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Executive Summary

Explain Financial analysis of chorus limited.
 

Chorus limited has been a provider of the telecommunication services which has been listed in NZX 50 index i.e. on newzealand stock exchange Also it has hire majority telephone lines as well the exchange equipments.

During the year 2008, Chorus limited has come as a separate business unit.   In the year 2011, it has been demerged from the telecom new Zealand on a terms and condition which requires winning the majority contract in respect of the government ultra- fast initiative towards the broad band. And as a result of the same and as per the condition or can also say in accordance with the law, it is required that they cannot sell directly to the consumers, it requires to provide whole sale service to the retailers. It has been clearly provided at the time when chorus won most of the contract in respect the UFB fibre that tee Chorus limited requires to be demerged as a separate company which has been unanimously recommended then by the directors and the same was approved by approx 99% of the shareholders. As a result, in 1stDecember, 2011 the same was formally separated and got listed on NZX. After that Chorus limited grab opportunity in regard to the copper lines, DSLAMs and also fibre backhaul. Ames as already discussed, requires having relationship with the retail customer. It was rebranded as a “Spark” on 8th August, 2014 (Corporateinformation ,2016).

As per the collected detail has been fund that they are responsible for building in approx 70% in respect of the new fabric ( i.e. ultra fast broadband network) for which they have received subsidy of an amount of approx $929 million so as to build the new fabric network (Corporateinformation ,2016). 

As we all are aware that the world is competitive and in this scenario, it is essential to check us the financial analysis of an entity so as to understand the financial position of the same in order to make better decision in while making investment. Also in order to analyse the financial position of the company it is necessary to analyse the annual report as well as the financial statement of the company. This report would help to provide necessary information in regard to the overall organization, about the current position as well as also in respect of the performance of the organization. Here, this report provide that financial analysis of the Chorus Limited while making comparison of two year balance sheet content and also income statement and also other data which would provide relevant information about the same. 

30th June 2015

30th June 2014

 

Assets

$M

$M

% Change

Current assets

Cash and call deposit

80

176

-55%

Trade and other receivable

165

196

-16%

Derivatives financial Instrument

3

1

200%

Financial Lease receivable

3

3

0%

Total current assets

251

376

-33.24

Non- current assets

Derivatives financial Instrument

14

3

367%

Trade and other receivables

11

-

11%

Software & other Intangibles

159

174

-9%

Network assets

3406

3,128

9%

Total non- current assets

3,590

3,305

8.62

Total Assets

3,841

3,681

4.35

Liabilities

Current liabilities

Trade and other payables

315

323

-2%

Income Tax payable

12

32

-63%

Derivative financial Instruments

12

14

-14%

Total current liabilities excluding Crown funding

339

369

-8%

Current portion of Crown funding

13

11

18%

Total current liability

352

380

-7.37

Non-current liabilities

Derivative financial Instruments

61

123

-50%

Financial Lease payable

130

126

3%

Debt

1663

1639

1%

Deferred Tax Payable

199

192

4%

Total non-current liabilities excluding CFH securities and Crown funding

2,053

2,080

-1%

CFH securities

107

73

47%

Crown funding

510

417

22%

Total non –current liabilities

2,670

2,570

3.89

Total liabilities

3,022

2,950

2.44

Equity

Share Capital

465

465

0%

Reserves

-3

0

-300%

Retained earning

357

266

34%

Total equity

819

731

12.04

Review of the Balance Sheet

(Annual report, 2015)

As we all know that the assets in the balance sheet have been divided into three main categories as capital, current and others. Current assets have been further divided as current as well as noncurrent assets. Current assets involve both cash and assets which are expected to be released within 12 months. It has been consider as a normal business life  where cash balance in a company rises as well as fall on the basis of the outflow an inflow of the operational and financing activities And noncurrent assets  refers to the assets which are not likely to turn into unexpected within a year from the balance sheet date.

On the similar sense, current liabilities refer to the obligation which a company are required to release within one year. The same has been considered as short term debt 

  1. The current assets of the company are $M00
  2. The non-current assets of the company are $M 3590.00
  3. The current liabilities of the company are $M 352.00
  4. The non-current liabilities of the company are $M 2670.00
  5. The total stockholder’s equity of the company are $M 819.00 

Taking into consideration above table, we can clearly analyse that (Annual report, 2015) 

  • There is decrease in the current assets by 33 % , which is mainly due to decrease in the call and cash deposit by 55 %and trade receivable by 16%. These represents that Chorus have been able to take out amount from the customer. On the other hand, increase in derivative financial instruments represents hedging of the cash flow. In the nutshell, decrease in the current assets specifies that the company have been able to take out the cash from customers in a realisable manner (Accounting tools, 2015).
  • non- current assets have been increased by 9%. It is mainly due to increase in the Derivative financial instrument which has been showing increase of 367%. Non- current assets also shows positive performance of the company 
  • There is decrease in the current liability by 7% it refers to the liability which are expected to be relies in one year for which settlement generally came from the utilization of the current assets like cash in hand, sale of inventory. Decrease in the same specifies that company s able to meets its current liability and showing positive romance. Noncurrent liability increase by 4% refer that there is increase in the liability which are expected to relapse in more than one year t may be due to lease, bonds payable, product warranties etc. 
  • Increase in the equity by 12 % specifies that there may addition in the capital or issue of shares. In the stated case there is no issue of shares but the increase is due to increase in the retained earnings by 34%.

In the nutshell, it can be stated that the performance of the company is good

The following is The list of the required account balances:

(Amounts in $M in thousands)

 Particulars

2015

2014

 % increase or -decrease

 Issued capital

465.00

465.00

Nil

 Reserves

-3.00

 .00

-300

 Retained earnings

357.00

 266.00

 34.21

 Number of shares:

 Ordinary shares

396.00

389.00

        1.80

 Preference shares

No change in the share capital shows that there is no issue of shares or any buyback of share during the mentioned period. Also it we  check us reserves, there is decrease of 300% which show negative impact about the financial position of the company .however increase in the retained earnings on other hand shoe good performance of the company it mainly show the part of profitability which is also considered by the investors at the time of making investment decision (Accounting tools, 2015).

In the nutshell, it can be stated that reserved on one hand shows negative impact of the company on the other hand increase in reserve is positive performance, but the overallscenarion provides that the compass is in financial crisis.

Particulars

2015

2014

 Indicates

 Current ratio:

                          0.71

                            0.99

Decrease- Bad

 Current assets

                      251.00

                        376.00

 Current liabilities

                      352.00

                        380.00

On the basis of above table, decrease in current ratio is not specifying good performance of the company, as we all know that lower current ratio may provide problem with the inventory, ineffective standard in respect of collecting receivables. The decrease is mainly due to higher decrease in current assets in comparison to the last year. And the cause of this  decrease is “decrease in cash& call deposit”. 

References:

My Accounting Course, 'Financial Ratio Analysis | Example | My Accounting Course'. Nap. 2015. Web. 22 May 2016.

Readyratios.com, 'Financial Analysis and Accounting Book of Reference: Statement of Financial Position | IFRS Statements | IFRS Reports | Readyratios.Com'. Nap. 2015. Web. 22 May 2016.

Readyratios.com, 'Financial Analysis and Accounting Book of Reference: Statement of Financial Position | IFRS Statements | IFRS Reports | Readyratios.Com'. Nap. 2015. Web. 22 May 2016.

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