Running head: FINANCE FOR BUSINESS

ASSIGNMENT NAME: GROUP ASSIGNMENT OF

FINANCE FOR BUSINESS (HI5002)

GROUP MEMBERS: Vipan Sharma (RWY8088)

Baneet Thakur(ZME8002)
Rahul Verma(EMV80589)
Piyush Sharma(DMA8060)

Submitted To: Dr. Phuong Duong

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FINANCE FOR BUSINESS

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Table of Contents
Introduction ..................................................................................................................................... 4
1. Description of the operation and comparative advantages of Carsales.com Limited and
Cleanaway Waste Limited .............................................................................................................. 4
2. Calculation and comparison of performance ratios of Carsales.com Limited and Cleanaway
Waste Limited ................................................................................................................................. 5
3. Analysis of monthly shares prices movements of the two companies within 3 years ................ 9
4. Identification of the significant factors which may influence the share price of Carsales. Com
Limited and Cleanaway Waste Limited during the time frame .................................................... 12
5. Calculation of the Beta values and expected rates of return using the CAPM of Carsales. Com
Limited and Cleanaway Waste Limited ........................................................................................ 13
6. Identification and comparison of dividend policies of Carsales.com Limited and Cleanaway
Waste Limited ............................................................................................................................... 15
7. Recommendation ...................................................................................................................... 15
References ..................................................................................................................................... 16
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Introduction
The study will properly provide description of the operations and comparative advantage
that Carsales.com Limited and Cleanaway Waste Limited provides along with the comparison of
performance ratios like Liquidity ratios, Profitability ratios and Capital structure ratios will be
provided relating to both the companies. Analysis of the monthly shares movement of both the
companies will be elaborated as well. Identification of the significant factors will also be
illustrated keeping the influence of share price for both the companies. Calculation of beta values
and expected rate of return will also be provided in the study. Identification and comparison of
dividend policies will also be provided in the study and this help in providing efficient
illustration about the performances that will be done by Carsales.com Limited and Cleanaway
Waste Limited.
1. Description of the operation and comparative advantages of Carsales.com
Limited and Cleanaway Waste Limited
Operations of Carsales.com Limited
Carsales.com limited is an online marketplace, which is specialized in selling and
purchasing of automobiles, motorcycle and class fields relating to marine business situation in
Australia. The headquarters of the company is Richmond and the CEO is Cameron McIntyre.
Gregory Paul Roebuck and Wal Pisciotta founded the company in 1997. The company is famous
for its AI projects under which its photo recognition tool Cyclops. Hosting of technical stack in
AWS also help the company to expand itself in the new countries. In 2018, the company gets
into a partnership business with CHE Proximity and creates a car provided to the private sellers
through online. The company also launched a foundation for the women scholarships, as this
foundation was started for supporting various charities and providing donations to the women in
need.
Comparative advantages of Carsales.com Limited
In taking note of the comparative advantage that, the company holds are like in April 2010 the
company purchased Quicksales for $1.1 million. Australia’s Formula 1 driver Daniel Ricciardo
is the brand ambassador of the company since 2017 and 2018. In January 2017, the company
purchased Motors for $6.7 million through which all its automobile deals where being done by
Demotors. From 2015-2017 the company invested more than $293 million including SK Encar
for an amazing $244 million and became owner of almost 6 big companies.
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Operations of Cleanaway Waste Limited

Cleanaway Waste management Limited is one of the Australia’s waste management companies
by employing more than 5,500 staffs all over Australia. The company is so flexible that it
provides service to customers ranging from small business to multinational companies. The
company operates within more than 4,000 trucks and consists of 250 branches all over the
country. The company consists of a service line over 300 products. A company named Brambles
Industries Limited, which wanted to expand its business in 1970, firstly founded the company;
however, in 1975 Cleanaway waste limited was founded with its headquarters in Melbourne,
Australia. In the current generation, the total revenue of the company is more than $1.454 billion
the chairperson is Mark Chellew. The company was purchased by Transpacific Industries in
2007, however the works that were being done separately for ten years. Therefore, in 2015 the
company announced to get rebranded to Cleanaway Waste Management Ltd. Since then the
company is performing to its potential growing to annual revenue of $1.45 billion.
Comparative advantage of Cleanaway Waste Limited
Since its formation in 2015, Cleanaway Waste Limited had been upgrading its plans and
improving its infrastructure. The company acquired Tax Free Solutions Limited on December
2017 and in this context dealing with the growing waste demand was primarily focused on
resource recovery (Cleanaway.com.au. 2018). The products and services that Cleanaway offered
were Recycling, Water blasting, Offshore cleaning, Maintenance solutions, facility management
and medical waste. The company also sponsored various foundations over the years like Clean
up Australia and the Great Barrier Reef Foundation. Both the foundations were being controlled
by the company, which resulted in prevention and clean up of Australia efforts. On the other
hand, funds were being protected and restored the Great Barrier Reef. In this context, the
company also received various awards like Landfill excellence award, Gold goods design and
Turnaround of the year.
2. Calculation and comparison of performance ratios of Carsales.com Limited
and Cleanaway Waste Limited
Liquidity ratio:

Carsales.com Ltd. 2015 (000) ($) 2016 (000) ($) 2017 (000) ($)
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Liquidity

Current ratio 67869/49017 74543/57512 89032/66492

Current assets/Current
Liabilities 1.384601261 1.296129503 1.338988149

Quick ratio

Cash + accounts
receivable/current liabilities 26823+39176/49017 28709+44722/57512 39795+48404/66492

1.346451231 1.276794408 1.326460326

Cleanaway waste limited 2015 ($m) 2016 ($m) 2017 ($m)

Liquidity

Current ratio 311.5/328.6 323.3/313.2 284.2/510.4

Current assets/Current Liabilities 0.9479610469 1.032247765 0.5568181818

43.2+247.9/510
Quick ratio 37+227.1/328.6 48.3+224.3/313.2 .4

Cash+ accounts receivable/current

liabilities 0.8037127206 0.8703703704 0.5703369906
As per the above illustration of the liquidity ratio, it can be seen that both the companies are
almost in the same way. The industrial average of Current ratio is calculated as 2:1, so Carsales.
Com limited's current ratio is calculated as 1.35 for 2015, 1.28 for 2016 and 1.33 for 2017. On
the other hand, Cleanaway waste limited is current ratio was calculated as 0.95 for 2015, 1.03 for
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2016 and 0.56 for 2017. In this context, it can clearly be seen that Carsales is much on the
positive side than Cleanaway waste limited. Now the quick ratio industrial average is calculated
as 1:1 and in this context both the company's quick ratio was calculated as 1.35 in 2015, 1.28 in
2016 and 1.33 in 2017 for Carsales. Com Ltd. and 0.80 in 2015, 0.87 in 2016 and 0.57 in 2017
for Cleanaway waste limited. In this context it will can be said that the ratio position of Carsales.
Com ltd. is much more on the positive side and makes it easy for the company to perform and
lead its performance accordingly.
Profitability ratio:

Carsales.com Ltd. 2015 (000) ($) 2016 (000) ($) 2017 (000) ($)

profitability ratio

Operating Profit margin 154338/311756*100 170310/344010*100 176497/372114*100

operating profit/ sales *100 49.51% 49.51% 47.43%

Net Profit margin 149506/311756*100 161526/344010*100 161275/372114*100

net Profit(before tax)/

sales*100 47.96% 46.95% 43.34%

Cleanaway waste limited 2015 ($m) 2016 ($m) 2017 ($m)

profitability ratio

Operating Profit margin 23.6/1384.9 43.1/1455.1 58.9/424

operating profit/ sales *100 1.70% 2.96% 13.89%

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Net Profit margin 31/1384.9 61.6/1455.1 32.1/424

net Profit(before tax)/ sales*100 2.24% 4.23% 7.57%

As per the calculation of profitability ratio relating to Carsales. Com Limited and Cleanaway
waste limited it can be seen that both the companies had been performing to the point. Under this
it can be said that Carsales. Com limited is performing to the point and had been calculated as
49.51% in 2015, 49.51% in 2016 and 47.43% in 2017. In this context in relating to cleanaway
waste limited record its operating profit margin as 1.70% in 2015, 2.96$ in 2016 and 13.89% in
2017. In relation to net profit margin for both the companies, a proper result had been developed
through which profit ratios for Carsales. Com Ltd. results in 47.96% in 2015, 46.95% in 2016
and 43.34% in 2017. On the other hand net profit margin is calculated as 2.24$ in 2015, 4.23$ in
2016 and 7.57% in 2017. In this context it will be essential to take control of the ratio and it can
be seen that Carsales. Com ltd. is performing to the point and properly through which it will
become more efficient in handling the ratio performance.
Capital structure ratios (Leverage):

Carsales. Com Ltd. 2015 (000) ($) 2016 (000) ($) 2017 (000) ($)

Capital structure ratios

(Leverage)

Debt equity ratio 262675/229513 285404/260370 262032/277160

Total liabilities/Total
shareholders’ equity 1.144488547 1.09614779 0.9454178092

262675/(262675+22 285404/(28404+260 195540/(195540+27

Capital gearing ratio 9513) 370) 7160)

Long-term liabilities/
Capital employed*100 53.37% 52.29% 41.37%
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Cleanaway waste limited 2015 ($m) 2016 ($m) 2017 ($m)

Capital structure ratios (Leverage)

Debt equity ratio 1115/1754.7 1128.3/1781.5 1132.6/1141.6

Total liabilities/Total shareholders’

equity 0.6354362569 0.6333426887 0.992116328

Capital gearing ratio

Long-term liabilities/ Capital 786.4/(786.4+1754 815.1/(815.1+1781 252/(252+1141.

employed*100 .7) .5) 6)

30.95% 31.39% 18.08%

As per the above calculation of Capital structure ratio it can be said that the debt equity ratio for
Carsales. Com Ltd. is calculated as 1.44 in 2015, 1.10 in 2016 and 0.94 in 2017 and Cleanaway
waste limited’s debt equity ratio is calculated as 0.64 in 2015, 0.633 in 2016 and 0.99 in 2017. In
this context it will be easy to say that Carsales. Com Ltd. is performing to the point and this is
helping the performances of the company to the most. On the other hand, calculation of capital
gearing ratio for Carsales.com ltd. is calculated as 53.37% in 2015, 52.29% in 2016 and 41.37%
in 2017 and Cleanaway waste limited is calculated as 30.95% in 2015, 31.39% in 2016 and
18.08% in 2017. This will help in maintaining the performances of the company and it can be
easily determined that Carsales. Com ltd. is the ultimate company, which takes proper working
analysis in different way possible.
3. Analysis of monthly shares prices movements of the two companies within 3
years
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Correlation between stock price 0.729626

of Carsales.com Ltd and ASX
Index

Correlation between stock price 0.884121

of Cleanaway waste limited and
ASX Index

As per the above charts which provides a proper illustration of the works under which the trend
line of Carsales. Com Limited is on the positive side and rising upwards on the other hand in
relating to the Cleanaway waste limited who's trending is also on the rising position. However, in
relating both the trend line it can be said that both the companies are growing positively
however, Carsales.com Limited is more prominent in performing and leading the performance
counter. In this context, in relation to the ASX trend line it can be said that both the companies is
on the same line and is showing positive intent (Homepage. 2018). In this case, it will be
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beneficial to say that if trend line of ASX increases then both the companies’ trend line will also
increase. The correlation between stock price of Carsale.com ltd and ASX index is 0.73 and
Correlation between Cleanaway waste limited and ASX Index calculated as 0.88 and both the
companies showing positive intent to go upwards. This will help both the companies to perform
to the point and positively. In this context, it will be easier to say Carsales.com Ltd is more
volatile and positive in nature.
4. Identification of the significant factors which may influence the share price
of Carsales. Com Limited and Cleanaway Waste Limited during the
timeframe
Two significant factors of Carsales.com limited are as follows:
Change of Director’s interest notice: In 19th April 2018, indirect interests notice was valued at
$28,808.642 and had been estimated as the value acquired from the Carsales Dividend
reinvestment plan. 2,113 ordinary shares had been allocated with a total valuation of $13.634 per
share. In this context, the volume weighted average daily price of the Carsales.com ltd shares had
been sold on over the period from 26 March 2018 to 3 April 2018.
DRP issue price: Carsales.com ltd. announces that the participants under the Dividend
Reinvestment Plan (DRP) had been allocated at a total share price of $13.634 per share for FY
2018. The price was then determined according to the DRP rules with the use of volume
weighted average daily price of the company. The company sold the ASX form 26 March 2018
to 3 April 2018.
Two significant factors of Cleanaway Waste Limited are as follows:
Dividend/Distribution: The Company release dividend at the period of six months, said to be as
ordinary shares. In this context, the company approved the distribution under certain timetables
like Security holder approval, court approval, ACCC approval and FIRB approval. Per share
price of the shares had been resulted to $0.014 and was registered addressed in Australia or New
Zealand.
Reduced Tax Expenses and Cash Tax Refunds: 7 August 2018 the company advised that the
Australian Taxation Office had provided objection to the FY13 tax return. In this context, it was
assessed that the tax return relating to FY13 to FY17 returns related to deductions of the previous
acquisitions. In the context, the impact of this response result to increase in the deferred tax by
approximately $118 million. Reduction in the FY 18 tax expense is approximately $18 million.
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Tax refunds that approximately resulted in $29 million under which $4.4 million was revised in
FY18.
5. Calculation of the Beta values and expected rates of return using the
CAPM of Carsales. Com Limited and Cleanaway Waste Limited

Computation of Beta

Beta of Carsales.com Limited (Covariance of stock 0.87225

return and index return / Variance of market index
return)

Covariance of stock return and index return 0.00089

Variance of market index return 0.00102

As per the above calculation of Beta it can be seen that the Covariance of stock return was
calculated as 0.00089 and Variance of market index return was calculated as 0.00102. In the
same way, the Beta of Carsales.com limited was resulted into 0.87225. This makes it easy to take
control of the performances and deal with the performances of the company in an effective
manner. The beta of the company is on the positive point, will help in providing positive working
factors to lead the performances accordingly.
Required rate of return

Required rate of return (Risk free rate of 10%

return + (Beta * (Market rate of return -
Risk free rate of return)

Risk free rate of return 5%

Market rate of return (5% + 6%) 11%

Beta 0.87225
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The required rate of return of the company provides information about risk free rate of return
was calculated as 5%. However, market rate of return was calculated as 11%. The beta calculated
as 0.87225. This had helped in maintaining the performance accordingly and provided the
company with proper feedback and maintenance.
Computation of Beta

Beta of Cleanaway waste limited 0.534608

(Covariance of stock return and index
return / Variance of market index return)

Covariance of stock return and index return 0.000545

Variance of market index return 0.00102

The computation of beta of Cleanaway waste limited had been calculated as 0.534608,
Covariance of stock return and index return was calculated as 0.000545. On the other hand,
Variance of market index return was calculated as 0.00102.
Required rate of return

Required rate of return (Risk free rate of 8%

return + (Beta * (Market rate of return -
Risk free rate of return)

Risk free rate of return 5%

Market rate of return (5% + 6%) 11%

Beta 0.534608

As per the above calculation of Beta it can be seen that the risk free rate of return had been
recorded as 5%, market rate of return calculated as 11%. On the other hand, beta calculation of
the company was recorded as 0.534608. In this context, it will be easy to say that the
performances of company had been done in an effective manner.
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6. Identification and comparison of dividend policies of Carsales.com Limited

and Cleanaway Waste Limited
The different dividend policies of Carsales.com limited will be illustrated in the
following points:
Stable dividend Policy: it is being used by the company in regular manner and provides
predictable dividend layouts through which the investors of the company will get attracted. The
goals of the dividend policy will grow in a long-term growth and take control of the
performances in more volatile manner.
Constant dividend Policy: It is said to be as the payment that is fixed in net earnings every year.
The amount of the dividend under the policy keeps on fluctuating in direct proportions (Wolfson,
2017). In this context carsales.com limited must need to pay out the dividend in a preferred
manner.
The different dividend policies of Cleanaway Waste Limited are as follows:
Regular Dividends: regular dividends are to be the type of dividend under which the revenues
generated by the companies are provided to the stakeholders in a constant manner (Waxman,
2017). This helps in elaborating the performance of the company permanently and to the point.
Irregular Dividends: The irregular type of dividend may sometimes being followed by
Cleanaway as this may also hamper the performances of the company and needs to be checked in
a regular manner so that the company does not fail to do so.
7. Recommendation
As per the above illustration of the different working policies worked out by Carsales and
Cleanaway made it easy to perform and develop easy working methods in proper manner. In this
context different ratios of both the companies along factors that influence the share factors of the
companies. In this context, it can be concluded that Carsales.com Limited had been performing
to the point and as per the process needed.
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References
Cleanaway.com.au. (2018). [online] Available at: https://www.cleanaway.com.au/wp-
content/uploads/2017/08/FY17-Results-presentation.pdf[Accessed 30 Aug. 2018].
Homepage. (2018). Retrieved from https://www.cleanaway.com.au/
Sodeyfi, S. (2016). Review of literature on the nexus of financial leverage, product quality, &
business conditions. International Journal of Economic Perspectives, 10(2), 146-150.
Waxman, K. T. (Ed.). (2017). Financial and business management for the doctor of nursing
practice. Springer Publishing Company.
Wolfson, M. H. (2017). Financial crises: Understanding the postwar US experience. Routledge.