You are an external analyst. Select key ratios to evaluate the following aspects of the Medibank (from the financial report of last 3 years):

Operating management

Investment management

Financing strategy

Dividend (or distribution) policy

Ratios need to be selected and calculated for 3 consecutive years. The most recent annual report available must be used.

You need to explain what the selected ratios are designed to assess E.G solvency, liquidity, profitability, operational efficiency or shareholderreturns.

You are to only select ratios that have direct relevance to the companys industry and nature of its business operation. The ratios selected will best assist in facilitating a strong understanding of the companys financial structure, risks and returns. Any calculations students want to show should go into the appendix to the report. The body of the report should ideally have these ratios presentedin graph format and potentially neat, easy-to-read tables.

The following ratios are suggested for consideration by students. Please note that sometimes the same ratio is found in several categories. The same ratio is not to be used twice.

The ratios presented below assume that there is no preference capital in the equity section of the balance sheet. Some ratios will need to be adjusted if preference capital makes up part of equity on the balance sheet. You are encouraged to speak to the lecturer regarding this if your company is affected.

Select 3 ratios from Operating Management:

ROE = Net Income / Average shareholders equity

ROA = Net Income/Average Total Assets

Gross Profit Margin = Gross profit/Total Revenue

EBIT Margin = EBIT/ Revenue

Accounts Receivable Turnover= Revenue/Average Accounts Receivable

Inventory Turnover=Cost of goods Sold/Average Inventory

Select 1 ratio from Investment Management:

Profit Margin = Net Income/Net Sales

Return on Ordinary Equity = Net Income/ Shareholders equity

Basic EPS. This can be obtained directly from the companys financial report

OR Diluted EPS. This is considered a more meaningful ratio than Basic EPS. This also can be obtained directly from the companys financial report. You can only do one of Basic EPS and Diluted EPS.

Select 3 ratios from Financing Strategy:

Current Ratio = Current Assets/Current Liabilities

Quick Ratio= Cash + Short-term investments + Accounts receivable

Current liabilities

Liabilities-to-equity ratio = Total liabilities

Shareholders equity

Debt Ratio = Total Liabilities /Total Assets

Equity Ratio = Total Equity/ Total Assets

Select 1 ratios from Dividend or Distribution Policy:

Dividend Yield (Dividend per Share / Ordinary share price at the start of the year)

Price Earnings Ratio (P.E)= Market per ordinary share/ Earnings per share

Dividend payout ratio = Cash dividends paid Net income