Aristocrat Leisure Limited: Case Study
The management activities of operating asset are the most importance factors in the field of profit and loss. The main business activities in the management of asset are total inventory and asset management and so on. Inventory is very important, because it is the fastest flow of assets into cash in a normal business process, and fundamentally affects the cash flow
Inventory turnover measures the conversion speed between inventory and sales and is defined by the average inventory divided by the cost of goods sold. Aristocrat 's inventory turnover of 8.42times is higher than the industrial average level, but there is only 1.99 times inventory turnover for Ainsworth. The low inventory turnover means that it may hinder the cash flow.
Receivable turnover measures the collection of average credit sales in the period and it is defined that …show more content…
From the table, it is obvious that Aristocrat Leisure Limited has increased its debt financing and equity financing. According to these increases, the equity financing is the preferred option to finance for Aristocrat Leisure Limited and the capital structure of Aristocrat is mainly from it. As a result, Aristocrat Leisure Limited does not get any tax benefits from increased debt financing. Over the four-year period, Aristocrat Leisure has increased the debt financing by a big margin, and thus the benefits of its tax shield have increased. This dual increase in debt and equity financing indicates that the company is trying to establish its optimization of financial leverage in order to reduce the cost of financial distress. In addition, the increase in equity financing reduces the costs related to debt financing. By comparing to the equity financing, the table further shows that the company did not low the leverage from debt