HI5020 Corporate Accounting Assessment item 2 — Assignment Due date: 11.59pm Friday Week 10 Weighting: 30 % Total Marks: 30 Instructions: 1. This assignment needs to be submitted using safe-assign. No...

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HI5020 Corporate Accounting Assessment item 2 — Assignment Due date: 11.59pm Friday Week 10 Weighting: 30 % Total Marks: 30 Instructions: 1. This assignment needs to be submitted using safe-assign. No hardcopy or email attachment will be accepted. 2. It is the responsibility of the student who is submitting the work, to ensure that the work is her/his own work. Plagiarism will be heavily penalised 3. Assignment should be of 3,000 words. Please use “word count” and include in report. Format of the Report Your submitted assignment at least should have the following details: a. Assignment Cover page clearly stating your name and student number b. Executive summary c. A table of content d. A brief introduction of the companies you had chosen and an overview of what you discussed in this assignment e. Body of the report where you write your answers with appropriate section headings f. Conclusion (No recommendation is necessary). g. List of references. (Inclusion of any references in this list without in-text referencing will be a futile exercise.) Assessment task Select two public limited companies listed on the Australian Securities Exchange (ASX) that are in the same industry. Go to the website of your selected companies. Then go to the Investor Relations section of the website. This section may be called, “Investors”, “Shareholder Information” or similar name. In this section, go to your companies’ annual reports and save to your computer your firms’ latest annual reports consecutively for last three years. Do not use your companies’ interim financial statements or their concise financial statements. Please read the financial statements (balance sheet, income statement, statement of changes in owner’s equity, cash flow statement) very carefully. Also please read the relevant footnotes of your companies’ financial statements carefully and include information from these footnotes in your answer. You need to do the following tasks: OWNERS EQUITY (5 Marks) (i) From your companies’ financial statements, list each item of equity and write your understanding of each item. Discuss any changes in each item of equity for your firms over the past year articulating the reasons for the change. (ii) Provide a comparative analysis of the debt and equity position of the two firms that you have selected. CASH FLOWS STATEMENT (5 Marks) (iii) From the financial statement of your chosen companies, list each item reported in the cash flows statement and write your understanding of each item. Discuss any changes in each item of cash flows statement for your companies over the past years articulating the reasons for the change. (iv) Provide a comparative analysis of your companies’ three broad categories of cash flows (operating activities, investing activities, financing activities) and make a comparative evaluation for three years. (v) Also provide a comparative analysis of the two companies that you have selected explaining the insights that you can get from the comparative analysis. OTHER COMPREHENSIVE INCOME STATEMENT (5 Marks) (vi) What items have been reported in the other comprehensive income statement for each company? (vii) Why have these items not been reported in Income Statement/Profit and Loss Statements? (viii) Provide a comparative analysis of the items shown in the other comprehensive income statement section for the two companies. If these items were included in the income statement / profit and loss statements of each company, how would the profit attributable to shareholders of the company be affected? (ix) Should other comprehensive income be included in evaluating the performance of managers of the company? ACCOUNTING FOR CROPORATE INCOME TAX (15 Marks) (x) What are the tax expenses shown in the latest financial statements of the two companies that you have selected? (xi) Calculate the effective tax rate for both companies that you have selected. Effective tax rate is calculated as (income tax expense / earnings before tax). Which one of the companies has the higher effective tax rate? (xii) Comment on deferred tax assets/liabilities that is reported in the balance sheet articulating the possible reasons why they have been recorded. (xiii) Was there any increase or decrease in the deferred tax assets or in the deferred tax liability reported by each of your selected companies? (xiv) Please calculate the cash tax amount for both companies using the book tax amount, changes in the deferred tax assets and deferred tax liability (please do your own research for your better understanding of these concepts and the method of calculating the cash tax amount the book tax amount.) (xv) Calculate the cash tax rate for both companies. Which company has higher cash tax rate? (Please do your own research to familiarise yourself with how to calculate cash tax rate). (xvi) Why is the cash tax rate different from the book tax rate? Please remember some aspects of your companies’ treatment of tax can be a very complicated area, particularly for some companies. For a better understanding of the concepts included in the assignment that has not been introduced in the class, please do your own research. PRESENTATION You might have to do a presentation in the class where your lecturer will question you from different angles of the assignment and you will have to satisfy the lecturer that you were sufficiently and appropriately involved in preparing the assignment. The presentation will take place in the last hour of the classes of week 11 and week 12. It is the discretion of the lecturer either to ask any student to do the presentation or to award marks to a student without asking to do the presentation. However, every student needs to be prepared for the presentation and well conversant about everything that has been written in the submitted assignment.
Answered Same DaySep 17, 2020HI5020

Answer To: HI5020 Corporate Accounting Assessment item 2 — Assignment Due date: 11.59pm Friday Week 10...

Abr Writing answered on Sep 23 2020
156 Votes
FINANCIAL ANALSYIS
(
FINANCIAL ANALSYIS
Jb Hi-fi Limited and Myer Holdings Limited
Student name:
Student
Number
)
Executive Summary-
The assignment is related to evaluation of financial statements of two ASX listed companies belonging to the industry of retailing namely Jb Hi-Fi limited and Myer Holding Limited. Through this assignment, a financial analysis report is being prepared based on the recent three years annual reports of both the companies. A Comparative analysis is also being undertaken for the period.
The assignment is guided towards major four sub-parts of the financial stat
ements such as equity, cash flow, OCIs and corporate tax expense. It helps in reading and understanding the financial statements and notes to them of the actual operating companies.
Table of Contents
Executive Summary    2
Introduction    2
Financial Analysis    3
A. Owner’s Equity-    3
B. Cash Flow Statement    5
C. Other Comprehensive Income Statement-    7
D. Accounting for Corporate Income Tax-    9
Conclusion    13
References    14
Introduction-
Jb Hi-Fi Limited is Australian based retail group which deals in home ware products and is headquartered at Chadstone, Australia. The group works under three segments, first Jb Hi-Fi through which it caters to consumers at Australia and New Zealand and provides electronic products such as computers, TVs, air-conditioners, instruments for music and games etc; second The Good Guys which is a retail chain of stores for consumer durables in Australia such as kitchenware, home appliances, small appliances etc; and third, Jb Hi-Fi Solutions which provides IT solutions and consulting services. The company operates through roughly around 300 retail stores of across Australia and New Zealand with takeover of Good guys in 2016. The annual revenue for the group was $ 5.62 billion with a profit margin of 3.06% for the year 2017. (Yahoo. Finance, 2018)
Myer holdings Limited, an Australian brand company is engaged in retailing consumer products through its chain of departmental stores across the country. It is headquartered at Docklands, Australia, and has around 60 stores under the brand name of Myer. The company provides products under 11 core categories such as apparels for men, women, children, fashion and beauty accessories, footwear, toys and electronic goods. The annual revenue for the company was $ 3.2 billion with net profit margin of just 0.46% in year 2017. (Yahoo. Finance, 2018)
Through this report, the financial statements of both the companies for the year ending 2015 to 2017 have been evaluated in specific four key areas such as equity, cash flow, income tax and other comprehensive income.
Financial Analysis
A. Owner’s Equity-
The owner’s equity refers to the total shareholders’ equity portion on the balance sheet. It includes the equity capital contributed by shareholders as contributed equity, reserves such as hedging reserves, foreign currency translation etc and the retained profits after payment of dividend under retained earnings head.
Jb Hi-Fi- Equity
(AUD in millions)
    Equity
    2017
    2016
    2015
    Contributed equity
    438.7
    49.3
    56.5
    Reserves
    33.2
    27.1
    17.6
    Retained earnings
    381.6
    328.3
    269.3
    Total
    853.5
    404.7
    343.4
The owner’s equity of Jb Hi-fi has increased over the last three years from $ 343.4 million in 2015 to $ 404.7 million in 2016 in spite of dip in contributed equity from $ 56.5 million to $ 49.3 million during the period with buyback of shares. This is due to the increase in retained profits. The equity capital just doubled during 2017 with issue of shares by the company under its entitlement offer of $ 394.2 million. The reserves have also shown increasing trend paving way for overall increase in equity
Myer Holdings- Equity
                                        (AUD in millions)
    Equity
    2017
    2016
    2015
    Contributed equity
    739.3
    739.3
    524.8
    Retained earnings
    342.1
    379.5
    335.4
    Reserves
    (8.6)
    (11.1)
    2.9
    Total
    1,072.8
    1,107.7
    863.0
The owner’s equity for Myer holdings increased from $ 863 million in year 2015 to $ 1,107.7 million in year 2016, majorly due to issue of fresh equity by the company of $ 214.6 million during the year. It however declined to $ 1,072.8 million in year 2017 with reduction in profits and high dividend payout from retained earnings. The reserves stood at negative $ 8.8 million during 2018 which comprises of the other comprehensive income for the company.
Apart from this, the debt portions of both the companies are also noteworthy to present the overall capital structure of them. The debt-equity portions for both companies are as below:
(AUD in millions)
     
    Jb Hi-Fi Limited
    Myer Holdings Limited
     
    2017
    2016
    2015
    2017
    2016
    2015
    Shareholder’s equity
    854
    405
    343
    1,072.80
    1,107.70
    863
    Borrowings
    559
    110
    140
    143.4
    147.3
    441
    Debt-equity ratio
    0.65
    0.27
    0.41
    0.13
    0.13
    0.51
Both the companies have changed their capital structure over the last three years. The above analysis provides that over the years Myer has reduced its debt capital and increased its equity portion, on the contrary, Jb Hi-Fi has increased both its equity and debt capital with more reliance towards borrowed capital is shown by it. Accordingly, the debt equity capital for both companies provides less risky venture for Myer holdings with 0.13 times of debt-equity as compared to Jb Hi-Fi with 0.65 times of such ratio. Thus, Myer can be termed as equity derived company.
B. Cash Flow Statement-
The cash flow statement of Jb Hi- Fi and Myer holdings lists the following items as part of inflows and outflows through three broad categories of operating, investing and financing:
1. Cash inflow items:
a. Receipts from customers – Realization of accounts receivables in cash, cash sales.
b. Interest receipt- Investment’s cash interest
c. Other income – Cash receipt of royalty, discounting
d. Sale of plant and equipment- Proceeds from sale of assets
e. Issue of shares- Fresh equity in cash
f. Borrowing proceeds-...
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