Step 8 – Ratio Analysis

My nominated company Novogen Limited (Kazia Therapeutics) is an interesting one. As they are a research and development company, they don’t have any of the typical sales revenue of other companies and their comprehensive income is constantly in deficit. The first hurdle I came across was finding the issued shares in their financial reports. Thanks to some help from a fellow student I was able to find these figures. Next came the challenge of finding the market price per share for the financial year. I was unable to find this information in the financial reports or on the ASX or google finance sites. I calculated the average by using the dollar amount for the shares divided by the number issued.

The net profit margin ratio seems to be completely wrong as it is a huge number. I can’t understand how the ratio isn’t a negative figure as the net profit is a negative. Even after adding a negative in the sum of the ratio it didn’t change anything.  The return on assets ratio is a negative figure as I would expect it to be considering the net profit after tax is negative. Comparing the four years’ worth of ratios, the return on assets is improving slowly.

The efficiency ratios were unable to be calculated as Novogen do not actually sell any goods. They are currently researching and conducting clinical trials.

The liquidity ratios suggest that Novogen is in a good position as the ratio is over 1, however it has decreased over the past year.

While calculating the financial structure ratios I found that when I compared the equity and debt ratios, they added up to 100% as suggested by Maria in the ‘how to” video. The equity/total assets ratio is quite high, so this tells me that Novogen is currently mainly funded by their shareholders. This figure that gone up and down over the past few years, but it is more favourable than in 2014 when Novogen was high in debt.

The market ratios are showing that Novogen is making a loss per share which is again contributable to the net profit after tax being negative.

Novogen Limited

Are your firm’s ratios similar to mine? I’d like to hear any thoughts you have on how my company is progressing.

Mandy