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Evaluation of Financial Statements of Flash Pan Ltd

University: Charles Darwin University

  • Unit No: 8
  • Level: Undergraduate/College
  • Pages: 8 / Words 2088
  • Paper Type: Business Plan
  • Course Code: ACT204
  • Downloads: 131
Organization Selected : Flash Pan

INTRODUCTION

Finance is the lifeblood of every business organization. It has been seen that without having a proper flow of funds a company is not being able to manage and regular their business in an effective manner. This project aims to prepare a letter to the chief financial officers of The Wentnor Dairy company Ltd. Certain financial ratios is being calculated in order to take a crucial decision in respect to making the appropriate decision. Some elements of the financial statements of Quanta's reports are taken into consideration in this report. On the basis of a trial balance of Flash pan Ltd, cash statements are being prepared by using the direct method (Scott, 2015.).

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QUESTION 1

CGU: It is known as cash generating units which is happens to be smallest identifiable aspect of assets that used to generates cash inflows that are widely independent of cash inflows from various assets or group of the same. The recoverable amount of CGU is similar as for an individual assets. It is the smallest identifiable group of assets that generate cash inflows that are widely remain independent of cash inflows from other assets or group of assets.

Impairment testing is all about analysing the value of asset by doing comparison between various elements. However, their main objective is to analyse the comparison between redeemable amount of specific asset with its high amount in order to identify the major differences which supports while making final decision. Moreover, various cash flows are mainly rely on appropriate financial budgets and forecasts. For example, some of the benefits are depend upon two variables instead of single one (Edwards, 2013). There are certain value which is being requires to be taken into account:

  • It is an estimation of future cash flows an organisation expects to derive from the assets.
  • Predication regarding variety in timing of cash flows.
  • The price for bearing the uncertainty inherent in accordance with the use of assets by the company in their daily business operations.

It has been seen that cash flows must be independent in respect of other cash flows of The Wentnor Dairy Company Ltd. A CGU need to be lowest aggregation of total assets those are independently essential for incurring cash flows in proper manner. There are certain factors that consists of:

  • Management required to monitors that entity's operations such as product lines, businesses, individual locations and regional areas. It consists of certain aspects that are related with break down of The Wentnor Dairy Company Ltd from their factories, dairy and products they are producing (Horngren and et. al., 2012).
  • Decision making done about continuous or disposing of their entity assets and their operations. In case management wanted to sell off parts of business while still keep a viable aspects of an organisation.
  • CGU policies and process are have been establish to ensure efficiency as well as to comply with state, accreditation and other regulations that are associated with the company.

QUESTION 2

Calculation of various ratios

Ratio

2017

2016

Current ratio

0.8152707345

0.7646132444

Acid test ratio

0.3537832311

0.3153529149

Inventory turnover ratio

14.6907855877

14.0557616474

Gross profit percentage

25.9580242446

25.3892880077

Account receivable turnover

37.1938088829

32.9565783166

Debt ratio

1.7166855467

1.5861608464

Debt equity ratio

49.6569216066

66.653478854

Rate of return net sales ratio

4.7190559476

3.9484854996

Total assets turnover ratio

2.5445291319

2.4259973481

ROE

16.0474918519

20.9181446112

Dividend yield

0.7071539658

0.7506730008

Dividend payout

76.2250453721

64.4891122278

On the basis of all financial ratios that are being calculated from the annual report of Woolworth limited is indicating more valuable outcomes for the company. At the closing of annual reporting period the group is having require recognition of ROU assets and associated with the leasing debts obligations. The group is presenting assessing the all impacts of new needs on the consolidated financial statements of the cited company (May, 2013). The impacts in expected to materially gross up the group financial position through using key financial ratios. The gross profit were significant expenses before tax of $958.6million incurred outside the ordinary course of trading operations outcomes from the ordinary course of trading operations gathered from group of all related aspects of an organisations. In the specific aspects, these items associated with the operating models and planning changes of $154.9million and property relationship of $344.2 million. The ROE of the company is 16 and 20 times respectively in coming period of time. Dividend yield ratio is delivering valuable outcomes with total of 0.7 and 0.75 times return to the company. All ratios are providing effective return so that they can earn maximum opportunity to increase future growth and stability for coming period of time.

According to the above calculated various liquidity position of Woolworth limited is showing appropriate solution to the company. As per current ratio for businesses would be having ideal ratio of 2:1 and 0.8 and 0.7 times. It is low to their ideal ratio which means that liquidity position of the company is not so effective to meet out short term debt obligations. In case of acid test ratio which lies in between 1.5 to 1 and the results is more similar in last two year. While it is also minimum in terms of ideal rations of the company. The rotation of current assets is much higher as compare to the current liabilities (Henderson and et. al., 20153).

QUESTION 3

Financial statements is said to be crucial report for Quanta's used to provide an entity financial data at a particular period of time for management, investors, shareholder and others associated stakeholders. These reports are used to prepared as essential needs of management, owners, government and other associated authorities of an organisation. There are certain aspects are:

  • Statements of financial performance or incomes statements.
  • Statements of balance sheet
  • Cash flow statements

Equity: It seems to be officially defined by IASBs framework which is used for the preparation of financial statements. It happens to be residual interest in the assets of an entity after deducting all debt obligations (Edmonds and et. al., 2013).

Equity= Assets-liabilities

Businesses would be involved in foreign exchange associated transactions in various manner. This must consists of foreign operations and currency transactions in their annual reports. It happens to be expressed and reported in financial statements in the reporting currency of an organisation. The current deals with principles issues in accordance with accounting for international operations and currency transactions which exchange rate is to be used. This standard does not specify the currency in a company that represent their valuable accounts that are being prepared by the company during an accounting period of time.

QUESTION 4

Cash flow form financing activityBank overdraft61209

Cash flow from operating activity

Sales revenues

260000

Salaries and wages

-129852

Change in working capital

43695

Cash flow form operating activity

173843

Cash flow form investing activity

Purchase of plant and machinery

37180

Sale of fixtures

2860

-34320

Cash flow form investing activity

-34320

Cash flow from financing activity

18309

Transfer to general reserve

6500

Issue of share capital

39000

Dividend paid

10400

A+B+C

21988

add: opening balance

65

Overdraft

21923

Working note:

Changes in cash:

Accounts receivable

11539

inventories

31280

account payables

876

43695

Cash flow statements are said to be one of the four main financial statements that are aimed to give lenders, investors and other key shareholder that are clearly essential for evaluating the cash flows of an organisation. The operating section is devoted to the core activities of business that drives cash transaction which is usually pertain to production and sale of companies total sales and services that are effectively important for the company in near future period of time. The investing activities record changes from property, plant and equipments such as marketable securities are taken into account. Cash from financing activities indicates total cash generated from loans or debts and from payment of dividends to their shareholders. Moreover, these inflows and outflows can used to changes depending on a companies total retained amount kept by the company in their regular course of businesses. There are certain effective analysis which is to be done as a statements of cash that is correctly incurred during the period of time. Need about homework help UK from expert writers. Contact our experts.

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CONCLUSION

From the above project report, it has been concluded that finance is an essential aspect of an organization. This will assist them to plan their future projects in a more effective manner. In this respect, various important aspects related to this are taken into consideration. Certain financial ratios is being helpful to the company in order to determine their current position as compared to last year. Evaluation of financial elements is discussed to examine any vital changes as compared to previous year transactions. Statement of cash flows from Pan Ltd is prepared so that future availability of cash can be determined effectively in near future.

REFERENCES

  • Edmonds, T.P. And et. al., 2013. Fundamental financial accounting concepts. New York, NY: McGraw-Hill Irwin.
  • Edwards, J. R., 2013. A history of financial accounting (RLE Accounting)(Vol. 29). Routledge.
  • Henderson, S. and et. al., 2015. Issues in financial accounting. Pearson Higher Education AU.
  • Horngren, C. and et. al., 2012. Financial accounting. Pearson Higher Education AU.
  • May, G. O., 2013. Financial accounting. Read Books Ltd.
  • Scott, W. R., 2015. Financial accounting theory(Vol. 2, No. 0, p. 0). Prentice Hall.
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