Hint – a professional management report should present information in understandable and digestible chunks – for example ensure your narrative is supported by summary charts/table which in turn are supported by the full details referenced in an appendix.
This assessment has two parts being:
A.Financial analysis report for the listed entity, Virgin Australia Holdings (VAH) 15 Marks
B.Financial analysis and report for the SME Prosperous Pty Ltd (financial statements provided).
Part A – Virgin Australia Holdings Ltd (VAH)
Part A requires a professional financial analysis report. Recommended sections are:
1.Quick analysis summary (executive summary)
2.Four year internal entity comparison: - Balance Sheet, Statement of Income, Ratio Analysis (Horizontal and Vertical), Detailed ratio analysis, trend analysis
3.Industry comparison: (similar to the above entity v’s industry – this will require individual research)
a.Note1: With respect to industry comparisons:
i.look for market research data over the industry for comparison
ii.research the financial reporting of competitor businesses and comment on similarities and variances with regard to the financial position and financial performance of the entities.
4.Comment regarding the audit comments including any explanatory notes regarding the purpose of a financial audit.
5.Comments and conclusions (review of business decisions that the company might face in the near term future) and the accounting position to support or negate business decisions.
Financial Comparison for the Entity - Internal
In this section of the report, the financial analysis of one of the companies Virgin Australia Holdings Ltd has been done. It is listed on the Australian Stock Exchange and represented as VAH. It is an airline company and operates in Australian as Virgin Australia, Virgin Australia Regional Airlines, Virgin Australia International Airlines and Tigerair Australia. It was previously being operated by Pacific Blue Airlines and was absorbed into Virgin Group in the year 2011 (Bromwich & Scapens, 2016). The company’s headquarters are based out of Brisbane and employs nearly 10000 people. It is one of the largest Airline services company in Australia after Qantas Group and Airline Group.
The comparative income statement for the last four years 2018, 2017, 2016 and 2015 has been shown below:
|
Virgin Australia Group |
||||
|
Consolidated statement of profit or loss |
||||
|
Particulars |
2018 |
2017 |
2016 |
2015 |
|
$m |
$m |
$m |
$m |
|
|
Revenue and income |
||||
|
Airline passenger revenue |
4,623.4 |
4,275.3 |
4,194.8 |
3,999.0 |
|
Other ancillary revenue |
793.8 |
765.3 |
790.9 |
707.0 |
|
Other income |
3.5 |
3.8 |
18.2 |
17.4 |
|
Net foreign exchange gains |
- |
2.9 |
17.1 |
25.8 |
|
Revenue and income |
5,420.7 |
5,047.3 |
5,021.0 |
4,749.2 |
|
Operating expenditure |
||||
|
Aircraft operating lease expenses |
(389.0) |
(426.2) |
(360.6) |
(290.0) |
|
Airport charges, navigation and station operations |
(1,060.7) |
(1,023.8) |
(984.1) |
(917.0) |
|
Contract and other maintenance expenses |
(246.4) |
(242.6) |
(182.0) |
(155.2) |
|
Commissions and other marketing and reservations expenses |
(467.4) |
(430.0) |
(408.2) |
(363.1) |
|
Fuel and oil |
(985.5) |
(898.4) |
(1,018.8) |
(1,191.6) |
|
Labour and staff related expenses |
(1,246.7) |
(1,219.2) |
(1,157.8) |
(1,118.8) |
|
Impairment losses on assets classified as held for sale |
- |
(7.8) |
(107.3) |
– |
|
Impairment losses on cash-generating units |
(120.8) |
- |
||
|
Impairment losses on other assets |
(47.8) |
(65.9) |
(118.1) |
– |
|
Onerous contract expenses |
(58.5) |
(29.6) |
(100.2) |
– |
|
Other expenses from ordinary activities |
(512.9) |
(516.9) |
(531.6) |
(464.2) |
|
Depreciation and amortisation |
(337.3) |
(309.7) |
(282.2) |
(275.4) |
|
Ineffective cash flow hedges and non-designated derivatives losses |
- |
0.7 |
(27.8) |
(27.4) |
|
Net operating expenditure |
(5,473.0) |
(5,169.4) |
(5,278.7) |
(4,802.7) |
|
Share of net profits/(losses) of equity-accounted investees |
3.5 |
2.1 |
0.7 |
(16.6) |
|
Loss before net finance costs and tax |
(48.8) |
(120.0) |
(257.0) |
(70.1) |
|
Finance income |
19.2 |
16.9 |
11.4 |
39.7 |
|
Finance costs |
(171.8) |
(186.5) |
(181.0) |
(132.9) |
|
Net finance costs |
(152.6) |
(169.6) |
(169.6) |
(93.2) |
|
Loss before tax |
(201.4) |
(289.6) |
(426.6) |
(163.3) |
|
Income tax benefit |
(451.9) |
103.8 |
201.9 |
69.5 |
|
Loss |
(653.3) |
(185.8) |
(224.7) |
(93.8) |
|
Attributable to: |
||||
|
Owners of the Company |
(681.0) |
(220.3) |
(260.9) |
(110.8) |
|
Non-controlling interests |
27.7 |
34.5 |
36.2 |
17.0 |
|
(653.3) |
(185.8) |
(224.7) |
(93.8) |
|
|
Earnings per share |
Cents |
Cents |
Cents |
Cents |
|
Basic earnings per share |
(8.1) |
(2.8) |
(7.4) |
(3.2) |
|
Diluted earnings per share |
(8.1) |
(2.8) |
(7.4) |
(3.2) |
From the above financial data on income statement and trend analysis over the past 4 years, we can see that the company has grown in terms of the revenue and the same can be seen from the record sales in airline passenger division and other auxiliary revenue (Bumgarner & Vasarhelyi, 2018). Besides revenue, the costs have also multiplied but the increase in operating costs has not been in proportion of sales and thus, the cost as percentage of sales has dropped. The major cost heads being the fuel, oil and power charges, the labour and staff related expenses, commission to the marketing agents and companies, contract maintenance expenses, airport lease charges and the Airport charges, station and navigations operation expenses (Kok, Ribando, & Sloan, 2017). The major loss for the company has been the major impairment expenses on the cash generating units as well as the assets, which were incurred during the year. Furthermore, it can be seen that the depreciation expenses has been increasing for the company every year on year. The finance income as well as the finance costs have been more or less constant during the last 3 years without much change. However, the loss for the company has been ever increasing which was $ 163.3 Mn in 2015, $ 426.6 Mn in 2016, and $ 289.6 Mn in 2017 and $ 201.4 Mn in 2018. Such has been the extent of loss that the company never had positive EPS in the last 4 years.
The comparative balance sheet of the company for the last 4 years has been shown below:
|
Virgin Australia Group |
||||
|
Consolidated statement of financial position |
||||
|
Particulars |
2018 |
2017 |
2016 |
2015 |
|
$m |
$m |
$m |
$m |
|
|
Current assets |
||||
|
Cash and cash equivalents |
1,415.5 |
1,396.1 |
1,123.8 |
1,028.5 |
|
Receivables |
281.6 |
308.9 |
313.2 |
312.2 |
|
Inventories |
47.6 |
46.3 |
42.3 |
41.1 |
|
Derivative financial instruments |
220.0 |
2.4 |
26.3 |
43.6 |
|
Other financial assets |
12.1 |
25.2 |
32.2 |
60.3 |
|
Current tax assets |
– |
0.2 |
||
|
Assets classified as held for sale |
- |
4.3 |
171.6 |
95.4 |
|
Other |
2.7 |
4.3 |
4.3 |
4.7 |
|
Total current assets |
1,979.5 |
1,787.5 |
1,713.7 |
1,586.0 |
|
Non-current assets |
||||
|
Receivables |
191.6 |
162.4 |
129.0 |
56.6 |
|
Derivative financial instruments |
64.0 |
6.6 |
23.2 |
6.9 |
|
Other financial assets |
284.2 |
292.5 |
265.0 |
234.7 |
|
Investment accounted for using the equity method |
8.2 |
4.6 |
4.0 |
6.6 |
|
Deferred tax assets |
- |
554.2 |
423.5 |
216.6 |
|
Property, plant and equipment |
3,031.0 |
2,916.6 |
2,872.8 |
3,081.9 |
|
Intangible assets |
617.0 |
617.2 |
590.7 |
564.3 |
|
Other |
12.9 |
14.2 |
18.9 |
26.0 |
|
Total non-current assets |
4,208.9 |
4,568.3 |
4,327.1 |
4,193.6 |
|
Total assets |
6,188.4 |
6,355.8 |
6,040.8 |
5,779.6 |
|
Current liabilities |
||||
|
Payables |
807.5 |
679.9 |
708.9 |
701.5 |
|
Interest-bearing liabilities |
295.1 |
280.9 |
875.8 |
440.3 |
|
Derivative financial instruments |
6.6 |
57.1 |
33.4 |
45.6 |
|
Provisions |
269.0 |
234.2 |
170.9 |
172.8 |
|
Unearned revenue |
1,142.1 |
1,074.2 |
990.4 |
939.3 |
|
Other |
3.6 |
22.0 |
0.4 |
0.3 |
|
Total current liabilities |
2,523.9 |
2,348.3 |
2,779.8 |
2,299.8 |
|
Non-current liabilities |
||||
|
Payables |
5.6 |
6.3 |
9.3 |
6.3 |
|
Interest-bearing liabilities |
2,273.0 |
2,152.4 |
2,124.2 |
2,321.9 |
|
Derivative financial instruments |
0.2 |
6.4 |
8.0 |
– |
|
Provisions |
277.6 |
263.5 |
214.6 |
122.4 |
|
Unearned revenue |
– |
2.0 |
||
|
Other |
13.1 |
5.1 |
6.1 |
6.4 |
|
Total non-current liabilities |
2,569.5 |
2,433.7 |
2,362.2 |
2,459.0 |
|
Total liabilities |
5,093.4 |
4,782.0 |
5,142.0 |
4,758.8 |
|
Net assets |
1,095.0 |
1,573.8 |
898.8 |
1,020.8 |
|
Equity |
||||
|
Share capital |
2,238.9 |
2,243.7 |
1,309.0 |
1,152.9 |
|
Reserves |
268.3 |
58.8 |
117.2 |
177.3 |
|
Retained earnings |
(1,415.8) |
(734.8) |
(514.5) |
(253.6) |
|
Equity attributable to the owners of the Company |
1,091.4 |
1,567.7 |
911.7 |
1,076.6 |
|
Non-controlling interests |
3.6 |
6.1 |
(12.9) |
(55.8) |
|
Total equity |
1,095.0 |
1,573.8 |
898.8 |
1,020.8 |
From the comparative balance sheet of the company for the last 4 year, it can be seen that the current assets have been on the increasing trend, especially the balance of cash and cash equivalents. This is done to have more liquid cash considering the requirements of growing business (Choy, 2018). The receivables balance has declined which indicates good collection measures and the stock or inventory balance has been more or less constant throughout the years. The company does not hold assets for sale anymore in 2018 and have sold it all. Amongst the non-current assets, the balance of receivables has increased indicating that the old debtors are not paying off the dues. The financial assets have remained more or less constant through these years and the same has been the case with property, plant and equipment and the intangible assets.
Industry Comparison
Amongst the current liabilities, the balance of payable has increased (which is due to increase in business volume). However, the balances of the unearned revenue and the provision has increased marginally. The non-current liabilities of interest bearing liabilities like debt and the long term provisions has increased which shows that the company has not being paying off on time (Jefferson, 2017).
Amongst the equity section, the balance of the equity share capital has doubled from 2015 to 2018, which shows that the company has been issuing shares on a continuous basis and has been focusing on internal capital instead of raising capital through debt, which is a positive sign. Conversely, the situation with the retained earnings has been adverse, as the negative balance has been piling up year on year due to continuous losses being incurred by the company.
Given below is the ratio analysis which shows the trend over past 4 years, the analysis also mentions the status of ratio against the industry trend and mentions if it is positive or negative.
|
1. Liquidity Ratios |
Comparison with Industry |
|||||||||||||
|
Current Ratio = Total current assets/ Total current liabilities |
2018 |
2017 |
2016 |
2015 |
||||||||||
|
Total current assets |
1,980 |
1,788 |
1,714 |
1,586 |
||||||||||
|
Total current liabilities |
2,524 |
2,348 |
2,780 |
2,300 |
||||||||||
|
Result |
0.78 |
0.76 |
0.62 |
0.69 |
Negative |
|||||||||
|
Liquid ratio /Quick Ratio = (Total current assets - Inventory - Prepaid expenses)/ Total current liabilities |
2018 |
2017 |
2016 |
2015 |
||||||||||
|
Total current assets - Inventory - Prepaid expenses |
1,929 |
1,737 |
1,667 |
1,540 |
||||||||||
|
Total current liabilities |
2,524 |
2,348 |
2,780 |
2,300 |
||||||||||
|
Result |
0.76 |
0.74 |
0.60 |
0.67 |
Negative |
|||||||||
|
2. Debt Management Ratios |
Comparison with Industry |
|||||||||||||
|
Debt ratio = (Total Debts / Total Assets) or ((Total assets- total owners' equity)/total assets) |
2018 |
2017 |
2016 |
2015 |
||||||||||
|
Total Debts |
2,279 |
2,159 |
2,134 |
2,328 |
||||||||||
|
Total Assets |
6,188 |
6,356 |
6,041 |
5,780 |
||||||||||
|
Result |
37% |
34% |
35% |
40% |
Positive |
|||||||||
|
Debt to Equity Ratio = (Total Debt/Total owners' equity) or ((Total assets- total owners' equity)/total owners' equity) |
2018 |
2017 |
2016 |
2015 |
||||||||||
|
Total Debts |
2,279 |
2,159 |
2,134 |
2,328 |
||||||||||
|
Total owners' equity |
1,095 |
1,574 |
899 |
1,021 |
||||||||||
|
Result |
208% |
137% |
237% |
228% |
Negative |
|||||||||
|
3. Asset management Ratios |
Comparison with Industry |
|||||||||||||
|
Receivables Turnover Ratio = Sales/Accounts Receivable |
2018 |
2017 |
2016 |
2015 |
||||||||||
|
Sales |
5,421 |
5,047 |
5,021 |
4,749 |
||||||||||
|
Accounts Receivable |
473 |
471 |
442 |
369 |
||||||||||
|
Result |
11.46 |
10.71 |
11.35 |
12.88 |
Positive |
|||||||||
|
Days Receivable = 365/Receivable turnover |
2018 |
2017 |
2016 |
2015 |
||||||||||
|
No. of days |
365 |
365 |
365 |
365 |
||||||||||
|
Receivable turnover |
11.46 |
10.71 |
11.35 |
12.88 |
||||||||||
|
Result |
31.86 |
34.08 |
32.15 |
28.34 |
Positive |
|||||||||
|
Inventory Turnover = COGS/Inventory |
2018 |
2017 |
2016 |
2015 |
||||||||||
|
COGS |
4,396 |
4,240 |
4,112 |
4,036 |
||||||||||
|
Inventory |
48 |
46 |
42 |
41 |
||||||||||
|
Result |
92.35 |
91.58 |
97.20 |
98.19 |
Negative |
|||||||||
|
Days' Inventory = 365/Inventory Turnover |
2018 |
2017 |
2016 |
2015 |
||||||||||
|
No. of days |
365 |
365 |
365 |
365 |
||||||||||
|
Inventory turnover |
92.35 |
91.58 |
97.20 |
98.19 |
||||||||||
|
Result |
3.95 |
3.99 |
3.76 |
3.72 |
Negative |
|||||||||
|
4. Profitability ratios |
Comparison with Industry |
|||||||||||||
|
Profit Margin / Net Profit ratio = Net income / Sales |
2018 |
2017 |
2016 |
2015 |
||||||||||
|
Net income |
(201) |
(290) |
(427) |
(163) |
||||||||||
|
Sales |
5,421 |
5,047 |
5,021 |
4,749 |
||||||||||
|
Result |
-3.72% |
-5.74% |
-8.50% |
-3.44% |
Negative |
|||||||||
|
Operating Margin ratio = Operating Profit/Sales |
2018 |
2017 |
2016 |
2015 |
||||||||||
|
Operating Profit |
(49) |
(120) |
(257) |
(70) |
||||||||||
|
Sales |
5,421 |
5,047 |
5,021 |
4,749 |
||||||||||
|
Result |
-0.90% |
-2.38% |
-5.12% |
-1.48% |
Negative |
|||||||||
|
Return on Equity = Net income/total owners' equity |
2018 |
2017 |
2016 |
2015 |
||||||||||
|
Net income |
(201) |
(290) |
(427) |
(163) |
||||||||||
|
Total owners' equity |
1,095 |
1,574 |
899 |
1,021 |
||||||||||
|
Result |
-18.39% |
-18.40% |
-47.46% |
-16.00% |
Negative |
|||||||||
From the above trend of ratios, we can see that though the current ratio has improved a bit, but the same is still is way below the industry trend of 2:1 times, similarly the liquid ratio or the decisive test ratio has been on the lower end compare to the industry trend of 1:1. Thus, it can be concluded that tough the company has improved its liquidity in the past couple of years but it is well below the industry trend and shows that the company does not have adequate current assets to pay off the short term liabilities (Grenier, 2017).
Amongst solvency or debt management ratios, the debt asset ratio has improved from 40% to 37%, is on the borderline, and thus can be said to be a positive aspect about the industry. On the other hand, if the debt equity ratios is seen, the same has been more than 200% in most of the years, which is again a major risk on the company in terms of debt principal and interest repayment. The ideal ratio in industry is 2:1 times and therefore it can be mentioned that the company is in risky position despite increase the share capital (Linden & Freeman, 2017).
Amongst the asset management ratios which are the reflection of the operating measures of the company and how the internal controls are helping it improve its efficiency, it can be seen that receivables turnover ratio has degraded from 12.88 times to 11.46 times and similarly the receivables days has increased from 28.34 days to 31.86 days. This shows that the control on receivables collection has decline but still it can be said to be positive considering the industry trend which is high (Heminway, 2017). The inventory turnover ratio has however been on the negative side and is more than 90 days, thus the company needs to improve on this and plan the inventory well.
Finally, the profitability ratios, it is vindicated that all the ratios be it return on equity, or return on assets or the net profit margin all have gone worse to worst simply because of the fact that the company is not earning adequate profits. Thus, it has been marked as negative factor as against the industry trend and thus the company needs to improve on the same (Mun, 2018).
Auditing Comments
The auditors of the company have been KPMG and they have expressed a clear opinion on the financial statement of the group. They have given a reasonable assurance as to the true and fair status of the financial statements including notes on account, director’s declaration, profit and loss account, cash flow statement, statement of changes in equity and the balance sheet. They have mentioned that the company has complied with all the relevant laws and regulation and have followed Australian Accounting Standards and the Corporation Act 2001 while preparing the financial statements. The key audit matters shown by auditors in Auditors’ Report include recognition of deferred tax assets, revenue recognition, fair valuation of velocity reward points and calculation of recoverable value of non-financial assets of Virgin Airlines (Gerlach, Mora, & Uysal, 2018).
Conclusion and Accounting Position of company
From the above in depth analysis and discussion, it can be concluded that though the company has been a growing one in the last few years but most of the parameters of the company has been on the negative side including the profitability, debt management, liquidity and operational efficiency. Furthermore, the auditors of the company have been apprehensive regarding few of the critical procedures of company and therefore it will not be wise decision to invest for short term. The company can be suitable from long-term perspective.
The company is a small-unlisted entity in Australia on which the financial analysis has been done to find out the viability of investment and to know the progress and growth of the company. Since the latest audited financial statements of entity are not available, therefore the same has been analysed basis annual report of 2014, 2015, 2016 and 2017. The name of the company being analysed is Southern Cross Star Services Pty Limited (Sirois, Bédard, & Bera, 2018).
The comparative financial statements are shown below including profit and loss account, balance sheet analysis.
|
Southern Cross Star Services Pty Limited |
||||
|
Consolidated statement of profit or loss |
||||
|
Particulars |
2017 |
2016 |
2015 |
2014 |
|
$ |
$ |
$ |
$ |
|
|
Trading Income |
||||
|
Gross Receipts |
1,980,779 |
2,009,085 |
1,997,811 |
2,010,965 |
|
Opening Stock |
165,789 |
143,390 |
134,455 |
120,000 |
|
Purchases |
1,506,433 |
1,444,788 |
1,398,468 |
1,307,127 |
|
Less Closing Stock |
(176,890) |
(165,789) |
(143,390) |
(134,455) |
|
Less Cost of Goods Sold |
(1,495,332) |
(1,422,389) |
(1,389,533) |
(1,292,672) |
|
Trading Income |
485,447 |
586,696 |
608,278 |
718,293 |
|
Income |
||||
|
Trading Income |
485,447 |
586,696 |
608,278 |
718,293 |
|
Security Services Income |
1,833,159 |
1,829,218 |
1,658,903 |
1,547,680 |
|
Installation Income |
817,690 |
756,832 |
356,478 |
135,637 |
|
Profit/Loss on sale of P,P&Equ. |
4,600 |
(2,360) |
(13,900) |
780 |
|
Other Income |
6,792 |
6,621 |
- |
5,460 |
|
Interest Received |
2,666 |
1,265 |
1,490 |
875 |
|
Total Income |
3,150,354 |
3,178,272 |
2,611,250 |
2,408,725 |
|
Expenses |
||||
|
Accountancy |
23,063 |
6,650 |
7,800 |
6,970 |
|
Advertising |
- |
1,363 |
2,300 |
4,500 |
|
Bank Charges |
780 |
614 |
1,290 |
870 |
|
Computer Expenses |
4,323 |
475 |
2,305 |
1,879 |
|
Consultants fees |
1,795 |
6,377 |
- |
5,100 |
|
Depreciation |
28,352 |
31,324 |
15,314 |
20,963 |
|
Donations |
3,000 |
409 |
500 |
1,200 |
|
Filing Fees |
558 |
243 |
280 |
280 |
|
General Expenses |
5,411 |
1,101 |
1,205 |
437 |
|
Gifts to staff |
1,145 |
3,583 |
2,890 |
4,970 |
|
Hire Equipment |
7,375 |
7,311 |
7,300 |
7,290 |
|
Insurance |
85,487 |
19,966 |
21,300 |
36,870 |
|
Interest |
11,837 |
19,524 |
32,582 |
37,874 |
|
Legal Fees |
3,272 |
6,363 |
300 |
1,560 |
|
Light & Power |
5,371 |
5,533 |
3,560 |
2,504 |
|
Materials & Supplies |
41,348 |
41,629 |
36,570 |
30,987 |
|
Meeting Expenses |
6,860 |
18,300 |
7,690 |
4,562 |
|
MV Fuel & Oil |
8,965 |
8,838 |
7,685 |
6,452 |
|
MV Interest |
1,031 |
- |
- |
890 |
|
MV rego & insurance |
11,766 |
13,367 |
12,567 |
11,532 |
|
MV repairs |
11,963 |
4,607 |
4,650 |
3,560 |
|
Payroll Tax |
72,258 |
71,437 |
57,044 |
52,214 |
|
Parking & Tolls |
1,524 |
2,219 |
1,235 |
1,425 |
|
Postage |
326 |
158 |
325 |
365 |
|
Printing & Stationery |
1,075 |
3,708 |
2,560 |
4,900 |
|
Protective Clothing |
7,819 |
10,516 |
8,960 |
4,250 |
|
Rent - office |
37,006 |
45,083 |
44,600 |
41,320 |
|
Rent - retail |
85,020 |
78,000 |
95,000 |
110,000 |
|
Repairs and Maintenance |
79 |
3,329 |
450 |
1,324 |
|
Salaries - retail |
315,541 |
410,687 |
425,795 |
502,805 |
|
Salaries - associated persons |
150,000 |
158,350 |
150,000 |
145,000 |
|
Salaries - security |
1,283,211 |
1,188,992 |
1,078,287 |
1,005,992 |
|
Salaries - installation |
327,076 |
302,733 |
142,591 |
54,255 |
|
Staff Amenities |
8,890 |
9,198 |
7,689 |
8,790 |
|
Staff Training |
1,365 |
2,994 |
5,679 |
6,720 |
|
Subcontractors |
13,000 |
25,000 |
14,500 |
9,800 |
|
Sundry expenses |
6,980 |
6,795 |
6,570 |
2,348 |
|
Superannuation |
178,139 |
175,973 |
152,317 |
144,582 |
|
Superannuation - associated persons |
13,875 |
25,000 |
25,000 |
25,000 |
|
Telephone |
10,572 |
9,601 |
9,700 |
13,250 |
|
Travel |
13,090 |
15,532 |
2,354 |
1,287 |
|
Total Expenses |
2,790,547 |
2,742,881 |
2,398,743 |
2,326,877 |
|
Profit before income tax |
359,807 |
435,391 |
212,506 |
81,847 |
|
Tax payable |
98,947 |
124,086 |
63,752 |
24,554 |
From the above income statement, it can be seen that the gross receipts of the company has declined and on the other hand, the cost of goods sold has increased indicating that the gross profit has declined as can be seen in the drop from $ 718293 in 2014 to $ 485447 in 2017 (Lessambo, 2018). Amongst the other incomes, the security service income and the installation income has multiplied whereas the trading income has declined. In case the overall income of the company is being analysed, it has grown by nearly 30% in 3 years from $ 2.4 MN in 2014 to $ 3.15 Mn in 2017. This is a positive indicator for the company. On the other hand, the total expenses have also grown year on year and has had a growth of almost 20% from $ 2.3 Mn in 2014 to $ 2.79 Mn in 2017 (Venezia, 2017). The less that proportionate increase in the expenses has led to increase in profit percentages for the entity and therefore the yearly profit, which was $ 81847 in 2014, has grown up to $ 359807 in 2017. It can be said that the growth of company has been monumental and it is still in the growth path.
|
Southern Cross Star Services Pty Limited |
||||||||
|
Consolidated statement of financial position |
||||||||
|
Particulars |
2017 |
2016 |
2015 |
2014 |
||||
|
$ |
$ |
$ |
$ |
|||||
|
Assets |
||||||||
|
Current Assets |
||||||||
|
Cash Assets |
177,729 |
84,312 |
99,359 |
58,342 |
||||
|
Inventory |
176,890 |
165,789 |
143,390 |
134,455 |
||||
|
Other |
49,287 |
51,765 |
42,994 |
40,000 |
||||
|
Total Current Assets |
403,906 |
301,866 |
285,743 |
232,797 |
||||
|
Non-Current Assets |
||||||||
|
Receivables |
67,912 |
48,783 |
54,639 |
43,126 |
||||
|
Property, plant and equipment |
484,525 |
449,421 |
475,985 |
476,992 |
||||
|
Other |
300,000 |
300,396 |
300,792 |
301,188 |
||||
|
Total Non-Current Assets |
852,437 |
798,600 |
831,416 |
821,306 |
||||
|
Total Assets |
1,256,343 |
1,100,466 |
1,117,159 |
1,054,103 |
||||
|
Liabilities |
||||||||
|
Current Liabilities |
||||||||
|
Payables |
85,339 |
58,528 |
51,433 |
49,329 |
||||
|
Financial liabilities |
148,902 |
275,181 |
493,033 |
570,000 |
||||
|
Current tax liabilities |
101,239 |
14,964 |
45,343 |
23,685 |
||||
|
Total Current Liabilities |
335,480 |
348,673 |
589,808 |
643,014 |
||||
|
Non-Current Liabilities |
||||||||
|
Financial liabilities |
48,379 |
50,216 |
50,000 |
61,240 |
||||
|
Total Non-Current Liabilities |
48,379 |
50,216 |
50,000 |
61,240 |
||||
|
Total Liabilities |
383,859 |
398,889 |
639,808 |
704,254 |
||||
|
Net Assets |
872,485 |
701,577 |
477,350 |
349,849 |
||||
|
Equity |
||||||||
|
Issued Capital |
2 |
2 |
2 |
2 |
||||
|
Retained Profits Current Year |
170,908 |
224,226 |
127,504 |
49,108 |
||||
|
Retained Profits |
701,575 |
477,348 |
349,844 |
300,736 |
||||
|
Total Equity |
872,485 |
701,577 |
477,350 |
349,846 |
||||
Comments and Conclusions
From the comparative balance sheet of the entity, it can be seen that the liquidity of the company has increased and thus the cash balance has grown to 3 times from 2014 to 2017. Inventory and other current assets have remained almost same over the years. Amongst the non-current assets of the company, the balance of the property, plant and equipment and other non-current assets has been almost constant whereas the balance of receivables has increased. Overall, the assets of the company have increased over time (Trieu, 2017).
Amongst the liabilities side of balance sheet, the current payables has increased whereas the financial liabilities have decreased drastically. The balance of non-current liabilities has again declined whereas the equity in the form of the retained earnings has grown more than twice which shows that the company is reliant on equity and own capital rather than on the debt capital, which is a positive sign for the business (Rimmer, 2017).
Conclusion and Accounting Position of company
From the above analysis of the financial statements, it can be concluded that the company though not listed on stock exchange and having a very small capital base, has been growing in business and has been able to multiply profits in the last few years. Given an investor point of view, the company looks a prospective investment avenue.
References
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Mun, K. a. (2018). A close look at the role of regulatory fit in consumers’ responses to unethical firms.
Rimmer, M. (2017). The Trans-Pacific Partnership: Intellectual property, public health, and access to essential medicines. . Intellectual Property Journal, 29(2), 277.
Sirois, L., Bédard, J., & Bera, P. (2018). The informational value of key audit matters in the auditor's report: evidence from an Eye-tracking study. Accounting Horizons., 32(2), 141-162.
Trieu, V. (2017). Getting value from Business Intelligence systems: A review and research agenda. Decision Support Systems, 93(1), 111-124.
Venezia, I. (2017). Behavioral Finance: 'Where Do Investors'' Biases Come From?'. Singapore: WORLD SCIENTIFIC.
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