balance sheet represents increase or decrease in assets and liabilities in current year, on the basis of previous year. According to balance sheet of AGL energy limited total assets increased by 12% and total liabilities increased by 7%, hence net assets and total equity increased by 16%. This reflects sound capital structure. Total assets and total liabilities of Genesis energy limited are decreased by 2.79% and 2.64% respectively, hence total equity decreased by 2.94%. It shows bad capital structure of company. Trend analysis of cash flow statement interprets increment and decrement in cash inflows and cash outflows in current year with compare to previous year. Cash flow statement of AGL energy limited shows that cash provided by operating and financing activities but cash used by investing activities which decreases cash and cash equivalents. Genesis energy limiteds statement reflects inflows from operating activities but outflows from investing and financing activities, hence overall decreases cash and cash eequivalent. Ratio Analysis Ratio analysis is a process of determining relation between two figures of financial statements. It is beneficial to know financial position of company. Ratios are useful in identify companys performance by comparing data of two or more years. Profitability Ratio: Profitability ratio is used to calculate performance of company by measuring its profitability. It shows profit earning capacity of business. Return on Assets: It shows the profitability of company on the basis of total assets held. Return on assets can be calculated by dividing profits (earnings before interest and tax) with assets. Return on assets of AGL energy limited was 5.38% in 2014 which decreases to 2.13% in 2015. And ROA of Genesis energy limited increases 3.98% in 2015 from 1.97% in 2014. Net Profit Ratio: It can be calculated by dividing net profit by net sales or revenue. It represents that how much profit earned by the company over its sales during the year. Net profit ratio of AGL energy limited was 5.46% in 2014 which decreases to 2.04% in 2015. And net profit ratio of Genesis energy limited increases 5% in 2015 from 2.45% in 2014. Profitability ratio shows that Genesis energy limited has better financial position than AGL energy limited. Liquidity Ratio: Liquidity ratio reflects the liquidity of company. In other words, it shows the capacity to meet its liabilities. Quick Ratio: Quick ratio also knows as liquidity ratio and acid-test ratio. The satisfactory quick ratio must be 1:1. It is calculated by dividing quick assets by current liabilities. If inventories and prepaid expenses deducted from current assets then quick assets arises. Quick ratio decreasing from 1.49 in 2014 to 1.29 in 2015 of AGL energy limited while decreasing from 1.07 in 2014 to 0.86 in 2015. Current Ratio: The standard current ratio for strong company must be 2:1. Means current assets should be double of current liabilities. When current assets divided by current liabilities, current ratio received. Current ratio decreasing from 1.57 in 2014 to 1.46 in 2015 of AGL energy limited while decreasing from 1.45 in 2014 to 1.12 in 2015. Both current and quick ratios of both companies are decreasing which shows that liquidity position is not good. Capital Structure Ratio: Capital structure ratios are based on capital structure of company. Debt to Equity Ratio: It presents that how much debt is available with compare to equity of a company. It shows proportion between total debts / liabilities and total equity. Debt equity ratio decreasing from 86.27% to 79.61% of AGL energy limited while increasing from 92.98% to 93.27% of Genesis energy limited. Equity Ratio: Equity ratio presents proportion between total equity and total assets of company. It is use to know the ratio of equity and assets of the company. Equity ratio increasing from 53.69% to 55.67% of AGL energy limited while decreasing from 51.82% to 51.74% of Genesis energy limited. Market Performance: Performance of any company can be measured by earning per share and dividend per share. Earnings per share: It is measured by dividing net earnings for equity shareholders (net profit after tax and preference dividend) by number of equity shares. AGL energy limiteds earning per share decreases from 98.2 to 33.3 while increases of Genesis energy limited from 4.92 to 10.49. Dividend per share: If dividend declared by company is divided by number of equity shares, dividend per share received. Dividend per share increases of AGL energy limited 63 to 64 and Genesis energy limited 6.6 to 8. Conclusion The Genesis energy limited is financially sound with compare to AGL energy limited. As the ratio analysis has been done which shows the position of both the companies and according to that analysis, the conclusion has been made. Both the companies are performing well but as per evaluation and analysis, Genesis energy limited is quite better than AGL energy limited. Recommendation The investor should invest in Genesis energy limited because its profitability and earnings per share is more than AGL energy limited. References AGL energy in action. our company. Retrieved on 29 August 2016 from: https://www.agl.com.au/about-agl/who-we-are/our-company ASX Release, (2015). AGL Annual Report 2015. Retrieved on 29 August 2016 from: https://www.asx.com.au/asxpdf/20150826/pdf/430t27pwhhbmr3.pdf Axel, T. 2012. Ratio Analysis Fundamentals: How 17 Financial Ratios Can Allow You to Analyse Any Business on the Planet: RatioAnalysis.net Genesis Energy, (2015). Genesis Energy Annual Report 2015. Retrieved on 29 August 2016 from: https://www.asx.com.au/asxpdf/20150904/pdf/4313hvljxkcz9m.pdf Genesis energy, (2016). about us-company information. Retrieved on 29 August 2016 from: https://www.genesisenergy.co.nz/company-information