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Answered Same Day May 01, 2020

Solution

Abr Writing answered on May 03 2020
110 Votes
Contents
Executive Summary    1
Introduction    2
Several Risks associated with the company    2
Corporate governance    3
Ratio Analysis    4
Balance Sheet Common size    5
Gross profit margin    8
Cu
ent ratio    8
Asset turnover    9
Debt to equity    9
Significant changes in the capital structure    9
Maximizing shareholders wealth    9
The alternate way to reduce the cost of capital    10
References    10
Executive Summary
In this report is we are analyzing the risk and corporate governance principle of ARB, initially we will assess the risk associated with the company and the practices which company has adopted to control its risk. After the risk analysis part corporate governance part is analyzed and then finally the financial analysis of the company is done to assess the financial performance on the several parameters.
The Financial ratios are analyzed for the past 3 years and they are observed for the company in order to analyze the performance of the company on various financial parameters.
After the ratio analysis, we have analyzed the details of the company for the previous. And the performance of those Returns as per the expectations from shareholders of the company.
Introduction
ARB is Manufacturing Corporation which produces four-wheel drive tools and other associated products. The firm has its business in further than 100 countries whereas its processes are mainly based in Australia, United States and Thailand.
The firm its fleet operators, stockiest and dealers who continue to act as a channel partner with the company to distribute its produces in the market.
The firm has a value of 383 million Australian dollars in 2017 and has a net profit of 49 million dollars in 2017.
ARB is known for its several innovative products and it has various patents in its name newer innovative practices are being adopted by the firm and its cu
ent growth rate of the country is very high and in future, the firm is also anticipated to grow at a comparable rate.
Several Risks associated with the company
The major risks associated with the business of ABR are described as follows,
The first risk associated with the business of ABR is Foreign Exchange risk foreign exchange risk is the risk due to the fluctuation in the domestic cu
ency against the US dollar Saral staff as the major business of ABR manufacturing is in the United States and Thailand, therefore, some revenues and costs are earned in the different cu
encies. 
Once the cu
ency fluctuates sometime on Revenue may be lesser in the home cu
ency due to the fluctuation in the exchange rate and similarly, sometimes more cost might be incu
ed due to the fluctuation in the cu
encies.  Thus the ABR  is subjected to a significant foreign exchange rate risk.
As described in the annual report of ABR uses the derivative financial instruments in order to hedge and reduce its exposure to foreign exchange risk which is the risk associated with the foreign cu
ency transactions. The company enters in forward exchange contract in order to sell and buy a specified amount of foreign cu
encies, the main objective of entering in such forward exchange contract is to safeguard the consolidated group against any unfavorable movements in the exchange rate.
The second major risk associated with the business of ABR is the interest rate risk interest rate risk is the risk of the increase/decrease in bo
owing due to the higher interest rate in future.  As the company has a huge cash on its balance sheet if the interest rate decline there will be a significant decline in the interest income and other investment income which could have the significant effect on the profit and loss statement of the company. The company tries to minimize its interest rate risk by monitoring the cash flows on the regular basis.
The third type of waste which is associated with the business of the company is the credit risk, credit risk is the risk of default by the counterparty to which the company is doing its business. For, ABR the credit risk arises in case of failure of non-payment of trade receivables.  As the company also deals in derivatives, the credit risk arises due to the failure of the counterparty to the contractual obligations.  The credit risk of the company is minimized because the company is a huge group and it deals with the several types of customers and is not dependent on any single customer for the significant amount of revenue.  Derivative transactions of the company are secured by the third party banks in order to reduce the credit risk.
The fourth type of risk is liquidity risk which is the failure of the company to manage its short-term operations liquidity risk of the company is minimized by regular monitoring of several liquidity ratios like cu
ent ratio quick ratio and cash ratio.
The fifth type of risk which company faces is which related to the fair values of the...
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