Stone Resources Essay

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Although Stone Resources Australia Ltd. has mathematically bigger ROE than BEST Resources Ltd.’s, Stone Resources Australia Ltd.’s ROE is irrelevant to profitability as the company has both negative net profits and average equity. Therefore we can interpret Stone Resources Australia Ltd.’s last financial year’s performance is obviously not profitable. This is because mining industry is gradually declining recently, thus finding investors or attract capital to this area is difficult (Dheeriya 1993, p. 115). Unlike declining trend in this field, BEST Resources Ltd.’s performance for this year was lucrative by demonstrating positive ROE, ROA, GPM, PM and Cash flows. According to Birt et el. (2014, p. 348), Profit Margin ratio (PM) illustrates what percentage of sales revenue results in profits or loss and BEST Resources Ltd.‘s PM is 76.6% which is so high. …show more content…
had no sales revenue last year so comparing these two companies with PM is not possible but considering the fact that Stone Resources Australia Ltd. achieved zero revenue in this year, though BEST Resources Ltd. recorded 76.6 percent of PM. Consequently, BEST Resources Ltd. profit margin is quite exceptional and according to the Stone Resources Australia Limited (2014, 2015, 2016), this market is under current gold price fluctuation risk and that is why Stone Resources Australia Ltd. hold its output in their hands rather than selling its minerals. Therefore, BEST Resources Ltd. functioned properly this year and can apply the going concern basis for the reason that it showed positive cash flows from operating activities as positive operating cash flows are essential for entities to survive (Birt et al 2014, p. 272). On the other hand, Stone Resources Australia Ltd. did not achieve any sales revenue this year and has more liabilities than assets, therefore having appropriate debt and maintaining business could be Stone Resources Australia Ltd.’s goal for next

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