Accounting For Business Decisions Part A

The assignment has two parts namely Part A (65 points) & B (35 points). Part A will require you  to undertake research choosing a company that is listed in the Australian Stock Exchange (ASX).  As a rule, Public Companies engaged in Banking & Financing like ANZ and Westpac,  Retailing like Wesfarmers and David Jones, Airlines like Qantas and Jetstar will not be  allowed. Part B will involve a case study. 

The assignment aims to develop an understanding of financial statements structure and their use  in decision-making. The task is to choose a publicly listed company from the Australian Stock  Exchange (ASX) which should be approved by your lecturer (as not to have the same  companies from other groups) and analyse the financial statements.  

This group project itself includes several assignments, each of which comprises a part of the  students' task. However, it is well encouraged to include any additional information that students may think will be useful in conducting financial statements analysis of the selected company. The maximum number of members is 5. This is non-negotiable. 

General Rules and Requirements: 

The report should be prepared by a group with a maximum of three members. Reports must be  confined to 2,500 words (+/- 5%). For Part A, a title page, table of contents page (based on your  report headings), introduction, conclusion and references should be included. Font type should  be Arial (size 11), paragraph spacing should be 1.5. For part B, follow the instructions in the  assigned case or problem. 

Note: Any additional material from external sources that you 'copy and paste' into your report is  NOT included in the word limit. Also, ensure it is appropriately referenced. 

PART A: 

Part A1 (10 points) 

Provide an executive summary of your company's background relating to business structure,  operations, services and all other business activities that are conducted, etc. 

Part A2 (20 points) 

Use the annual report for the year ending 30 June 2014. Your group will need to review the  major sections of this report in order to familiarize yourselves with the content of each of the  financial statements and appropriate notes to the financial statements.  

Review the balance sheet of the company and indicate the amount of the following: a) Total current assets 

1. b) Total non-current assets 
2. c) Total current liabilities 
3. d) Total non-current liabilities 
4. e) Total stockholder's equity

Compare the above figures with the previous year and compute the percentage increase or  decrease and comment on the comparative financial condition of the company. 

Part A3 (15 points) Review the income statement and indicate the following: 

1. a) Total (operating) revenues 
2. b) Cost of Goods Sold (if relevant) 
3. c) Total expenses (before income taxes) 
4. d) Any non-operating (or extraordinary) gains and losses 
5. e) Earnings per common share 

Compare the above figures with the previous year and compute the percentage increase or  decrease and comment on the comparative financial operation of the company. 

Part A4 (10 points) 

Review the statement of cash flows for the most recent year and indicate the  following:  

1. a) net cash inflow (outflow) from operating activities 
2. b) net cash inflow (outflow) from financing activities 
3. c) net cash inflow (outflow) from investing activities 
4. d) net increase (decrease) in cash during the year 

Analyse the Cash Flow Statements for the last 2 years and comment on the cash  position of the company. 

Part A5 (10 points) 

Review the stockholders’ equity section in your chosen company’s most recent year-end  balance sheet and compare that with the previous year-end balance sheet. Compare percentage  increase or decrease. 

List the stockholders’ equity account balances and number of outstanding shares  from these two balance sheets and compute the increase or decrease for each  during this past year. 

Part B Case Study (5 points ea. 35 points) Recently you received the following offers from the organizers of Melbourne Tennis Open 2015: 

Now you can buy premium tickets to the coming Melbourne Tennis Open 2015 with signatures  of your choice of popular tennis players like Rafael Nadal, Roger Federer to name a few.  However, there are only 3,000 tickets that have these collectible features. ∙ Retail price: $300 each 

∙ Tennis club members: $280 each 

∙ To order, complete the online order form @ www.MTO2015.com.au. ∙ Allow 5 days for delivery 

Required: 

1. Describe the alternatives the organisers have in relation to recognizing revenues. Which  would you recommend and why? 
2. Would your answer differ if you included in the sale of the tickets that if the customers  are not happy the tickets may be returned within one month? 
3. Let us assume that the organisers contracted a selling agent that takes care of all selling  and marketing responsibilities, gets 10% as commission. The policy states that no return  no exchange. When should the organisers recognize revenue? 
4. With regards to the authenticity of the signatures, do you think the accounting profession  have the skills to provide the services to authenticate? Discuss and show examples. 5. Discuss the importance of Cost of Goods Sold(COGS) in this case. How is it applied? 6. Let us say that the signatories will get a fixed fee for the effort, when would the  organisers recognize the expense? 
5. Assume that the signatories will get a 5% commission on the sales of their signed tickets.  When would the organisers recognize the cost

Part A:

Executive Summary

Caltex traces its root back to 1900 in Australia, and in the current scenario, it is the market leader in transport fuel. Caltex deals in all categories of fuel, such as petrol, diesel and jet fuel. It has a strong network of supply chain, retailing and marketing network across the length and breadth of Australia. It has refineries in Sydney and Brisbane and markets its product under the brands of Caltex Star Mart, StarCard, StarCash, Bio E10 Unleaded and Delo. Keeping tap with the current situation, Caltex has introduced Biofuels sustainable to the environment. Caltex is instrumental in keeping it updated with the latest technology and accordingly made a strategy to promote itself through the usage of Caltex Fuel Cards and various sorts of online services. Customer satisfaction is one of the strategic issues that Caltex encase on and promote itself through a various rewards program and discounting strategies to woo the customer and maintain their loyalty in the long run. 

Introduction

A case study has been undertaken to review the financial performance of Caltex, a leading transport fuel company in Australia. For this, the figures would be derived from the year 2014 and compared with that of 2013, to see deviations if any, the company would have and whether its performance is improving or suffering.

Balance Sheet of the company

1. Total current assets for the company for the year ended 2014 and 2013 are $2,099,336 and $3,251,728 respectively. So from the figures, it is seen that there is a sharp [(3251728 – 2099336) / 3251728*100] 35.44% decrease in the current asset figures. The current assets of a company are important because they could be easily converted to cash and support the firm in times of necessity. The figures tell that Caltex has compromised on its liquidity, it has substantially decreased its liquid cash amount by 75%, from $199,922 in 2013 to $53,122 in 2014. It could be a risk for the firm to go low on its liquidity, as in times of worst circumstances these assets could lead the firm out of any such financial crisis (Herman, 2011). 
2. The Non-current assets figure for Caltex stands at $3,029,198 in 2014 as compared to $2,769,142 in 2013. It is seen that Caltex has been able to increase its non-current assets by [(3029198 – 2769142) / 2769142*100] 9.40%. The company capitalised the assets, it means that the costs of the assets got allocated over a number of years rather than allocating the entire cost to the accounting year it was purchased (Fullerton, Kennedy, & Widener, 2013). It might be a strategic decision on the part of the company to undertake a risk by decreasing the liquidity share and concentrated more on long-term asset building.  
3. The Current liabilities figure stand at $1,503,900 for 2014 and $2,072,157 for 2013 respectively. The Balance sheet figure suggests that Caltex has taken care to cut down its current obligations by 27.42% [(2072157 – 1503900) / 2072157*100]. It is a positive step that the firm has been able to cut down its immediate obligations unto a substantial level. So if it reduces its current assets, the risk gets neutralised as the current ratio figures are maintained significantly (Kaplan & Atkinson, 2015). The current ratio figures for 2013 was (3251728/2072157) 1.57 as against (2099336/1503900) 1.40 for 2014. So it could be seen that the current ratio is unto the industry standard of 1.5, a matter to be least bothered. It could be stated that Caltex has strategically decreased both its current assets and current liabilities. At the same time, the safety of the organisation is maintained by carrying a significant current ratio needed in times of necessity.