The common size statements for the two companies tend to
exhibit similarities and differences in certain crucial indicators of
performance. For instance, both companies have registered a declining trend in
their operating profit margins. In the case of Transurban, the movement was
from 64.5% in 2010 down to 55.17% in 2012 constituting a drop of 9.33%. One
must anayse this trend in the context of the prevailing business environment in
question. The impact of the 2007/8 financial statement was still on. This made
it extremely difficult for most businesses to register impressive profit
margins. The same scenario played out in the statements of Toll Group although
its reduction in profit margins was not very substantial.
In terms of cost management, the management at Toll Group
seems to have been adept at keeping their key cost factors under control. This
is evidenced by the fact that the group only registered a slight decline in
operating profit margins through the years under review. Such an approach to
cost management is in line with the core objective of maximizing shareholder value
(Clayman,Fridson & Troughton,2008,p.162).
Despite the few instances where Toll Group may seem to be
a better company, a holistic view of the figures would indicate that Trans
Urban is much better. For one, the management has been able to ensure that idle
cash is put to better use. That the
common size balance sheet indicates a decline in cash and cash equivalents into
investments is a testimony to this. In addition, Trans Urban faces a relatively
small risk of customers defaulting in paying up their receivables. This is in
contrast to the situation at Toll Group where increasing receivables is the
major explanation for an expanding current assets.
Reference
Clayman, M.R., Fridson, M.S., and Troughton, G.H. (2008).Corporate Finance: A Practical Guide. Hoboken, New Jersey: John
Wiley & Sons.
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