1 Assignment for Submission Subject: BUACC 5930, Accounting Concepts and Practices Semester 1, 2020 This is a Group Assignment. This is due in week 10 or 11. All questions must be completed. Question...

ACCOUNTING CONCEPTS AND PRACTICES
    Serial Number
    Contents
    Page Number
    1.
    Answer to Question 1
    1-3
    2.
    Answer to Question 2
    4-5
    3.
    Answer to Question 3
    6-8
    4.
    Answer to Question 4
    9-13
    5.
    References
    14
ANSWER TO QUESTION 1
Lendlease is an infrastructural company which is the fifth-largest in Australia. Lend Lease Corporation Limited was established in the year 1958 and was listed on the Australian Stock Exchange (ASX) in the year 1962. In the year 1971, the company started its operations in North America, and in the year 1973, the company began its operations in Singapore and 1991 in the United Kingdom. The brand name of Lendlease was introduced in the year 2015.
On the evaluation of the annual report, it came to light that the total revenue of the company Lendlease has decreased in the year 2019 when the same is compared to the year 2018. The revenue from operations in the year 2019 was $16386 million in 2019 and was $16422 million in 2018. The revenue decreased by $36 million between the years. The cost of sales of the company Lendlease rose from $15,038 million in 2018 to $15,438 million in 2019. The cost improved by $400 million between 2019 and 2018 (Subramanyam, K.R., 2014).
Cost to revenue ratio: Cost / Revenue                                 
This ratio reflects the proportion of cost to the revenue. This ratio comes to 0.908 in the year 2018 and 0.934 in the year 2019. It means that the company has to spend $0.908 to earn one dollar in the year 2018 and $0.934 in the year 2019. Therefore the average cost of the company has improved (Khadafi, M., Heikal, M. and Ummah, A., 2014).
In the year 2019, the gross profit ratio of Lendlease was 6.7% which was at 9.17% in 2018. There was a giant fall in the Gross Profit ratio (GP Ratio) of the company Lendlease. The reason for such a vast fall in the gross profit ratio (GP Ratio) was because the cost of the company Lendlease has increased in the year along with no increase in the revenue of the given company. The cost of sales of the company Lendlease increased by 2.69% without a substantial increase in the revenue due to which the reason for such a giant fall in the gross profit ratio (Edwards, J.B., 2016).
The share of profit has ended up being 2.58 times since the year 2018 in 2019 of equity-accounted investments. The other income has diminished by $ 201 million. The other revenue of the given company has increased in 2019 by 13.44 % which is earned form the investments made in the shares of the subsidiaries and other joint ventures. Therefore this analysis reflects that the revenue of Lendlease has diminished between the years 2019 and 2018 in the main operations but there has been an increase in the other income (Khadafi, M., Heikal, M. and Ummah, A., 2014).
In June, 2018 the net profit ratio was 4.8% which came down to 2.82% in June 2019. The net profit ratio the same as the gross profit ratio has decreased a lot due to the reason that the revenue of the Lendlease has not raised and the expenses have increased. This harmed the profit ratios of the given company. There was a decrease of $ 327 million in the profit after-tax (PAT) amount of the Lendlease. The company has seen a sharp increase in the cost or the expenses but there was no corresponding increase in the revenue of the company. The main operations of the company highly underperformed during the year ending 2019.
The average EPS of lendlease was 100.2 cents in 2018 which was at 55.2 in June 2019. The EPS of the company fell by 44.51% between the year 2019 and 2018 which gave a negative signal to the stakeholders of the company which directly harmed the market valuation and capitalization of the company. The EPS of a company is used in the computation of the market price of the share of that company. It is also used as a performance index of the company which also declined because of the fall of the EPS of the company. EPS is the allocation of earning to the shareholders against their investment in the shares of the company valued at one share.
The company had borrowed funds from the market due to which the finance cost or the interest cost of the company has increased. In the year ending June 2018 was at $ 88 million which increased to $ 142 million because of the increase in the debt of the company. The company had borrowed $ 606 million during the financial ending June, 2019 which thereby increased the finance cost of the company. As the debt in a company increases, the capital structure of the company changes thus the company has increased its risks by borrowing funds. The debt of a company when it increases, the company operates its business on the borrowed funds than to its fund. This decreases the confidence of the shareholders thus increasing the cost of capital of the company.
The current of a company measures its capabilities to pay off its current liabilities with its current asset at the given date. The current ratio of Lendlease for the year ending June 2019 was at 0.92 but the same was at 0.96 in the year ending June 2018. There has been a marginal decrease in the current ratio but it is still is not a good sign. The current ratio of a company should be more than one and therefore the company's current ratio is not a good performance.
The total long term debt taken by the company in the year 2019 was at $ 3937 million for the year 2019. For the year 2018, the same was at $3483 million. The debt equity ratio of the company was at 0.62 which means that the debt of the company is 0.62 times the equity of the company. The debt equity ratio for the year 2018 was at 0.54. The increase in the debt equity ratio was because of the new additional capital borrowed by the company. The change in the debt equity ratio made the company more risky. With the increase in the debt of the company, company’s operations were carried out on the funds of the debt which creates a lack of confidence on the equity shareholders of the company. The debt equity ratio of both the years was below one which is a good sign but the increase in the portion of debt in the current year the current debt ratio has increased which will eventually make the cost of capital of the company costly.
From the overall analysis of the Lendlease’s annual report including the...