The aim of this report is to analyse the performance of Billabong International Limited. This is evaluated using the ratio analysis of profitability, efficiency, liquidity and gearing. EPS, Dividend yield and P/E ratio are also analysed. Billabong’s financial statements of 2011 and 2012 are collected from the websites and used for ratio analysis.
The ratio analysis reveals that Billabong’s performance is not well in 2012 as all ratios have decreased from 2011 to 2012. Compared to other ratios, company’s acid-test ratio, average collection period and payment period is somewhat better. The company has net loss in 2012. Hence ratios like net profit, ROA, ROE, EPS and P/E are negative. The company is not even in a position to meet its interest expense on debt. This is not good for the company and indicates its financial ill health. Hence, the company has to improve its revenue and control its cost to avoid bankruptcy condition.Financial analysis helps to identify and forecast the situation and the financial performance of the company (Babalola & Abiola, 2013). Financial statement analysis is done by using certain analytical tools. Ratios are one of the most prevalent financial analysis tools (Bajkowski, 1999). Financial ratios are used to evaluate the business performance and managerial success (Barnes, 1987). Financial statements help to recognize the business situation of a firm or enterprise. It also aids in making proper decisions for the firm. Moreover, this information is beneficial to shareholders, investors etc. It is also useful to other parties who are interested to invest in the firm (Investopedia, n.d.).Ratio analysis is advantageous for assessing the profitability, efficiency, liquidity and the market performance of the companies. It is very suitable in analysing the link between the two items for a specific period. They are helpful to assess the profitability and the threats of the firm. This is the most extensively conventional method to evaluate the effectiveness and the efficacy of the firms and companies.