Assignment Task -
You are required to select a product oriented company which to listed on the New Zealand Stock Exchange (NZX). Review the company's 2016 & 2015 annual reports and answer task 1 and 2.
Task One:
Review the statement of profit or loss and other comprehensive income, statement of financial position (balance sheet), statement of changes in equity and statement of cash flows for your selected company. By taking examples from the above financial statements explain the following questions:
1. Explain the nature of business structure of your selected business and two key advantages of your business structure compared to other forms of business entity.
2. Identify ant three users of financial reports for your chosen company. Discuss why these users are interested in the final reports of the company.
3. Explain how the accrual basis would have been applied to the financial statements of your selected business.
4. Outline the fundamental qualitative characteristics of financial reporting information to be considered when preparing general purpose reports.
5. Discuss the essential characteristics of an asset, liability, income and expenses by providing examples from your selected company's financial statements.
6. Explain how mangers use your selected business's statement of profit or loss and other comprehensive income for decision making.
7. Answer the following questions by using the statement of financial position (balance sheet) provided for your selected business:
a) How are the assets classified in your business and why?
b) Explain the nature and purpose of the balance sheet.
c) Select one asset from your balance sheet and demonstrate your understanding of that asset in terms of recognition and measurement.
8. If you were a shareholder of your selected business, what reaction might you have to the cash flows in 2016?
9. Distinguish between a 'legal entity' and an 'accounting entity' in relation to different business types.
Task Two -
The Managing Director of your selected NZ Company has approached you, as their financial advisor. He has asked you to prepare a report by critically analysing the company's financial statements (profitability, asset utilisation, and financial stability) for the financial years of 2015 and 2016. Your analysis should include the trend analysis, relationship between ratios, problems and suggestions. Use the following ratios in your analysis. (Formulas are provided on page 6 of this assignment booklet)
Profitability
- Gross profit margin
- Net profit margin
- Return on assets
- Return on equity
Asset Utilisation
- Average inventory turnover period
- Age of Accounts receivable
- Fixed Assets turnover
Financial stability
- Current ratio
- Quick ratio
- Debt ratio
- Interest cover ratio
Investor ratios
- Dividend per share
- Earnings per share
- Operating cash flow per share
You are required to attach the hard copy of financial statements (Statement of profit or loss and other comprehensive income, Statement of financial position and statement of cash flows) for both years with your assignment. Your analysis should include the name of the measure, formulas, and calculations for both years and final answer rounded to two decimal places with the units.
Learning outcomes assessed
Interpret financial Statements for a business entity.
Analyze critically and evaluate business performance and position using information contained in financial statements.
Assignment File -
https://www.dropbox.com/s/6z9vhonc2j6biqr/Assignment%20Files.rar?dl=0