Brookside Energy Ltd is an Australian publicly traded company that focuses on oil and gas exploration and production in the United States. The company has established relationships in the oil and gas sector over the past 10 years. According to its financial statements for the period ending June 2015, Brookside saw decreases in current assets and non-current assets compared to the prior period. It also saw an increase in current liabilities. Overall, the company's equity decreased substantially from the prior period, suggesting it paid off shares and had difficulty obtaining funds from the market.

1. Company: Brookside Energy Ltd
BrooksideEnergy Limited is an Australian publicly held company listed on the Australian Securities Exchange
(ASX:BRK). The Company was established in 2004 and firstlisted via an Initial Public Offeringin October 2005. The
Company has established deep and valued relationshipsin the oil and gas sector over the last10 years through its
successful activities in theoil and gas sector focused on the mid-continent region of the United States. Brookside’s
goal is to build valueper sharethrough a disciplined portfolio approach to the acquisition and development of
producingoil and gas assets and the leasingand development of acreage opportunities.
Source: http://brookside-energy.com.au/payne-county-oklahoma/
Part 1:
Executive Summary:
Overview of Subject Matter: Financial statements are accountingreports that show more than justthe current-
year activity or balances.The three major financial statements arethe balancesheet, the income (or profitand
loss) statement and the cash flowstatement. Comparative statements are required in order to comply with
generally accepted accountingprinciples.They give readers a more complete view of the direction of the company
over time.” Financial statements are a collection of reports about an organization's financial results and condition.
They are useful for the followingreasons:
 To determine the ability of a business to generate cash,and the sources and uses of that cash.
 To determine whether a business has thecapability to pay back its debts.
 To track financial results on a trend lineto spot any loomingprofitability issues
 To derive financial ratiosfromthe statements that can indicatethe condition of the business.
 To investigatethe details of certain business transactions,as outlined in the disclosures that accompany
the statements.
SCOPE OF STUDY:
The scope extends over the followingthree dimensions.
1. Profitability –for the organization to minimize costand to maximizereturn
2. Liquidity – the ability to meet its operating activities
3. Safety or security – to overcome undue risk
4. Decision making – scope of decisions extends to the followingareas.
a. Investment decision which include Short-term: working capital management and Long-term: capital budgeting.
b. Financingdecision includes decision aboutfixingFinancingmix and determiningcapital structure.
c. Dividend decisions areaboutDividend policy:zero, residual,constant,stabledividend policies.Financial
management primarily dealswith Maximization of return to the shareholder and peripherally dealswith Secondary
objectives likecustomer satisfaction,increasein market shares,Growth, Survival and innovation.

2. To satisfy variousstakeholders likeShareholders,Environment, Employees, Government, Management, Supplier,
Community, and Customers is also within thescope of financial management.
Source: http://www.imr.ac.in/09_studentCorner/Academics/StudyNotes/MCA_301/Chapter%20II.pdf
RESEARCH METHODOLGY
Methods of data collection;-
Secondary data The secondary data is derived from the annual reports,Business lineand financenewspapers
websites.
Methods of analysis: The most commonly used techniques of financial analysisareas follows:
Vertical Analysis
Analyzinga singleperiod financial statement works well with vertical analysis.On the income statement,
percentages represent the correlation of each separate accountto net sales.Express all accountsother than net
sales as a percentage of net sales.Net income represents the percentage of net sales notused on expenses. For
example, if expenses total 69 percent of net sales,net income represents the remaining31 percent. Vertical
analysisperformed on balancesheets uses total assets and total liabilities for comparison of individual balance
sheet accounts.
Horizontal Analysis
Horizontal analysis isthecomparison of data sets for two periods.Financial statements users review the change in
data much likean indicator.Optimistic analysts look for growth in revenue, net income and assets in addition to
reductions in expenses and liabilities.Calculatingabsolutedollarchanges requires the user to subtractthe base
figure from the current figure. Expressingchanges with percentages requires the user to dividethe basefigure by
the current figure, and multiply by 100.
Trend Analysis
Review of three or more financial statement periods typically represents trend analysis,a continuation of
horizontal analysis.The baseyear represents the earliestyear in the data set. Although dollarscan represent
subsequent periods,analysts commonly usepercentages for comparability purposes.Users review statements for
patterns of incremental change representing changes in the business in questions.Financial statement
improvements includeincreased incomeand decreased expenses.
Ratio Analysis
Ratios express a relationship between two more financial statement totals,and compare to budgets and industry
benchmarks. Five common categories of ratios exist:liquidity,assetturnover, leverage, profitability and solvency.
Reviewing ratios for performance compared with prior periods or industry specificbenchmarks provides financial
statements users with recognition of strengths and weaknesses. Risk Management Association,or RMA, publishes
data on industry specific benchmarks for more in-depth analysis.
Source: Jeremy Slaughter, Demand Media

3. CLASIFICATION OF RATIOS: - The ratios may be classified under various ways,which may use various criterions to
do the same. However for the convenience purpose,the ratios areclassified under followinggroups.
1. Liquidity group
2. Turnover group
3. Profitability group
4. Solvency group and
5. Miscellaneous group
Findings:
 Current Ratio of 47.00 suggests that money that could be working for the business is tied up in
government
securities, cash savings or other safe funds.
 Quick Ratio of 44.00 suggests that a company is doing well.
 Turnover of Cash Ratio of 0.83 suggests that a company may have funds tied up in short-term low-yielding
assets or may have a cash surplus, which is not invested in the business.
 Debt to Equity Ratio of 0.6% suggests that a company is doing well.
 Debt/FCF of -2.14 suggests that a company has a negative Free Cash Flow and probably will not be able to
pay off its long term debt.
 Inventory Turnover Ratio of 25.00 suggests that a company is doing well.
 Return on Invested Capital (ROIC) of -3.4% suggests that a company may not be able to fund future
growth from within.
 Return on Investment (ROI) of -3.5% suggests that a company may not be able to fund future growth from
within.
Recommendations:
 The sharecapital valuehas gonedown in the subsequent years,so the company has to focus to increase
its wealth.
 The company should take some measures for improvingmore profits; saleshould beenhanced from into
end through innovativemarketing techniques.

4. Part 2
Consolidated Statement of Financial Position as at 30 June 2015
Source: http://www.asx.com.au/asxpdf/20150911/pdf/4318g5k06xv1cg.pdf
Decrease in Current Assets:
-$31,026 - $47,624 / 47,624 *100 =- 165.14%
Decrease in non- current assets:
-$31,026 - $51,773 / $51,773 * 100 =- 159.92%
Increase in Current Liabilities:
$1,008,601 - $817,718 / - $817,718 * 100 = 23.34%

5. Decrease in equity:
-$977,575 - $160,866,532 = -$161,844,107
Company industry sector
Quick Ratio (MRQ) -- 1.47 1.50
Current Ratio (MRQ) 27.80 1.55 1.76
LT Debt to Equity (MRQ) 0.00 58.55 33.49
Total Debt to Equity (MRQ) 0.00 73.77 42.78
Interest Coverage (TTM) 0.13 32.42 20.0
Revenue/Employee (TTM) -- 3,025,264,832 3,261,396,498
Net Income/Employee (TTM) -- -650,606,380 65,868,846
ReceivableTurnover (TTM) 0.77 5.84 9.49
Inventory Turnover (TTM) -- 6.54 11.30
Asset Turnover (TTM) 0.03 0.15 0.71
Current assets arebalancesheet accounts that represent the value of all assets thatcan be converted into cash
within one year. Current assets include cash and cash equivalents,accounts receivable,inventory, marketable
securities,prepaid expenses and other assets that can be readily converted to cash.
Non-current assets arethose that will not have their full valuerealized within 12 months of the balancesheet date.
Examples of noncurrent assets includeinvestments in another company, intangibleassets such as goodwill, brand
recognition and intellectual property, and property, plantand equipment.
Current liabilities aredebts and obligations of the company that are due within a year.
Bonds, mortgages and loans thatare payableover a term, more than one year would be fixed liabilities or long-
term liabilities.

6. Part 3
Source: http://www.asx.com.au/asxpdf/20150911/pdf/4318g5k06xv1cg.pdf
PROFITABILITY RATIOS
Company Industry Sector
Gross Margin (TTM) -- 31.43 24.98
Gross Margin - 5 Yr. Avg. -- 48.33 26.02
ITD Margin (TTM) -2,291.51 -- --
EBITD - 5 Yr. Avg -- 34.90 15.63
OperatingMargin (TTM) -1,112.73 -9.98 5.24

7. OperatingMargin - 5 Yr. Avg. -- 18.28 -1.29
Pre-Tax Margin (TTM) -7,548.00 -12.11 2.85
Pre-Tax Margin - 5 Yr. Avg. -- 16.38 3.09
Net ProfitMargin (TTM) -7,548.00 -17.98 -0.33
Net ProfitMargin - 5 Yr. Avg. -- 4.07 -1.67
Effective Tax Rate (TTM) -- 17.26 29.43
Effective Tax Rate - 5 Yr. Avg. -- 55.12 33.19
Source: Reuters

8. Part 4
Statement of cash flows
*Data for the year ending 2015 is not availableand therefore year 2014 and 2013 considered.
Source: http://www.asx.com.au/asxpdf/20150911/pdf/4318g5k06xv1cg.pdf
Net Cash inflow from operating activities:
$28,466,646 – $26,776,404 = -$1,690,242 (Increase)
The company is performinggood and ableto drawcash from its operatingactivities.
Net cash outflow from investing activities:
-$879,777 – (-$1,232,229) = $352,452 (Increase)
The company is investinga loton their projects which is a good sign in increasingthe sizeof the company.
Net cash inflow from financing activities:
-$13,893,595 –( -$13,635,109) = $258,486 (Decrease)
This decrease shows that the company is unableto get funds from the market.

9. BrooksideEnergy Ltd's cash flowfor capital expenditures for the six months ended in Dec. 2015 was $0.00 Mil.Its
cash flowfor capital expenditures for the trailingtwelvemonths (TTM) ended in Dec. 2015 was $-52.90 Mil.
The statement of cash flows uses information fromthe other two statements (Income Statement and Balance
Sheet) to indicatecash inflows and outflows.A Cash Flow Statement comprises information on following3
activities:
1. OperatingActivities
2. InvestingActivities
3. FinancingActivities
1. OperatingActivities: Operating activities includecash flows fromall standard businessoperations.Cash receipts
from sellinggoods and services represent the inflows.The revenues from interest and dividends arealso included
here. The operational expenditures are considered as outflows for this section.Although interest expenses fall
under this section but the dividends arenot included .Dividends areconsidered as a partof financingactivity in
financial accountingterms.
2. InvestingActivities:Investingactivities includetransactionswith assets,marketablesecurities and credit
instruments. The saleof property, plantand equipment or marketable securities is a cash inflow.Purchasing
property, plantand equipment or marketable securities areconsidered as cash outflows.Loans made to borrowers
for long-term use is another cash outflow. Collections fromthese loans,however, arecash inflows.
3. FinancingActivities:Financingactivities on the statement of cash flows aremuch more defined in nature. The
receipts come from borrowingmoney or issuingstock.The outflows occur when a company repays loans,
purchases treasury stock or pays dividends to stockholders.As the casewith other activities on the statement of
cash flows depend on activities rather than actual general ledger accounts.
Advantages of Cash Flow Statement:
1. It shows the actual cash position availablewith the company between the two balancesheet dates which funds
flow and profitand loss accountareunableto show. So it is importantto make a cash flowreport if one wants to
know about the liquidity position of the company.
2. It helps the company in accurately projectingthe future liquidity position of the company enablingitarrangefor
any shortfall in money by arrangingfinancein advanceand if there is excess than it can help the company in
earningextra return by deploying excess funds.
3. It acts likea filter and is used by many analystand investors to judge whether company has prepared the
financial statements properly or not because if there is any discrepancy in the cash position asshown by balance
sheet and the cash flowstatement, itmeans that statements are incorrect.
Disadvantages of Cash FlowStatement:
1. Since itshows only cash position,itis notpossibleto deduce actual profitand loss of the company by just
lookingatthis statement.

10. 2. In isolation this isof no use and it requires other financial statements likebalancesheet, profitand loss etc…,
and therefore limitingits use.

11. Part 5
Stockholders' equity
Source: http://www.asx.com.au/asxpdf/20150911/pdf/4318g5k06xv1cg.pdf
Equity funds allowhigh-net-worth individualsand a variety of institutions to directly investin and acquireequity
ownership in companies.Funds may consider purchasingstakes in privatefirms or public companies with the
intention of de-listingthe latter from public stock exchanges and taking them private. After a finiteperiod, the
privateequity fund will divestits holdingsthrough a number of options,including initial publicofferings or sales to
another privateequity firm.
Although minimum investments vary for each fund, the structure of privateequity funds historically follows a
similar framework that includes classes of fund partners, management fees, investment horizons,and other key
factors laid outin a Limited Partnership Agreement (LPA).
This statement consists of four major categories:
Capital Stock --- This category reflects the equity financingdecision,differentclassesof equity stocks,and can also
includemore esoteric items such as ESOP’s (see below)

12. Accumulated Other Comprehensive Income (AOCI) --- Described above in terms of transactions (other than
Accounting Income transactions) that impactstockholders’equity without stockholders’beinginvolved in the
transaction.
Retained Earnings ---- Results from Accounting Income and Dividend payments
Treasury Stock --- in the US a company can trade its own stock.
Source: https://www.stock-analysis-on.net/NASDAQ/Company/Alphabet-Inc/Financial-Statement/Liabilities-and-
Stockholders-Equity
By analyzingthe statement, we can concludethat, sharecapital has goneup in 2015 as compared to 2014:
-$977,575 - $160,866,532 = -$161,844,107
This is a massivedecreasewhich states that company has paid off its shares. This decreasealso shows thatthe
company is unableto get funds from the market.