Introduction

The present report is developed for providing an evaluation of the key cost accounting and
corporate finance concepts of a selected company to its Board of Directors. This is done on
the perspective of a potential candidate seeking for the job of a finance director of a
company listed on Alternative Investment Market (AIM) within the London Stock Exchange
(LSE). It is developed as a part of the interviewing process for the job role that needs to be
presented to the Board of Directors for presenting information in relation to the vision and
strategic financial goals of the selected company. The financial performance of the company
is selected with the use of financial ratios such as profitability, efficiency, liquidity and other
that are relevant for gaining an understanding of its current and future financial outcomes.
This is followed by carrying out a critical evaluation of the corporate governance framework
of the selected company to analyze its impact on the brand and reputation. It has also
provided a discussion in relation to the discussion of the proposed medium term financial
strategies of the selected company for achieving a dominant position within its respective
sector.

Brief Introduction of the Selected Company ‘Epwin GROUP PLC'

The company selected for the analysis purpose is ‘Capital Land Limited’ that is a public-
limited entity traded as SGX in Singapore. It is known to be one of the largest real estate
company recognized for managing a global portfolio of real estate products. The company’s
product portfolio consists of integrated developments, shopping malls, residencies, offices,
homes and financial services. The company is providing its products and services in about 30
countries but its core markets include Singapore and China. It has recorded a turnover of
about $93 billion as of the end of the year 2018. It is recognized as one of the largest
investment management businesses across Asia and is estimated to provide employment to
about 8.48K people around the world.

Section A: (Part 1): Performance of the selected company (Epwin GROUP PLC)

Ratio Analysis of Epwin GROUP PLC for last five years

Ratio analysis is an important management tool that is used to make the quantitative
analysis of financial information contained in the financial statements of the company. The
main purpose of ratio analysis is to evaluate the various aspects of company financial or non
financial information such as profitability, solvency, liquidity, asset efficiency ratios and
economic value added.

Profitability analysis

Profitability analysis is an important financial measure that is used to measure the

company’s ability to generate earnings in relation to sales, assets, and equity. Some of
important profitability ratios are net profit ratio, return on assets and return on equity.

1. Net profit ratio: This ratio provides the percentage of net profit earned on net revenue. It
is most important ratio from the investor’s point of view as the net profit percentage is
something they look for in any company. On looking at the above graph it can be said that
Capitaland has very high net profit ratio in current year (2017) as compared to previous
years. Overall it can be said that there was increasing trend in net profit ratio of the
company.

2. Return on Equity: This ratio is most important among all the profitability ratios as it
reflects percentage of profits earned on owner’s capital. The graph above clearly indicates
that in year 2017, Capitaland has earned maximum return on equity as compared to
previous four years. It shows improvement in ability of company to earn maximum revenue.
There was increasing trend in return on equity ratio (Brealey, Myers and Marcus, 2007).

3. Return on assets: This ratio is mainly calculated by the management to know their
performance in utilizing the assets of the company to earn the revenue. This ratio provides
percentage of net profit earned on total assets of the company. It seems that company
earns very little profit percentage on the total assets employed by the company in a year. It
is because Capitaland belongs to real estate industry where the value of assets is much
more in compare to earnings earned by the company. However, it can be said that company
has able to maintained the sufficient percentage of return on assets looking into the sector
in which belongs.

Assets efficiency ratios

Asset efficiency ratio is also known as asset management ratios that aim to compare the
assets of the company to the revenue earned by the company. The purpose of efficiency
ratios is to evaluate the ability of the company to utilizing the assets in to generate the
revenue. Some of the important asset efficiency ratios are average collection period in days,
asset turnover in days etc.

1. Asset turnover in days: It is the most important improving efficiency ratio that measures

how effectively and efficiently management is disposing the assets to generate the sales. In
other words this ratio measures the productivity of assets to generate the profits for the
company. Capitaland has very high asset turnover ratio in all the last five years. It is because
Capitaland poses very high value of assets that needs time for disposal and also the profit
margin is very low. Construction industries generally have very high assets turnover ratio (in
days) due to value of assets they kept to earn the revenue (Brigham and Houston, 2012).

2. Average collection period in days: This ratio is also called as accounts receivable turnover
ratio as this ratio provide number of days taken by the company to collect the debtors
balance. Generally in construction sector, company takes longer period of time to collect the
account receivable.

Liquidity analysis

The purpose of liquidity analysis is to measure the company ability to pay the short term
debt obligations through used current assets (short term assets). It means this analysis
provides with information on how much assets company have to pay the debt expenses as
and when it falls due. The important liquidity ratios are current ratio and acid test ratio.

Current ratio: This ratio measures the ability of company to pay the short term obligations
through use of current assets. It is measured through dividing current assets by current
liabilities. Generally current assets and current liabilities that falls in next 12 months period
is taken for calculation of current ratio (Higgins, 2012).
The above graph shows that there was sharp decline in current ratio in last five years which
clearly indicates the poor liquidity performance Capitaland. However, the ratio is not below
one which shows that company has capability to pay the liabilities in current year as well.
There is need to improve the liquidity position of the company.

Economic value added is mainly used to measure the amount company generates from the
total funds invested in the operations. The positive amount reflects that the company has
derived some return for their shareholders while negative EVA indicates poor performance
of the company (Deegan, 2013). From year 2013 to 2016, Capitaland has negative EVA while
in year 2017 it was positive $368.50 million which shows a great improvement in the
financial performance of the company.

Section B

 Part1: Critical Evaluation of Corporate Governance Compliance

 CapitaLand Limited has placed high emphasis on attaining the highest standards of
corporate governance and thus continually seeking the ways for its regular improvement.
The company is focused on complying with the principle of the Code of Corporate
Governance for promoting integrity and transparency in its overall business activities. The
Board of Directors is responsible for developing the policies in relation to corporate
governance framework of the firm. The framework needs to be followed by the business
managers and employees for enquiring that they carry out their roles and responsibilities in
an ethical manner. The company has disclosed the relevant information regarding its Board,
remuneration, accountability and audit and shareholders’ rights in its investor section under
the corporate governance (CapitaLand Limited, 2017).

The development of an effective corporate governance framework within the company has
positive impacted its brand reputation. It is listed under the Singapore Governance and
Transparency Index (SGTI) for having the presence of a well-governed and transparency
corporate governance system. SGTI assess companies in relation to their corporate
governance disclosures and practices by examining the transparency of their business
policies and financial announcements. The presence of effective corporate governance
policies has enabled the company in achieving trust and confidence among wide range of its
stakeholders. The key stakeholders of the company include employees, customers, business
associated, builders, suppliers and the local community (Meixian, 2018). The achievement of
trust in the wide range of its stakeholders has enabled in promoting the growth and
development of the company by gaining large capital inflows from the investors. The
effective governance policy has enabled the company to disclose credible information to the
shareholders, analysts and the media. It provides regular updates o its strategies, financial
performance and operations through adequate announcements and press releases
(CapitaLand Limited: Global Sustainability Report, 2017).

Part 2: Proposed Medium-Term Financial Strategies of Selected Company

The medium-term financial strategy for the company is proposed for supporting its growth
and development of the company through business planning directed to develop adequate
resources for meeting its adequate needs and priorities. In this context, the medium-term
financial strategy propped to the company is recommending the development of capital
structure having an adequate proportion of equity and debt. This is essential for continually
meeting its funding requirements as the company operates in real estate sector and
therefore a continuous flow of cash flow is important for carrying out its business
operations. As a finance director, I would emphasize on continual review and monitoring of
capital structure of the company to ensure that the capital needs and adequately met. Also,
the development of capital growth strategies would be emphasized by the use of sources
that reduced the financing cost on the company (CapitaLand Limited: Performance Review,
2017). The company should also place emphasis and identifying its funding sources through
using a combination of bank facilities and capital market issuances to reduce the financial
risk. This is essential for the medium-term growth and development of the company. The
presence of an optimum capital structure would also ensure that the company manages its
debt obligations on time which will help it to maintain a healthy financial position.

Conclusion

Overall financial performance of company is satisfactory in all the five years of review but in
year 2017 company has shown drastic improvement in the financial performance. However,
there is need to focus on the liquidity performance of the company. Capitaland has strong
corporate governance policies that help the management to achieve the trust of the
shareholders.