Preparing brief outline of the company, outlining core activities, markets and factors in company’s activities:

The main operation of Living Cell Technologies Ltd is to use biotechnology to improve wellbeing of people with serious diseases. The company aims in providing service to mankind by developing, discovering and commercializing regenerative treatments within humans. The company markets in Australia, which helps in generating required level of profits from operations. From the historical evaluation, Living Cell Technologies Ltd has been developing DIABECELL, as an effective treatment for unstable type 1 diabetes. The company has been developing treatment for neurological disorder since their establishment date of 1999 (Lctglobal.com 2018).

Naming the main substantial shareholders:

Naming the main people involved in firm governance:

Calculating return on assets, return on equity and debt ratio of the company:

Explaining the phenomenon captured by variable TA/OE, while depicting its impact on return on assets and return on owner’s equity:

The calculation of TA/OE indicates the increment in asset, which is obtained by the company. this increment in asset in comparison with equity has allowed the organisation to obtain 11.70% in 2017 from 8.44% in 2015. This is directly increasing return on asset value, while decreasing return on equity.

Explaining why ROE is greater or less than ROA:

The ROA is less than ROE, as the overall asset value is less than ordinary equity obtained by Living Cell Technologies Ltd. The asset value in comparison with equity is relatively low, which is indicating low value of ROA in comparison with ROE (Filipovic, Kremslehner and Muermann 2015).

Preparing graph/chart for movements in the monthly share price cover last two years against All Ordinary Index:

Depicting how closely related are share price of the company and All Ordinary Index:

The evaluation of above graph helps in identifying the volatility of Living Cell Technologies Ltd, which is calculated at the levels of -0.0851. This relevant correlation value indicates that share price is negatively correlated, where increment in value of All Ordinary Share would result in the decline of Living Cell Technologies Ltd share value.

Providing significant announcements, which influenced share price of the organisation:

Depicting the calculated beta of the company:

The beta identified from Reuters is mainly calculated at the levels of 0.17, which could help in depicting risk level of Living Cell Technologies Limited (Au.reuters.com 2018).

Calculating rate of return of company’s share:

Explaining whether the company chosen is a conservative investment:

From the evaluation of overall beta and CAPM returns the investment scope of the organisation is determined. In addition, the overall beta indicates that the company comes under conservative investment section, where bet is less than 0.50.

Calculating WACC of the company:

Explaining the implications that a higher WACC has on management’s evaluation on perspective investment project:

WACC valuation is mainly conducted to understand the cost of capital, which is required by the company to support its activities. In addition, high WACC mainly forces the management to select projects, which has higher return than their current WACC. This could eventually help in improving the return that is needed by the company to raise their profitability. Therefore, the management needs to be select projects in future, which could provide higher return than WACC or else it would not generate adequate return and increase their loss. Loughran and McDonald (2016) mentioned that with the use of WACC investors are able to understand minimum requirement that is needed by organisation to support their profitability.

Depicting whether optimal capital structure is used by the company:

From the evaluation of above table debt ratio of the organisation could be identified, which is increasing at an alarming rate. This directly indicates that the company is acquiring debt to conduct its operations, which is portraying the chances of the company being insolvent in future.

Depicting what they have done to adjust their gearing ratio:

The company has mainly utilised share issue option to adjust its gearing ratio and improve their financial position. The directors have also acknowledged share issue, which was conducted to increase their cash reserves and raise their net assets.

Discussing the dividend policy adopted by the management:

From the evaluation of annual report, the company is not paying any kind of dividend, which portrays non-payment dividend policy adopted by the company. The management has not paid any kind of dividend to its shareholders after its incorporation.

Providing recommendations why the company could be included in his/her portfolio:

After evaluating annual report and share price performance of the company, it could be understood that adding the stock in the portfolio could directly result in loss. The company is losing share value and is incurring loss for more than 2 fiscal years. No progress can be seen from its annual report, which is highlighting a red flag for the investors. Therefore, discarding the stock could allow investor in improving its return and safeguard their investments.

Reference:

Au.finance.yahoo.com. (2018). LCT.AX: Summary for LIV CELL FPO – Yahoo Finance. [online] Available at: https://au.finance.yahoo.com/quote/LCT.AX?p=LCT.AX [Accessed 22 Jan. 2018].

Au.reuters.com. (2018). ${Instrument_CompanyName} Latest Company News. [online] IN. Available at: https://Au.reuters.com/finance/stocks/company-news/LCT.AX?date=01212018 [Accessed 22 Jan. 2018].

Filipovi?, D., Kremslehner, R. and Muermann, A., 2015. Optimal investment and premium policies under risk shifting and solvency regulation. Journal of Risk and Insurance, 82(2), pp.261-288.

Floyd, E. and List, J.A., 2016. Using field experiments in accounting and finance. Journal of Accounting Research, 54(2), pp.437-475.

Fourie, M.L., Opperman, L., Scott, D. and Kumar, K., 2015. Municipal finance and accounting. Van Schaik Publishers.

Gippel, J., Smith, T. and Zhu, Y., 2015. Endogeneity in Accounting and Finance Research: Natural Experiments as a State?of?the?Art Solution. Abacus, 51(2), pp.143-168.

Gippel, J., Smith, T. and Zhu, Y., 2015. Endogeneity in Accounting and Finance Research: Natural Experiments as a State?of?the?Art Solution. Abacus, 51(2), pp.143-168.

Lctglobal.com. (2018). Living Cell Technologies | History. [online] Available at: https://www.lctglobal.com/about-lct/history [Accessed 22 Jan. 2018].

Loughran, T. and McDonald, B., 2016. Textual analysis in accounting and finance: A survey. Journal of Accounting Research, 54(4), pp.1187-1230.

Ramírez, R.R., 2017. Teaching ethics through court judgments in Finance, Accounting, Economics and Business. Etikk i praksis-Nordic Journal of Applied Ethics, 11(1), pp.61-87.