HI5001 Accounting For Business Decisions

HI5001 Accounting For Business Decisions

HI5001 Accounting For Business Decisions

Part 1

Executive summary

In this report financial analysis made over the financial activities of the Boral Ltd. The statements of Boral Ltd. such as statement of financial position, income statement, statement of stakeholder's equity and cash flow statement. Financial analysis is made for the purpose of evaluating the financial position and strength of the Boral Ltd. It helps in enhancing the financial performance of the Boral Ltd. as with the help of it they enhance their performance. Under analysis of balance sheet all the heads such as total current assets, total non-current assets, total current liabilities, total non-current liabilities and total stakeholder's equity get evaluated in effective manner. The balances of the current year and previous year get evaluated and utilised for the purpose of comparing the performance of the Boral Ltd. In the same manner the analysis is made over the other statements such as income statement, statement of change in equity and cash flow statement. Analysis or comparative analysis helps in getting effective knowledge related to the financial performance and financial position of the Boral Ltd. It helps in making effective decisions and helps in taking corrective actions for the betterment of the business organisation (Hay & Hay, 2015).

HI5001 Accounting For Business DecisionsAfter the analysis there is effective interpretation made over the findings or results of the discussion that helps in getting the problems or issues related to the business organisation. In the conclusion head current financial position and performance get discussed that helps knowing the current position of the Boral Ltd. In the next head recommendations effective level of suggestions will made in context to the betterment of the Boral Ltd. These recommendations are made as per the performance of the Boral Ltd. as they attain negative cash balance from financing activities so they need to focus over enhancing or minimising the negative balance for the purpose of strengthening their liquid base. On the other hand there is increase in their non-current liabilities as there is increase in their long term loans. With the increase in these long term loans there is significant increase in risk factor and they need to maintain adequate liquid funds to meet them out and lower the risk factor. There is need of running business on equity capital instead of increasing long term loans as it hampers the financial position of the Boral Ltd. So these kinds of recommendations get made for the betterment of the Boral Ltd (Richardson, et. al., 2009).

Introduction

Boral Ltd. is an Australian based multinational company and they are dealing in building and construction materials. It was founded in the year 1946 on 4th March by Frederick G. Hilmer. Along with Australia they are performing their activities in Asia and United States. They render employment to around 12,000 employees over 600 operating sites. Boral get demerged from "old" Boral Limited in the year 2000 (February month). Earlier old Boral was engaged into comprising energy assets and get renamed as Origin Energy. The "old" Boral started the business activities as oil and bitumen refining company under the name o Bitumen and Oil Refineries Australian Limited. Later on it its name get changed with the company's acronym name as Boral Limited. As they get change their motive from inception because they change their activities from oil refineries to building industry such as road line mining, concrete, plasterboard, timber, windows, quarry, landfill, transport, roof tiles, bricks and pavers. They also indulge into producing Boral Cement (Cable, 2010).

Their headquarters is located in Sydney, Australia and also get supported from the prospect of company's establishment, New South Wales, Australia. The support is rendered to the operations performed in Australia, Asia and United states.

In the year of 1948 they face oil supply problems that get continued to the year 1950 after the started their business activities. They made contract with the California Texas Oil company Ltd. for the purpose of getting oil supply. They also face problems related to the marketing of Matraville refinery products. In the year 1973 they face serious problems related to the increase in wages and decrease in the business activities. With the effect of it they postpone their move of getting into overseas market till the time their domestic economic situation get stabilised. It took around five years. In the 1990's they tries to enter into European market. In the Mid of the 1990s they focused over their South-East Asian neighbours and they make investment mainly in Indonesia and Malaysia along with in China. In these countries they especially focused over the concrete and plasterboard. In the year 1994 they purchase Malaysia's only plasterboard producer - Wembley Gypsum Producers Sdn Bhd. Along with this they established their first plasterboard plant in Shanghai, China. In China is get denoted as new building material (Cable, 2010).

With the effective development and growth in the major terms such as technology advancement, capital markets, communication and transportation along with the increase in the competition level due to globalisation it become large corporation and moved in front line of economic activity and job creation. In the first 50 year's Boral face lots of challenges such as shortage of oil supply, marketing issues, domestic economic problems and many more and even after these challenges now they are performing in effective manner. They make effective use of the developed technology along with this adapt the Australian conditions in effective manner (Cable, 2010).

Part 2

A. Statement of financial position

Review the balance sheet of the company and indicate the amount of the following: -

Heads

Amount 2015 ($ millions)

Total current assets

1,741.3

Total non-current assets

4,124.1

Total current liabilities

923.2

Total non-current liabilities

1,418.10

Total stakeholders equity

3,524.10

(Whittington, et. al., 2009)

Compare the above figures with the previous year and compute the percentage increase or decrease and comment on the comparative financial condition of the company: -

Heads

Amount (2015)

Amount (2014)

Percentage

Comment

Total current assets

1,741.3

1,664.5

4.61%

There is increment is noted down in the current assets in the year 2015 as compare to the 2014. The ratio get increased with 4.61%. There is subsequent increase is noted down in cash balance and inventories as compare to last year.

Total non-current assets

4,124.1

3,894.6

5.89%

There is increment is noted down in the non-current assets in the year 2015 as compare to the 2014. The ratio get increased by 5.89%. There is subsequent increase in the amount of the receivables and investment balances.

Total current liabilities

923.2

1,170.2

(21.11%)

There is effective fall is noted down in the current liabilities balances. The ratio of decrease in the current liabilities is 21.11%. They pay-off the loan amount and their provisions also get decreased due to which there is fall in the current liabilities.

Total non-current liabilities

1,418.10

1,040.8

36.25%

There is effective increase is noted down in the balance of the non-current liabilities as the ratio get increased by the 36.25%. There is effective increase in the long term loan and borrowings that effectively increase the balance of the non-current liabilities.

Total stakeholders equity

3,524.10

3,348.1

5.26%

There is subsequent increase is noted down in the balances of the total stakeholders equity. The ratio by which it get increased is 5.26%. The  balance of retained earnings shows adequate increase in their balances that increase the overall balance of the equity balances.

(Kardos & Durham, 2015)

As per the above interpretation it is evaluated that there is subsequent increase is noted down in the assets that shows that the financial position of the Boral Ltd. is become effective and strong that helps in growing their respective market in efficient manner. They easily meet out their short term liabilities and along with this they maintain adequate level of cash balance with them shows their competitive advantage over their competitors (Kardos & Durham, 2015).

B. Stockholder Equity

Review the stockholders' equity section in your chosen company's most recent year-end balance sheet and compare that with the previous year-end balance sheet. Compare percentage increase or decrease. List the stockholders' equity account balances and number of outstanding shares from these two balance sheets and compute the increase or decrease for each during this past year.

Head

2015

2014

Percentage

Interpretation

Issued capital

2,361.6

2,477.6

(4.68%)

There is fall in the issued capital as they pay-off some of their shares and the percentage of the decrease in the amount is 4.68%.

Reserves

166.2

2.1

7,814.29%

There is huge increase is noted down if it get looked through the percentage increase as in the year 2014 the share of reserve funds was 2.1 million that get increased to 166.2 in 2015.

Retained earnings

996.3

868.40

14.73%

There is significant increase in the retained earnings as compare to the last year and the ratio of increase in balance of retained earnings is 14.73%.

(Kardos & Durham, 2015)

As per the above interpretation it get concluded that there is fall in their issued capital share as compare to their previous years balance. But there is effective increase in the balance of the reserve funds. Boral Ltd. put their profits in retained earnings that also increase the level of equity share capital (Kardos & Durham, 2015).

C. Statement of profit and loss

Review the income statement and indicate the following: -

Heads

Amount 2015 ($ millions)

Total (operating) revenues

4,297.6

Cost of goods sold

3,039.2

Total expenses(Before income taxes)

4,180.4

Any non-operating gains and losses

12.8

Earnings per common share

32.9

(Cartney, 2011)

Compare the above figures with the previous year and compute the percentage increase or decrease and comment on the comparative financial operation of the company: -

Heads

Amount (2015)

Amount (2014)

Percentage

Comment

Total (operating) revenues

4,297.6 M

4,325.7 M

(0.65%)

There is fall noted down in the balance of the total revenues earned by them. The percentage noted down is 0.65%.

Cost of goods sold

3,039.2 M

3,141.5 M

(3.26%)

There is fall noted down in the share of the cost of goods sold and the ratio of decrease in the share is 3.26%. It shows that they make less sales as compare to the last year. It is not favourable for them as it decreases the share of their sales revenues.

Total expenses(Before income taxes)

4,180.4 M

4,225.5 M

(1.07%)

There is fall noted down in the expenses made by them as there is effective decrease of 1.07% noted down in the balance of the expenses. The fall in expenses considered as favourable for them as it helps in getting adequate share of income for them.

Any non-operating gains and losses

12.8 M

20.3 M

(36.95%)

There is fall noted down in non-operating gains. The ratio stated that there is effective fall in the non-operating gains in the ratio of 36.95%.

Earnings per common share

32.9

22.2

48.20%

The EPS or earning per share shows effective increase as there is increase of 48.20% as compare to the price of last year.

(Cartney, 2011)

As per the above analysis it get interpretation that there is fall in the sales and the revenues. As compare to the last years balance the balances of current year are less. There is effective decrease in the expenditure also as compare to the last years balance that considered as favourable for them (Cartney, 2011).

D. Statement of cash flow:

Review the statement of cash flows for the most recent year and indicate the following: -

Heads

Amount 2015 ($ millions)

Net cash inflow (outflow) from operating activities

418.30

Net cash inflow (outflow) from financing activities

(55.7)

Net cash inflow (outflow) from investing activities

(251.6)

Net increase (decrease) in cash during the year

505.80

(Hasan, et. al., 2016)

Analyse the cash flow statements for the last 2 years and comment on the cash position of the company

Heads

Amount 2015 ($ millions)

Amount 2014 ($ millions)

Percentage

Interpretation

Net cash inflow (outflow) from operating activities

418.30

507.3

(17.54%)

They attain huge fall in the balance of the cash flow from the operating activities. The balance of 2015 shows 17.54% less balance as compare to the last years balance.

Net cash inflow (outflow) from financing activities

(55.7)

267.2

(120.85%)

There is huge fall is noted down in the balance of the cash flows from the financing activities. In 2015 they attain negative cash balance whereas in the year 2014 they attain huge positive balance. As per the ratio they get fall of 120.85%.

Net cash inflow (outflow) from investing activities

(251.6)

(524.6)

(52.04%)

They attain huge fall in the balance of the cash flow from the investing activities. The balance of 2015 shows 52.04% less balance as compare to the last years balance. This is considered as favourable for them as the negative balance get reduced as compare to the last year.

Net increase (decrease) in cash during the year

505.80

383.2

31.99%

The net balance of the cash flow statement shows some positive balance and it get increased as compare to the last year's cash balance. The balance shows the increment of 31.99%.

(Van Deventer, et. al., 2013)

There is fall noted down in the positive as well as negative balances of the activities as the balances of the operating activities get decreased as compare to the previous year balance. In the same manner the balance of financing activities get fallen down and attain negative balances. The balance of investing activities also get decreased but it is favourable as the negative balance get minimised. There is effective need of managing the cash activities so that they perform adequately and attain huge positive cash balance (Van Deventer, et. al., 2013).

Part 3 Conclusion

In the above part there are effective findings are made that helps in getting the financial status and performance of the Boral Ltd. It is important to get the information related to the financial activities that helps in making effective level of decisions related to their betterment and enhance its effectiveness. For the purpose of getting the information all financial statements get analysed and below effective interpretation get made over it such as: -

Statement of financial position: -

By making analysis of statement of financial statement it is interrelated that they maintain adequate current assets which get utilised for the purpose of meeting their short term current liabilities. Along with this it is also indentified that there is effective increase in the share of current assets by 4.61% as compare to the balance of the 30th July 2014. There is adequate increase in the share of liquid funds that helps in meeting their current liabilities. Along with this in order to strengthen their financial position there is increase in non-current assets balance also as compare to the last year's balance (Chandrangsu & Rasmussen, 2011).

By analysing the statement of financial position it is also get to know that there is fall in their current liabilities as the short term loan get paid off by them that helps in reducing their overall liability and lower down the risk factor. But on the other hand there is increase in the non-current liabilities as there is increase in the balance of the long term loans and borrowings that hampers the long term financial position and increase the risk factor in long term survival (Lin & Yang, 2012).

The equity capital balance get increased as the amount of reserve funds get increased subsequently that get utilised for distributing dividend among their shareholders (Lin & Yang, 2012).

Income statement: -

By analysis the income statement of 2015 it get observed that they are not performing effectively as all the fixtures get reduced as compare to the fixtures of the 2014. In 2015 they fail to maintain the level of sales of 2014 as their sales get dipped down by 0.65%. The decrease in sales results into decrease in their revenues share. Along with this there is also decrease in the cost of goods sold as it get decreased by 3.26% as compare to their last years cost of goods sold (El-Dalabeeh, 2013). The decrease in cost of goods sold somewhat affect the revenues as required sales didn't get made that results into decrease in revenues. The favourable thing is that there is decrease in the expenses too as the expenses incurred in the year 2015 were lesser than the expenses incurred in 2014. This is the only thing that results into favourable condition otherwise all results are negative. There is effective increase in their earning per share as it get increase by 48.20% as compare to their last year's earnings per share (Lin & Yang, 2012).

Cash Flow statement: -

The balances of the cash flow activities are not satisfactory as the all three balances yields negative balances but their description are different such as: -

Cash flow from operating activities: There is fall noted down in the balances as there is fall of around 17.54% in the balances of cash balances from the operating activities as compare to the last years balance (Stone, et. al., 2013).

Cash flow from financing activities:There is huge fall in the balance as it become negative in the year 2015 whereas  in 2014 it attain high positive balance. The fall is of around 120.85% (Stone, et. al., 2013).

Cash flow from investing activities: There is decrease in the negative balances as compare to the last years balance and the overall fall is of 52.04%.

The overall balance of the cash statement get significantly increased in 2015 as compare to the 2014. The ratio of increase in balance is 31.99% (Pazarceviren, et. al., 2015).

Part 4 Recommendations

On the basis of the above conclusion it get concluded that Boral Ltd. is facing some issues related to their sales, cash transactions and others. The recommendations are as follows such as: -

1. They need to manage their cash transactions with the use of effective cash budgets so that they didn't attain negative balances.

2. They need to increase the ratio of cash sales that helps in decreasing the balance of inventories as well as accounts receivables (Ahrendsen & Katchova, 2012).

3. Increase in cash sales helps in increase in the revenues earned.

4. They need to control their prices that helps in getting effective profits out of their sales.

5. With the effect of control over the cash transactions there is effective control put over the cash transactions and get control over the inflow and outflow of cash and liquid funds.

6. There is effective need of lowering the non-current liabilities so that they can strengthen their financial strength (Uechi, et. al., 2015).

7. They also need to control the balances of the non-current assets as it decreases the share of the current assets.

Part 5 References

Ahrendsen, B.L. & Katchova, A.L. 2012, "Financial ratio analysis using ARMS data",Agricultural Finance Review, vol. 72, no. 2, pp. 262-272.

Cable, J. 2010, Building a green future--brick by brick: Boral Bricks leads the way in placing the ancient craft of brick making on the cutting edge of sustainability, Penton Media, Inc., Penton Business Media, Inc. and their subsidiaries.

Cartney, D. 2011, Strategic financial analysis & cashflow for company directors, Thomson Reuters, Pyrmont, N.S.W.

Chandrangsu, T. & Rasmussen, K.J.R. 2011, "Structural modelling of support scaffold systems", Journal of Constructional Steel Research, vol. 67, no. 5, pp. 866-875.

El-Dalabeeh, A.K. 2013, "The Role of Financial Analysis Ratio in Evaluating Performance: (Case Study: National Chlorine industry)", Interdisciplinary Journal of Contemporary Research In Business, vol. 5, no. 2, pp. 13.

Hasan, M., Zhang, M., Wu, W. & Langrish, T.A.G. 2016, "Discounted cash flow analysis of greenhouse-type solar kilns", Renewable Energy, vol. 95, pp. 404-412.

Hay, D.L. & Hay, G.A. 2015, "Areeda–Turner “Down Under”: Predatory Pricing in Australia Before and After Boral", Review of Industrial Organization, vol. 46, no. 3, pp. 269-286.

Kardos, A.J. & Durham, S.A. 2015, "Strength, durability, and environmental properties of concrete utilizing recycled tire particles for pavement applications", Construction and Building Materials, vol. 98, pp. 832-845.

Lin, C. & Yang, T. 2012, "Validation the Role of Previous Information in Predicting TSE Corporation Bankruptcy", Procedia - Social and Behavioral Sciences, vol. 57, pp. 560-565.

Pazarceviren, S.Y., Ozsuer, U. & Dede, B. 2015, "A MODEL SUGGESTION FOR CASH CONVERSION OF INVENTORYAND BASEMENT OF MODEL FINANCIAL RATIOS ANALYSIS", European Scientific Journal, .