Financial Analysis Of Origin Energy Power Limited And Woodside Petroleum Limited In Essay.

Owner’s Equity

Select two public limited companies listed on the Australian Securities Exchange (ASX) that are in the same industry. Go to the website of your selected companies. Then go to the Investor Relations section of the website. This section may be called, “Investors”, “Shareholder Information” or similar name.

In this section, go to your companies’ annual reports and save to your computer your firms’ latest annual reports consecutively for last three years. Do not use your companies’ interim financial statements or their concise financial statements. Please read the financial statements (balance sheet, income statement, statement of changes in owner’s equity, cash flow statement) very carefully. Also please read the relevant footnotes of your companies’ financial statements carefully and include information from these footnotes in your answer.

Owners Equity

(i) From your companies’ financial statements, list each item of equity and write your understanding of each item. Discuss any changes in each item of equity for your firms over the past year articulating the reasons for the change.

(ii) Provide a comparative analysis of the debt and equity position of the two firms that you have selected.

Cash Flow Statement

(iii) From the financial statement of your chosen companies, list each item reported in the cash flows statement and write your understanding of each item. Discuss any changes in each item of cash flows statement for your companies over the past years articulating the reasons for the change.

(iv) Provide a comparative analysis of your companies’ three broad categories of cash flows (operating activities, investing activities, financing activities) and make a comparative evaluation for three years.

(v) Also provide a comparative analysis of the two companies that you have selected explaining the insights that you can get from the comparative analysis. Other Comprehensive Income Statement

(vi) What items have been reported in the other comprehensive income statement for each company?

(vii) Why have these items not been reported in Income Statement/Profit and Loss Statements?

(viii) Provide a comparative analysis of the items shown in the other comprehensive income statement section for the two companies. If these items were included in the income statement / profit and loss statements of each company, how would the profit attributable to shareholders of the company be affected?

(ix) Should other comprehensive income be included in evaluating the performance of managers of the company?

Accounting for Corporate Income Tax

(x) What are the tax expenses shown in the latest financial statements of the two companies that you have selected?

(xi) Calculate the effective tax rate for both companies that you have selected. Effective tax rate is calculated as (income tax expense / earnings before tax). Which one of the companies has the higher effective tax rate?

(xii) Comment on deferred tax assets/liabilities that is reported in the balance sheet articulating the possible reasons why they have been recorded.

(xiii) Was there any increase or decrease in the deferred tax assets or in the deferred tax liability reported by each of your selected companies?

(xiv) Please calculate the cash tax amount for both companies using the book tax amount, changes in the deferred tax assets and deferred tax liability (please do your own research for your better understanding of these concepts and the method of calculating the cash tax amount the book tax amount.)

(xv) Calculate the cash tax rate for both companies. Which company has higher cash tax rate? (Please do your own research to familiarise yourself with how to calculate cash tax rate).

(xvi) Why is the cash tax rate different from the book tax rate? 

Owner’s Equity

The present report is prepared in the light of financial analysis of Origin Energy Power Limited and Woodside Petroleum Limited. The said corporations fall under the category of top 100 ASX Listed companies and belong to the energy industry of Australia. Origin Energy is an energy retailer of Australia and is based in Sydney. It is engaged in the business of exploration, generation, buying and selling of energy. It has been in existence since 1990. Origin Energy supplies energy and gas products such as solar systems, batteries, LPG packages for domestic as well as commercial units (Bloomberg, 2018).

Woodside Petroleum is also engaged in the business of exploration, evaluation, development of hydrocarbons. The company got incorporated in 1954 with its head office at Perth, Australia. Woodside produces and supplies oil and gas products across the country. The main products of the company are Liquefied Petroleum Gases, Natural gas pipelines, LPG gases and crude oil. Along with these products, the company is also engaged in the business of provision of processing of LNG, ship chartering and various other types of services. The operations of the company are undertaken in various countries like Oceania, Asia, Canada and Africa (Bloomberg, 2018)

Part a

Origin Energy

	2017	2016	2015
Share Capital	$                 7,150.00	$                   7,150.00	$                        4,599.00
Reserves	$                     439.00	$                      857.00	$                            576.00
Retained earnings	$                 3,807.00	$                   6,032.00	$                        7,548.00
Parent Company Interest	$               11,396.00	$                14,039.00	$                      12,723.00
Non-controlling interests – Contact Energy	$                              -	$                                -	$                        1,244.00
Non-controlling interests – others	$                       22.00	$                         21.00	$                            192.00
Total Equity	$               11,418.00	$                14,060.00	$                      14,159.00

Share capital is the important component of firm’s equity. It reflects the quantum of funds generated by the company through the issues of shares. The company had issued new shares in 2016 and due to this its share capital account has been increased in 2016 as compared to 2015.

Reserves are the part of profit that is set aside for the specific purpose. These reserves are utilised during the course of business for the purposes for which they are created. However, a company also have a general reserve which could be prepared for the general purposes of the business.  In case of Origin Industry, the company has created foreign currency translation reserve, hedging reserve, available for sale reserve and the share based payment reserve.  The foreign currency translation reserve has been created to account for any gains and losses on the hedging transactions which have not yet settled.  Available for sale reserves are created to account for the changes in the fair valuation of investments. Foreign currency translation reserves are created to record the differences that arise on account of translation of foreign operation transactions.

There has been loss on foreign currency translation in respect of foreign operations in 2017 due to which the cost reserves have declined. Also there was a loss on the hedging transactions also and even the value of assets that were available for sale was reduced. All these transactions and events have contributed to decline in the value reserves in 2017.

Part a

Retained earnings are the amounts of profits earned out of business operations and are kept back in the business only for the use in the forthcoming years for the payment of dividend or for the further business operations.

Due to the loss in the normal business operations in 2017, the balance of retained earning has reduced significantly over the last 3 years (Origin Energy, 2017).

Parent company interest reflects the portion of company’s equity that is held by the holding (parent) company. Parent company is the company which holds more than 50% or maximum of the shares of the company.

Non-controlling interests are hold by the shareholders who belong to minority segment. They hold less than 50% of the total shares of the company.

Woodside Petroleum	2017	2016	2015
Issued and fully paid shares	$                 6,919.00	$                   6,919.00	$                        6,547.00
Shares reserved for employee share plans	-$                      35.00	-$                        30.00	-$                             27.00
Other reserves	$                     997.00	$                      979.00	$                            963.00
Retained earnings	$                 7,169.00	$                   6,971.00	$                        6,743.00
Parent Company Interest	$               15,050.00	$                14,839.00	$                      14,226.00
Non-controlling interest	$                     830.00	$                      823.00	$                            799.00
Total Equity	$               15,880.00	$                15,662.00	$                      15,025.00

In 2016, Woodside Petroleum had issued new shares and this has resulted in the increase in the amount of share capital held by the business.

The share reserved for employee share plans is shown negative because some of the plans have already been exercised by the company while some of those plans have been lapsed.

The reason of increase in the retained earning account is due to the increase in the profitability position of the business.

Part b

Debt equity position: Comparative Analysis

Comparative Analysis	Origin Energy	Proportion	Woodside Petroleum	Proportion
Equity	$                      11,418.00	45%	$                      15,880.00	63%
Debt	$                      13,781.00	55%	$                        9,521.00	37%
Capital Structure	$                      25,199.00	100.00%	$                      25,401.00	100.00%

The debt and equity component of the financial statements cumulatively forms a capital structure of the firm. Debt portion reflects the amount of finance that is generated from the external sources such as loans and borrowing, issue of bonds and debentures. On the other side, equity portion reflects the amount of funds raised through the internal sources of finance such as retained earnings, issue of shares etc.  Higher the weightage of debt in the capital structure of a firm, higher are the chances of insolvency. Ideally, a firm can have a debt to equity ratio of 2:1 (Tracy, 2012).

In the present case of Origin Energy, the debt proportion of debt is higher than that of equity and hence the financial leverage of the company is higher than Woodside petroleum whose debt proportion is lower than its equity proportion. The risk of insolvency is higher on Origin Limited because it is relying more on debt financing for its funding requirements (Papadopoulos, P. 2011).

The capital structure of Woodside Petroleum is better than that of Origin Energy.

Origin Energy

	2017	2016	2015
Cash flows from operating activities
Receipts from customers	$               15,263.00	$                14,040.00	$                      15,532.00
Payments to suppliers	-$              14,027.00	-$                12,688.00	-$                     13,590.00
Income taxes paid	$                       53.00	$                         52.00	-$                           109.00
Net operating cash inflows	$                 1,289.00	$                   1,404.00	$                        1,833.00
Cash flows from investing activities
Acquisition of property, plant and equipment	-$                    354.00	-$                      460.00	-$                           564.00
Purchases of  exploration and development assets	-$                      65.00	-$                      112.00	-$                           920.00
Purchases of other assets	-$                      82.00	-$                      119.00	-$                           250.00
Acquisition of businesses, net of cash acquired
Investment in equity accounted investees	-$                    389.00	-$                        10.00
Payment received on settling pre-existing arrangements
Investment in joint ventures			-$                             34.00
Loans to equity accounted investees		-$                  1,544.00	-$                       2,330.00
Repayment of loans to equity account investees
Net proceeds from sale of non-current assets			$                              19.00
Interest received from equity accounted investees	$                     218.00	$                      338.00	$                            165.00
Investment in equity accounted investees	-$                    127.00
Interest received from others	$                         1.00	$                           1.00
sale of investment in Contact Energy		$                   1,599.00
sale of non-current assets	$                     887.00	$                      118.00
Net investing cash outflows	$                       89.00	-$                      189.00	-$                       3,914.00
Cash flows from financing activities
Proceeds from borrowings	$                 4,017.00	$                   9,102.00	$                      16,021.00
Repayments of borrowings	-$                4,973.00	-$                11,792.00	-$                     12,756.00
Proceeds from share rights issue		$                   2,496.00
Interest paid	-$                    540.00	-$                      611.00	-$                           547.00
Dividends to non-controlling interest	-$                         2.00	-$                          8.00	-$                           248.00
Loan from equity accounted investees	$                     127.00
Dividends paid by parent company		-$                      410.00	-$                           474.00
Net financing cash outflows	-$                1,371.00	-$                  1,223.00	$                        1,996.00
Net (decrease) in cash and cash equivalents	$                         7.00	-$                          8.00	-$                             85.00
Opening Cash and cash equivalents	$                     146.00	$                      155.00	$                            228.00
Impact of exchange rate changes on cash	-$                         2.00	-$                          1.00	$                              12.00
Closing Cash and cash equivalents	$                     151.00	$                      146.00	$                            155.00

There are various transactions where inflow and outflow of cash takes place. But, generally, the cash flows are bifurcated in three categories: operating activities, investing activities and financing activities. Operating activities are those activities which are undertaken as a part of normal business operations of the business. Investing activities are those activities which involve application of money in the long term sources for the purpose of making investments. The sales of such investments and interest earned on such investments are also categorised as investing activities. Financing activities are those activities which are undertaken to generate large sums of funds for the business. It also involves repayment of such funds and also the dividend paid and received on the shares.

Cash Flow Statement

In case of Origin Limited, there has been decrease in the cash inflow from operating activities over the last three years. Mainly three activities have been undertaken in the last 3 years as a part of operating the business. These activities are: cash collections made from the customers (inflow of cash) and the payment made to suppliers and government by way of taxes (outflow of cash).

As a part of investing activities, the company has purchased various long term assets for its business in the last 3 years. Also, it has made various investments such as equity investees, joint venture (outflow of cash). The interest income received on these investments was the inflow for the company. Further Origin Energy had disposed of various assets of the business and this has resulted in cash inflow for the company. In 2017, the company has earned cash inflows.

The financing activities of Origin Energy have resulted in net cash inflow of $ 16021 by way of loans from bank and financial institutions. Along with that inflow of cash has been resulted from the issue of right shares. The payment of dividend, interest and loan repayment has resulted in the cash out flow of the business.

The cash and cash equivalent are those items which are held by the company in the form of cash or any other assets which can easily be converted into cash.

Woodside Petroleum:

WOODSIDE PETROLEUM	$                 2,017.00	$                   2,016.00	$                        2,015.00
Cash flows from operating activities
Profit after tax for the year	$                 1,120.00	$                      973.00	$                            113.00
Non-cash items
Depreciation and amortisation	$                 1,204.00	$                   1,346.00	$                        1,539.00
Impairment of oil and gas properties			$                        1,083.00
Gain on disposal of oil and gas properties		-$                        23.00	-$                                3.00
			$                                2.00
Loss on disposal of investment			$                              14.00
Change in fair value of derivative financial instruments	-$                         1.00	$                           5.00	$                                1.00
Net finance costs	$                       84.00	$                         48.00	$                              85.00
Tax expense	$                     446.00	$                      367.00	$                            243.00
Exploration and evaluation written of	$                       58.00	$                         54.00	$                            131.00
Other	$                       28.00	$                         45.00	-$                             28.00
Changes in assets and liabilities
Decrease in trade and other receivables	$                         7.00	$                         21.00	-$                             28.00
(Increase)/decrease in inventories	-$                      25.00	$                         45.00	$                              67.00
(Decrease)/increase in provisions	-$                      75.00	$                         16.00	$                              79.00
Increase in other assets and liabilities	-$                         4.00	-$                          7.00	-$                             30.00
Increase/(decrease) in trade and other payables	$                       37.00	-$                        81.00	$                              55.00
Cash generated from operations	$                 2,879.00	$                   2,809.00	$                        3,323.00
Purchases of shares and payments relating to employee share plans	-$                      47.00	-$                        54.00	-$                             45.00
Interest received	$                       10.00	$                           8.00	$                                5.00
Dividends received	$                         6.00	$                           7.00	$                                8.00
Borrowing costs relating to operating activities	-$                      21.00		-$                           119.00
Income tax paid	-$                    411.00	-$                      172.00	-$                           768.00
PRRT received/paid	$                         6.00	$                         14.00	-$                             10.00
Payments for restoration	-$                      22.00	-$                        25.00	-$                             16.00
Payments for carbon tax			-$                                2.00
Net cash from operating activities	$                 2,400.00	$                   2,587.00	$                        2,376.00
Cash flows used in investing activities
Payments for capital and exploration expenditure	-$                1,390.00	-$                  1,608.00	-$                       1,819.00
Borrowing costs relating to investing activities	-$                    178.00	-$                      153.00
Payments for disposal of oil and gas properties		-$                        14.00
Payments for acquisition of joint arrangements net of cash acquired		-$                      698.00	-$                       3,637.00
Net cash used in investing activities	-$                1,568.00	-$                  2,473.00	-$                       5,456.00
Cash flows (used in)/from financing activities
Proceeds from borrowings	$                 2,220.00	$                   2,673.00	$                        1,834.00
Repayments of borrowings	-$                2,133.00	-$                  2,128.00
Borrowing costs relating to financing activities	-$                      15.00	-$                        18.00
Contributions to non-controlling interests	-$                      51.00	-$                      193.00	-$                           162.00
Proceeds from underwriters of Dividend Reinvestment Plan (DRP)		$                      277.00
Dividends paid (net of DRP)		-$                      274.00
Dividends paid outside of DRP	-$                    826.00	-$                      286.00
Dividend Paid			-$                       1,730.00
Net cash (used in)/from financing activities	-$                    805.00	$                         51.00	-$                             58.00
Net (decrease) in cash and cash equivalents	$                       27.00	$                      165.00	-$                       3,138.00
Opening Cash and cash equivalents	$                     285.00	$                      122.00	$                        3,268.00
Impact of exchange rate changes on cash	$                         6.00	-$                          2.00	-$                                8.00
Closing Cash and cash equivalents	$                     318.00	$                      285.00	$                            122.00

The cash flow statement of Woodside premium is prepared using the indirect approach where non-cash and non-operating items are adjusted back to the net profit earned during the given year. Depreciation is a non-cash item because it does not involve any flow of cash in and out of the business and hence it is added back to the net profit while preparing cash flow statement. Similarly, the impairment is also a non-cash item and is determined for the difference in the recoverable value and carrying value of the asset. Since impairment involves no cash movement and is already debited to the profit and loss account it is added back to the profit to determine actual cash flows. Further, the increase in current liabilities and decrease in current assets results in cash flows and hence it is added to the net profit to reach at the operating profits. Further, decrease in current liabilities and increase in current assets results in cash outflow and hence it is deducted from the cash flow statement of Woodside Petroleum. Payment of any type of tax is the operating activity only which results in cash outflow. Further, while determining the net profits, the dividend income is also reduced as it is not the part of operating activities. The investing activities of Woodside Petroleum include interest expense payment and payment for the disposal of oil and gas properties, payments made to acquire the joint arrangements. All these activities include cash payments but in any of the three years no investing activity was undertaken which could have resulted in cash inflow for the business. Financing activities related to Woodside fuel covered dividend payment, repayment of borrowings as the cash outflow transactions. But collection of cash from underwriters and proceed from loans are the cash inflows for the business of the company.

Part iii

Part 2

Comparative analysis for all the 3 years:

		2017	2016	2015
ORIGIN ENERGY	Net operating cash inflows	$      1,289.00	$      1,404.00	$      1,833.00
ORIGIN ENERGY	Net investing cash outflows	$            89.00	-$         189.00	-$      3,914.00
ORIGIN ENERGY	Net financing cash outflows	-$      1,371.00	-$      1,223.00	$      1,996.00
		2017	2016	2015
WOODSIDE PETROLEUM	Net operating cash inflows	$      2,400.00	$      2,587.00	$      2,376.00
WOODSIDE PETROLEUM	Net investing cash outflows	-$      1,568.00	-$      2,473.00	-$      5,456.00
WOODSIDE PETROLEUM	Net financing cash outflows	-$         805.00	$            51.00	-$            58.00

Origin Energy

• In terms of basic business operations, Origin performed best in 2015 and least in 2017.
• In terms of investment decisions, Origin performed best in 2017 and worst in 2015.
• In terms of financial decisions Origin performed best in 2015 but worst in 2016.

Woodside Petroleum:

In terms of basic operations, the performance of Woodside was best in 2016 as it generated highest cash inflows in 2016.

In the areas of investments, the company has performed worst in 2015 as high volume cash has flew out of the business in this year.

In the areas of financial decisions, 2016 was the best year as company could generate few cash inflows after recovering the cash outflows of the business that took place in that year.

Comparative analysis of Origin Energy and Woodside Petroleum

		2017	2016	2015
ORIGIN ENERGY	Net operating cash inflows	$      1,289.00	$      1,404.00	$      1,833.00
WOODSIDE PETROLEUM	Net operating cash inflows	$      2,400.00	$      2,587.00	$      2,376.00
ORIGIN ENERGY	Net investing cash outflows	$            89.00	-$         189.00	-$      3,914.00
WOODSIDE PETROLEUM	Net investing cash outflows	-$      1,568.00	-$      2,473.00	-$      5,456.00
ORIGIN ENERGY	Net financing cash outflows	-$      1,371.00	-$      1,223.00	$      1,996.00
WOODSIDE PETROLEUM	Net financing cash outflows	-$         805.00	$            51.00	-$            58.00

From the angle of operating performance Woodside petroleum is performing better than Origin Energy because it was able to generate more cash inflows from the operating activities of the business in all the three financial years.

From the perspective of investing activities, Origin Energy is performing better than Woodside Petroleum in all the three financial years because in 2017. Origin has managed its investments decisions in such a way that it has resulted in the net cash inflow whereas, Woodside petroleum failed to cover its cash outflows from the cash inflows. Moreover, the quantum of cash outflow in 2015 and 2016 is more in case of Woodside Petroleum as compared to Origin Industry.  

From the financial perspective, again Woodside petroleum is performing better than the Origin industry as it has taken sound financial decisions in the areas of raising and repaying the borrowed funds.  The net cash outflows in case of Woodside premium are lesser than that of Origin Industry in 2017. But in 2015, Origin energy had performed better than Woodside (Origin Industry, 2015)

Part vi

Origin Energy
Items not to be reclassified to profit or loss
Actuarial gain/(loss) on defined benefit plans	$                         1.00
Items to be reclassified
Foreign currency translation differences	-$                    200.00
Valuation gain/loss	-$                      41.00
Fair value changes of net investment hedges
Effective portion of changes in fair value of cash flow hedges
Net change in fair value of cash flow hedges reclassified to profit or loss	-$                    202.00
Tax on items to be reclassified to profit or loss
Total value of Items to be recycled to profit or loss in further periods	-$                    443.00
Total Comprehensive Income	-$                    442.00

Woodside Petroleum
Items not to be recycled to profit or loss
Actuarial gain/(loss) on defined benefit plans	$                         4.00
Tax on items not to be reclassified to profit or loss
Total value of Items not to be recycled to profit or loss in further periods
Items to be reclassified
Foreign currency translation differences
Valuation gain/loss
Fair value changes of net investment hedges
Effective portion of changes in fair value of cash flow hedges
Net change in fair value of cash flow hedges reclassified to profit or loss	-$                         2.00
Tax on items to be reclassified to profit or loss	$                         8.00
Total value of Items to be recycled to profit or loss in further periods	$                         6.00
Total Comprehensive Income	$                       10.00

Part vii

The above items have not been reported in income statements of both the companies because these earnings or losses are not on account of normal business activities. Rather, such profits and losses are taken place due to the non-business activities. These incomes and expenses have not yet realised in the business. Hence, they are excluded from the income statement and are shown below the income statement. Both GAAP (generally accepted accounting principles) and taxation rules do not allow the inclusion of these incomes and expenses in the income statement.

Part viii

Comparative analysis

Items not to be reclassified to profit or loss	Origin Energy	Woodside Petroleum
Actuarial gain/(loss) on defined benefit plans	$                                1.00	$                       4.00
Items to be reclassified
Foreign currency translation differences	-$                           200.00
Valuation gain/loss	-$                             41.00
Fair value changes of net investment hedges
Effective portion of changes in fair value of cash flow hedges
Net change in fair value of cash flow hedges reclassified to profit or loss	-$                           202.00	-$                       2.00
Tax on items to be reclassified to profit or loss		$                       8.00
Total value of Items to be recycled to profit or loss in further periods	-$                           443.00	$                       6.00
Total comprehensive income/loss	-$                           442.00	$                     10.00

If these items were included in the income statement, the profits attributable to shareholders would not be affected as they gains or losses are not yet realised and neither does they are generated from the core business activities.  

Part iv

Part ix

Yes, managers must give due consideration to the other comprehensive income while evaluating the performance of the company as it gives holistic view of company’s operations as well as other activities which form integral component of its overall economics. It can help the managers to determine more accurate fair value of the investments held by it. Also, it provides insights about the foreign transactions.

Part x

	Origin Energy	Woodside Petroleum
Tax Expense/Benefit	$                      26.00	-$                  569.00

Part xi

	Origin Energy	Woodside Petroleum
Tax Expense/Benefit	$                      26.00	-$                  569.00
Profit before tax	-$                  2076.00	$               1,566.00
Effective Tax Rate	-1.25%	36.33%

Woodside Petroleum has a higher tax rate.

Part xii

Deferred tax assets are created to adjust the temporary difference between the tax on the book profits and tax on the returned income (Guenther & Sansing, 2000). When excessive taxes had paid in the last periods taking into account the tax profits, then the differential amount must be treated as DTA. However, when low taxes are paid taking into account the taxation provisions, then the differential amount must be treated as deferred tax liability (Laux, 2013).

In case of Origin Energy, the DTA is created because of tax paid under Petroleum Resource Rent Tax rules as it is taken into account while preparations of financial statements as per AASB 112. The rate of tax is measured on the basis of provisions of income tax. As the forecast in the respect of this tax indicates no requirement of utilisation of PPRT and hence no DTA has been created in this respect and also DTL in respect of investment in Australia Pacific is not created as the company is unable to control the timing of reversal of any temporary difference in this respect. For other temporary differences in respect of assets and liabilities such as financial instruments, accrued expenses, employees benefits, Petroleum Resource Rent Tax, Acquired environmental scheme certificate purchase obligations, DTAs and DTLs are created. 

In the annual report of Woodside Petroleum, both deferred tax assets and deferred tax liabilities have been shown separately in 2017. DTAs and DTLs are not offset in the situations where there are no legal enforceable rights available for such offsetting  and when the both corresponds to different taxation rules provided by different authorities. A DTA has been recorded in respect of foreign taxes losses for US $ 403 million in 2017 in case of Woodside Petroleum. The balance of DTA in 2016 was $ 407 million which corresponds to the unused foreign tax losses. Since DTAs and DTLs are not created on the same taxation grounds, they are not offset in the financial statements. Rather both the items are shown separately (Woodside, 2017).

xiii

There is a decrease in the balance of deferred tax asset in 2017 as compared to 2016 in case of Origin Energy.

Origin Energy	$      2,017.00	$      2,016.00	Decrease
DTA	$            32.00	$            92.00	-$            60.00

There is an increase in the deferred tax assets and deferred tax liabilities of Woodside petroleum from 2016 to 2017.

Woodside Petroleum	$      2,017.00	$      2,016.00	Increase
DTA	$      1,125.00	$          965.00	$          160.00
DTL	$      1,798.00	$      1,578.00	$          220.00
Woodside Petroleum	$      2,017.00	$      2,016.00	Increase
DTA	$      1,125.00	$          965.00	$          160.00
DTL	$      1,798.00	$      1,578.00	$          220.00

Part xiv

Cash Tax Calculation	Origin Energy	Woodside Petroleum
Book Tax	$                              26.00	$                   446.00
Less: Increase in DTA		$                   160.00
Add: Increase in DTL/ Decrease in DTA	$                              57.00	$                   220.00
Current income taxes	$                              83.00	$                   506.00
Add: Tax Shield on Finance Cost	$                              98.70	$                     25.20
Unlevered Cash Taxes	$                            181.70	$                   531.20

Part xv

Cash Tax Rate Calculation	Origin Energy	Woodside Petroleum
Unlevered Cash Taxes	$                            181.70	$                   531.20
EBITA	-$                       2,075.00	$               1,650.00
Cash Tax Rate	-8.76%	32%

Part xvi

The determination of cash tax amount and book tax amount involves two different concepts. Cash tax is calculated as per all the taxation provisions applicable to the entity whereas book tax is calculated as per the book profits of the company. Book profits are determined as per the GAAP rules and taxable income is calculated as per the income tax rules (Guenther & Sansing, 2000).

Conclusion:

From the above analysis, it can be said that Woodside Petroleum is performing better than Origin Energy from various aspects such as: profitability, solvency and cash management efficiency since the last three financial years and hence it has better future prospects as compared to Origin Energy

References:

Origin Energy. 2015. Annual Report: 2015. Available at: https://www.annualreports.com/HostedData/AnnualReportArchive/O/ASX_ORG_2015.pdf Accessed on: 30.09.2018

Origin Energy. 2017. Annual Report: 2017. Available at: https://www.originenergy.com.au/content/dam/origin/about/investors-media/annual%20review%202017/AnnualReport_FY2017.pdf Accessed on: 30.09.2018

Whitehaven Coal. 2017. Annual Report: 2017. Available at: https://www.whitehavencoal.com.au/wp-content/uploads/2017/09/WVN_223766_Annual-Report-2017_FA4-web.pdf Accessed on: 30.09.2018

Woodside Petroleum. 2015. Annual Report: 2015. Available at: https://www.woodside.com.au/Investors-Media/announcements/Documents/17.02.2016%202015%20Annual%20Report.PDF Accessed on: 30.09.2018.

Bloomberg, 2018. Company Overview of Woodside Petroleum Ltd. Available at:

https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=873963 Accessed on: 30.09.2018

Bloomberg, 2018. Company Overview of Origin Energy. Available at:

https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=6439876 Accessed on: 30.09.2018

Tracy, A. 2012. Ratio Analysis Fundamentals: How 17 Financial Ratios Can Allow You to Analyse Any Business on the Planet. RatioAnalysis.net.

Papadopoulos, P. 2011. Investment Report - Fundamental Analysis/ Ratio Analysis. GRIN Verlag.

Guenther, D.A. and Sansing, R.C., 2000. Valuation of the firm in the presence of temporary book-tax differences: The role of deferred tax assets and liabilities. The Accounting Review, 75(1), pp.1-12.

Laux, R.C., 2013. The association between deferred tax assets and liabilities and future tax payments. The Accounting Review, 88(4), pp.1357-1383

References