Reference no: EM132345557

Accounting Principles - Case Study Assignment

Requirements - For this project, you will be analysing the financial statements of two companies in the same industry listed in the ASX. You will draw conclusions about the overall health of each company. Your project will culminate in a written paper that details your analysis. Your groups will be composed of three to four members.

Company Criteria - Select two companies to study throughout the semester. Selected companies must be in the same general industry (i.e. retailers, restaurants, toy manufacturers, etc.). The companies selected must meet all of the following criteria:

• Must be listed in Australian Securities Exchange (ASX).
• Must have receivables (trade receivables, accounts receivable, etc.) on the balance sheet/statement of financial position.
• Must have inventory on the balance sheet/ statement of financial position.
• Operations in Australia.
• Financial reports and annual reports must be available for 2017/2018 (or 2016/2017 if 2017/2018 is not yet filed).
• Must not be in bankruptcy.

Be sure to obtain the financial reports and annual reports for each of the companies selected and make sure each criterion is met prior to making your company selections.

Companies -

1. AUML - Australia United Mining Limited (Use Annual Report For the year ended 30 June 2018)

2. ABX - Australian Bauxite Limited (Use Annual Report Calendar year 2017)

Part A: Written Report

General writing instructions - Your source documents for the information you will be using for this project will primarily be your companies' financial reports. To follow are a list of questions and other requirements. You are to use the financial reports for your companies to answer the questions.

Industry and company overview -

Write a 200-word paragraph including general facts about the industry in which your companies operate. Also, summaries each company you selected (in your own words) from reading the annual report and financial report. Each company description should be 200 - 300 words in length. Do not copy and paste information; put the information in your own words.

Cash -

1. On what financial statement(s) do you find "Cash and cash equivalents" (or similarly-named account)?

2. How much cash does the company have at the end of each of the most recent three years?

3. Comparing the most current two years in the financial statements, has the company's cash increased or decreased?

Receivables -

1. Look in the Notes to the Financial Statements. What type of receivables does this company have?

2. What do you know about the company's Allowance for Uncollectible Accounts? What name does the company call its allowance? Where in your company's financial reports do you find this information?

3. What is the gross amount of the company's receivables? What percentage of this gross is its allowance?

4. Calculate and interpret these ratios for two years (show your calculations):

4.1 Current ratio

4.2 Quick ratio

4.3 Average daily sales (Net sales / 365 days)

Inventory -

1. On which financial statement do you find Inventory? How much does the company have in Inventory at the end of the most recent financial year? Is this inventory dollar amount in thousands, millions, or billions?

2. On which financial statement do you find Cost of goods sold (or Cost of sales)? List the page number from the most recent financial reports where you found Cost of goods sold for your company. What was Cost of Goods Sold for the most recent year? Is this Cost of Goods Sold dollar amount in thousands, millions, or billions?

3. What cost flow assumption method(s) does the company use for its inventories? Where did you find this information?

4. What do you know about the lower of cost or market related to inventories at the company?

5. Calculate and interpret the inventory turnover ratio for the most recent financial year.

Property, Plant and Equipment -

1. On which financial statement do you find Property, Plant and Equipment? What does account title does your company use for its PP&E? What types of Property, Plant and Equipment are listed on the financial statement? How much does the company have in PP&E at the end of the most recent financial year? In Accumulated Depreciation?

2. Now refer to the notes to the financial statements. Locate the notes that are related to PP&E. What specific categories or types of PP&E does the company have? (Usually in the notes to the financial statements, more information is given than provided on the face of the financial statements.)

3. What depreciation method(s) does the company use?

4. Over what range of useful lives does the company depreciate its various types of plant assets?

5. What type of intangible assets (if any) does the company have? How does it account for each of these intangible assets over the asset's life?

Current liabilities -

1. On which financial statement do you find current liabilities? What types of current liabilities does the company have?

2. Locate information about the company's contingent liabilities in the notes to the financial statements. Summarise each of the company's contingent liabilities disclosed in the notes.

Non-current liabilities -

1. On which financial statement do you find long-term liabilities? What types of non-current liabilities does the company have?

2. What information is provided in the notes to the financial statement with respect to the company's non- current liabilities? Give a summary; you do not need to go into depth.

3. Calculate and interpret the debt ratio for the most recent two years.

4. Calculate and interpret the times-interest-earned ratio for the two most recent years.

Shareholders' equity -

1. Locate the Shareholder's equity section on the statement of financial position.

2. Describe the type(s) of shares that the company has authorised and/or issued. How many shares of each type of share has the company issued as of its most recent financial year end? How many shares of each type of share are outstanding as of the most recent financial year end? Are these numbers in thousands or millions or billions?

3. Did the company issue any new shares of stock during the most recent year? How many shares?

4. Did the company declare any dividends in the most recent year? What type of dividends? What was the dollar value of the dividends declared?

5. Calculate the return on equity for the company for the most recent year.

Auditor's letter -

1. Give an example of an internal control that this company may have in place in some part of the organization. (You can use your imagination.) Be specific; discuss the department, the process, and any other details you could imagine about this internal control process in place at the company.

2. Locate the auditor's report on internal controls. Does the auditor think that the company's system of internal controls is adequate? Summarise the report in a paragraph. Do not copy and paste exact words; put it in your own words.

Statement of cash flows -

1. Now locate the statement of cash flows.

2. Which method (direct or indirect) does the company use to report cash flows from operations? How do you know?

3. Did the company buy or sell more plant assets in the most recent year as compared to the prior two years?

4. Did the company buy back any of its own stock? Did it pay any dividends?

5. What type of activity (operating, financing, or investing) in total generated the most cash flows for the company in the most recent year? What conclusions can you draw?

Ratio analysis -

Calculate and interpret the following ratios and measures.

1. Measuring ability to pay current liabilities (Liquidity analysis): Based on the ratios calculated, how easily can the companies meet their current obligations? Which company is more liquid?

2. Measuring leverage (overall ability to pay debts): Based on the ratios calculated, how easily can the company meet its long-term obligations?

3. Measuring profitability:

• Calculate or list the following ratios for the latest year presented: Gross margin ratio, Operating profit ratio, and Earnings per share. How profitable are the companies?
• Calculate Return on Assets for the two most recent years. What is the trend?

4. Analyzing stock as an investment: Calculate the following ratios for the latest year presented: Price-earnings ratio and dividend yield ratio. How does the stock market view the company's future earnings potential?

Overall analysis -

This section is the overall analysis of your two companies. Which company do you believe is healthier? Why? Which company would you be more likely to invest in? Why? Be specific in your reasoning.

Be sure to fully support your conclusion of which company is healthier. Be sure to include a variety of measures, not just one measure of financial health.

Part B: Oral Presentation

In-class presentations - You will be making a ten-minute presentation in class in Week 11 and 12 covering the major points of interest from your analysis of your companies. You should prepare a PowerPoint slide presentation. Do not include many words on your slides - make sure the slides are readable from anywhere in the room (use large fonts.)

Attachment:- Accounting Principles Assignment File & Template.rar