FNS60217 Advanced Diploma of Accounting FNS50217 Diploma of Accounting FNSACC607 Evaluate Business Performance Prerequisite: This Unit has a Prerequisite FNSACC511 Provide financial and business...

Assessment Task 1:
Assess Business Performance Trend: Nick Scali Furniture
Part A:
Income Statement:
    Particulars
    2012
    2013
    2014
    Revenue from sale of goods
    109391
    127431
    141442
    Cost of goods sold
    42883
    49925
    56019
    Gross Profit
    66508
    77506
    85423
    Other Income
    1067
    6430
    1284
    Marketing Expenses
    9587
    11404
    12543
    Employment Expenses
    18435
    20431
    22297
    General & Administration Expenses
    4226
    4826
    5576
    Property Expenses
    20604
    21812
    23046
    Distribution Expenses
    530
    612
    639
    Depreciation & Amortization
    1327
    1734
    1947
    Finance Cost
    221
    252
    301
    Profit Before Income Tax
    12645
    22865
    20358
    Income Tax Expenses
    3621
    6863
    6122
    Net Profit after Tax for the year
    9024
    16002
    14236
    Cash flow hedges gain/ (loss) taken from equity
    -8
    661
    -723
    Total Comprehensive Income for the year
    9016
    16663
    13513
Balance Sheet:
    Particulars
    2012
    2013
    2014
    Current Assets
    $'000
    $'000
    $'000
    Cash Assets
    20691
    26441
    35903
    Receivables
    808
    6397
    164
    Inventories
    13649
    14569
    19013
    Other financial assets
    1
    852
    8
    Other assets
    602
    286
    92
    Total Current Assets
    35751
    48545
    55180
     
     
     
     
    Non Current Assets
     
     
     
    Deferred tax assets
    1204
    1194
    0
    Property, plant & equipment
    14573
    22047
    22868
    Intangible assets
    2378
    2378
    2378
    Total Non-Current assets
    18155
    25619
    25246
     
     
     
     
    Total Assets
    53906
    74164
    80426
     
     
     
     
    Current Liabilities
     
     
     
    Payables
    20660
    23465
    27407
    Current tax liabilities
    1636
    3804
    2367
    Provisions
    448
    1209
    1379
    Total Current Liabilities
    22744
    28478
    31153
     
     
     
     
    Non-Current Liabilities
     
     
     
    Provisions
    309
    2335
    1972
    Deferred tax liabilities
    0
    255
    409
    Borrowings
    3500
    6762
    6762
    Total Non Current Liabilities
    3809
    9352
    9143
     
     
     
     
    Total Liabilities
    26553
    37830
    40296
    Net Assets
    27353
    36334
    40130
     
     
     
     
    Equity
     
     
     
    Contributed equity
    3364
    3364
    3364
    Reserves
    11
    685
    -35
    Retained profits
    23978
    32285
    36801
    Total Equity
    27353
    36334
    40130
Cash Flow Statement:
    Particulars
    2012
    2013
    2014
    Cash Flows from Operating Activities
    $'000
    $'000
    $'000
    Receipts from customers
    123726
    135762
    166298
    Payment to Suppliers and employees
    -108402
    -112338
    -139104
    Interest received
    977
    992
    1124
    Income tax paid
    -3448
    -4713
    -5902
    Net Cash Flows from Operating Activities
    12853
    19703
    22416
     
     
     
     
    Cash Flows from Investing Activities
     
     
     
    Purchase of property, plant & equipment
    -2203
    -9268
    -2933
    Net Cash Flows (Used) in Investing Activities
    -2203
    -9268
    -2933
     
     
     
     
    Cash Flows from Financing Activities
     
     
     
    Payment of dividends on Ordinary shares
    -7290
    -7695
    -9720
    Proceeds from borrowings
    0
    3262
    0
    Interest paid
    -221
    -252
    -301
    Net Cash (Used) in Financing Activities
    -7511
    -4685
    -10021
    Net Increase in Cash Held
    3139
    5750
    9462
    Add: Opening cash b/f
    17552
    20691
    26441
    Closing cash c/f
    20691
    26441
    35903
Trend Analysis: Sales Revenue to Gross profits and Net profits
Evaluation of the Assets and liabilities from the balance sheet
The total current assets of Nick Scali furniture have increased from 2012 till 2014. While the cash has increased considerably the receivables have decreased. This is a positive sign for the company as receivable reduction illustrates the company’s ability to collect the debts from its credit sales. Inventories have increased which means includes both work in progress and raw material along with finished goods. Company was able to reduce the deferred tax assets gradually in 2014. They have invested proportionately in property, plant & equipment and hence the value of the same have enhanced gradually. The value of the intangible assets has remained the same for all the years. The current liabilities have increased gradually due to increase in the production process. The borrowings of the company have also increased in 2013 from 2012 and have remained the same for the next years. There has been increase in net assets observed and the growth percentage in 2014 compared to 2013 is 10.45%. This states that Nick Scali has a positive Net working capital in all the years till 2014. While the contribution to the equity share capital of the company has remained the same, there has been a growth in the total equity mainly due to increase in retained earnings in 2013 and 2014.
Cash flow analysis
The net cash flows from operations of Nick Scali furniture is positive and is increasing for all the three years from 2012 till 2014. The cash flow from operations is the cash the company generates and produces internally. The net income or profit is adjusted with non cash charges and the increase and decrease in the net working capital items to arrive at this figure. This is a positive sign for the company.
The cash flows from investing activities is the amount used for investing in capital expenditures like plant, properties, equipments and acquisition of long term assets for business. It is generally negative as there are cash investments made by the company for acquiring the assets. For Nick Scali the figures are negative for all the years but the rate of negativity has been observed to have declined in the year 2014. This illustrates the ability of the company to earn returns on the investments made. This is also a positive indicator for Nick Scali furniture.
The cash flows from financing activities indicate the ability of the company to borrow funds in the form of debt and equity. Also, on repayment of interest on debt and dividends on equity to the shareholders the amount of financing decreases. The same has happened for Nick Scali. It is observed that due to repayment of dividend to the shareholders and proceeds from borrowings in the year 2013 the cash flow from financing activities is in declining pattern for all the year.
Cost and Sales analysis
There has been increase in sales observed for Nick Scali Ltd for the year 2013 and 2014. The growth in sales was more in 2013 at 16% compared to the growth in 2014 at 11%. Similarly, the growth in cost was 16% in 2013 and 12% in 2014. Hence, it is observed that the costs are slightly higher than rate of growth in sales and needs to be taken into account for Nick Scali Ltd.
Analysis of debtor and creditor
There has been decreased in the receivables for gradually from 2012 till 2014 onwards. This states that Nick Scali Ltd. ability to collect cash from the debtors on the credit sales within specified time limit. The creditors of the company have increased from 2012 till 2014. This is an indication of more time allotted by the suppliers of goods to Nick Scali Ltd for credit purchases. It will definitely help the company to get additional time for making payment to the creditors. Hence, there will be a balance between the debt collection from the debtors and payment to the suppliers.
Analysis of the Director’s Report
Business critical factors: The furniture market in Australia remained downcast and highly competitive for the year 2014. The consumer demand was also volatile and the result of Nick Scali was positive in 2014. After analysing the potential demand of the customers Nick Scali Ltd. is strategizing various plans of action to open more furniture stores in various regions in Australia to crater their business. Also, the company is responsible for delivering a fair business policy through hike in the remuneration of the executives and employees, promoting ethical, honest and conscientious decision making policies, abiding and maintaining the diversity policy, conducting audits for safeguarding the interests of the shareholders, promoting a work health and safety policy and recognition and management of the risks during the business operation process.
Growth prospects: In 2014 as observed, the net profits of Nick Scali was slightly lower than 2013 by -11%. There has been growth observed in the dividend of the company in the same year by 26%. Company wants to emphasize on...