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This report is prepared on the Domino’s Pizza Enterprises Limited with a motive to identify the underlying issues in their financial statements. This organization is dealing under the food and beverages industry, and is the largest among all the food and beverage providers. It has almost 1900 stores in the belt of Australia, New Zealand, France and Belgium. The Domino’s was the first service provider who offers home delivery in Australia. The first store in Australia was opened in Springwood, Queensland with a tie up with Silvio’s Dial a pizza and later this organization merged and combined as Domino’s Enterprises. There is an interesting story behind the name of the organization and the dots in their logo. There were two partners initially James and Tom who started this business in the year 1960, but James left this business and forbade Tom using the name they have decided at that time which was Dominick’s (Alin-Eliodor, 2014). Hence the Domino’s name came in existence. The three dots were the three stores which were opened in the initial time and were planned as piercing the dot in the logo each time the organization will be opening a new store. But due to the massive recognition and growth they dropped this idea and started with the same three dot logo. This report is evaluating the factors of the growth of the business and the issues in their financial statements with the comparison of their financial statements with the organisation itself and the industry to get the useful and desired data.
This section will cover the backbone of the report. Here we have categorized these sections in the major four elements which will provide us the platforms to identify the issues and making the issues addressed. These sections will be analysed and evaluated separately with their financial statements and the financial statements will be attached in the appendices for a thorough and deep study. The financial statements are all together very necessary component of the business. They provide the history of the business with the transactions. These can be relied upon as these are prepared with a motive to get profits. The financial statements also help the business in getting proper recognitions and proper adequacy within the business operations. They also helps in making the transparency and ethical practices surrounded in the business as the financial statements are prepared with the involvement of GAAP, AASB principles which are universally recognized and are approved by the professionals like CPA or financial analyst (Cucchiella, D?Adamo & Rosa, 2015). There may be some defects while preparing the financial statements with an intention or unintentionally. The unintentionally defects are generally eradicated with a resolution passed. But the intentional defects if scrutinized create a huge gap in society and the organization. The organization needs to pay penalties for that and even they can be charged according to the criminal laws of the country.
The first statement we are discussing here is the statement of financial position. This statement covers the balance sheet which is the major section of the financial statements. This statement provides us all the details related with the assets and liabilities of the business. Here we are picking some useful information from the financial position of the organization to get the adequacy of the financial statements, although we have included a copy of the financial position in the appendices 1, where we can further elaborate it or can utilize more figures in case of any assistance. The figures are presented in the below table.
Statement of Financial Position of Domino’s Pizza Enterprises Limited
Total Current Assets
Total Non-Current Assets
Total Current Liabilities
Total Non-Current Liabilities
Total Stockholder’s Equity
(DMP Annual Report, 2016)
(Full financial position attached in Appendices 1 in appendices section)
Comparative Financial Condition:
The financial condition according to the financial statements figures depicted over here are strengthened and sound. The business is doing well with its performance. There is control on the investments and the working capital proves to be adequate in the respect of the business. The percentage change in total current assets and non-current assets with their respective previous year’s transactions is huge which a good sign of business is. The stockholders equity has increased to 30% almost which is a positive sign for owners and investors. The business is doing well and the shareholders and investors seem to be happy with the results. The non-current liabilities are also increased simultaneously with a great percentage which is a dark sign of accounting. Its increased over 141% which is huge and hence the results of positivity in the current assets are due to the liabilities which are taken upon. This statement is providing us a balance nature judgment where one side is fruitful and other side is disguised. Hence we will take the extraordinary non-current liabilities increased as negativity in the financial position.
The stockholders equity is another section which provides is details related with the stocks, owners’ equity and the retained earnings in the business. Its owners wealth which is invested in the business and hence the right of the profits and losses retains with them according to their proportion. This section truly provides us the details of the owner interest in the business. If they have invested their own money with the medium of share purchase it means they are more concerned to the process not dividing or distributing the rights, but if they have invested the money via the medium of open share trading or stock or loans which means they are distributing the participation rights to the external or other related business parties.
Stockholder’s Equity balances of DMP
Total Stockholder’s Equity
Total Outstanding Shares
(DMP Annual Report, 2016)
With the above analysis we can observe that stockholder’s equity is consistently and sharply increased to 30%. We have identified one reason in the first section of the report which was extraordinary increment in the non-current liabilities which inject the funds in the business, and might be that can be one of the reason in increasing the owner’s equity in that instance. Further with this section we are observing that total outstanding shares are also increased which means the company has gathered funds by issuance of shares. Almost 75.80% of the shares from the last held shares were out rightly issued for public for gathering the funds. This can be one of the great reasons for increasing of the owner’s equity as the share funds are directly added in the capital structure and make the increment in the owners’ equity. Hence with this section we are again getting leaks in the business and defects in the financial analysis, where the sound position of the company as per the financial tools are kept under consideration and these should be revised again before getting the adequacy of investments. According to the evaluation the business is not as per the standards of performance up till now.
The statement of profit and loss helps the business in identifying the expenses and receivables for the business. It tracks all the transactions related with these heads at one place and determine the net profits for the business. The determining of the net profits is equally important for the business to gather and attract the institutional investors and making the right choice of available alternatives of investments. This profit and loss statement also provides the details related with the depreciation and taxation charged over the business which identified the actual amount of the funds distributed among the shareholders and helps in determining the earnings per share.
Statement of Profit and Loss of DMP
Total (operating) revenues
Cost of Goods sold
Total Expenses (before income tax)
Any non-operating gains and losses
Earnings per common share
(DMP Annual Report, 2016)
(Full statements attached in Appendices 2 and 3 in appendices section)
Comparative Financial Operation
The financial operation based on the above figures can be analysed at good tempo and adequacy. As the revenues are increased with 30.89% which is a positive sign for business, the cost of goods sold is increased with 37.48% and in the proportion the revenues are really fine and decent with reasonable amount of increment. The total expenses are increased at proportionately less rate for example, the revenues are increased at 30.89% and the expenses are increased at 33% which is a great sign for the business. There is another head related with the non-operating gains and losses which is again an additional benefit to the business as it is tax free element. The earnings per share have increased to 82,428 from the previous of 64,048 with a 29% increase. This section provides us feasibility and adequacy of the usage of the issuance of the new shares which can be taken as the funds required establishing the new locations or expanding the business which is a sign of growth and development. Overall the section C is favourable as per the financial analysis of the business.
The Cash flow statement of the business provides all the related aspects of the cash flow positions which allow us to analyse the operating cash and expenses of the business. This helps us in determine the working capital analysis. This provides the details of the business cash indulged in different activities which are investing, operating and financing. Also it provides us the relation with cash and cash equivalents with the net increase and decrease in the cash during the year. This is also a verification method of the cash flow statement where the balance of the cash available should match with the balance sheet transaction of cash availability.
Cash Flow of DMP
Net cash inflow (outflow) from operating activities
Net cash inflow (outflow) from financing activities
Net cash inflow (outflow) from investing activities
Net increase (decrease) in cash during the year
(DMP Annual Report, 2016)
(Full statements attached in Appendices 4 in appendices section)
Cash Position of the Company
The cash position from the above analysis founds to be accurate and sound of the business. There are many reasons with the cash analysis in which the non-current liabilities increment and the issuance of the new shares are the prime reasons. But when we observe the operating activities cash we analysed that it is increased with 21.15% which is again a good sign and company is controlling the operating expenses. As organization has issued new shares hence the financing activities are in negative but a positive sign here is with the investing activities. These were in negative last year but now are in positive with a huge hike of 584%. This is in favour of the business and is increasing their assets and capital structure. Further this will help the business in increasing their market worth. Lastly, the cash increase is also approx. 542.12% which is good for business but can be possible with the left out funds or unutilized funds from the finance raised. But overall this section has good adequacy with the financial statements proving the sound structure and transparency in the process.
With above all arguments and justifications finally here we are concluding that the business has control over their operations. They are not biased with any data or transaction, and provided all the related figures and fixtures with honesty and transparency. There are some key points which can be discussed as a part of conclusion which can be taken care by the organization at the time of financial planning but cannot be considered as defects in the organization. These are the organization policies related with the funds utilization (Grimm & Blazovich, 2016). They have efficiently utilized all their funds but if they can plan it better there may be a better option without raising the equity or non-current expenses for the year. They can use the funds investing options in the meeting of their operating expenses. This will provide them an opportunity not to call money from the equity raising option either they cannot increase the non-current liabilities. These both options will not undervalue the financial statements and hence the liabilities sections will be undermined this year also (Ishibashi, Iwasaki, Otomasa & Yada, 2016). This helps the organization in attracting the funds to the business from the institutional investors as they will not get liabilities which proved the sound and adequacy of the structure in the business.
Rest with the discussions above we have observed that the organization is well to do business. They have raised the liabilities as per the business requirements of the business expansion. In the annual report there are several evidences of taking over the different business of food and beverages in Australia. This helps us in understanding that the business financial statements are providing a true picture where they are evaluating the consistency factors of the business performance (Lim & Noh, 2015). The actual financial position in the cash flow statement and profit and loss statements are really reasonable as per the business is considered. The stockholders equity is also found to be decent with the 30% increase which provides their confidence and trust in the business. The shareholders are satisfied with the business and there is no recent change in the hierarchy or board of directors. The business is in good hands and the administration is working on the operations of the business far better than the expectations (Longinidis & Georgiadis, 2011). The business financial statements are providing true evidences of the cash and cash equivalents and the effectiveness and efficiency of the business. This report is also including recommendations sections for the further growth and development of the business.
There are several recommendations for the business to make the progression of the financial statements more sound and adequate. They can use the financial statements predictions in the terms of growth and development. We have divided the recommendations in three major segments which will provide an idea how they can contribute better in the business and make the significant difference in the underlying issues in the financial statements (Nazal, 2015). The above predictions of the financial statements provide us the fair and reasonable data from the financial analysis which is highly positive for the organization. But these recommendations are based on the financial analysis done above to make the financial position one step forward with what it is right now. Classification of the recommendations is as follows:
a. Liquidity: The organization is though using the financial instruments quite perfect but there are several instruments which can be invested well to make the fair usage of the financial statements (Puri, 2014). Like the cash available in the business is approx. 15 million which is very high and business can invest this component in any decent place to get more return.
b. Efficiency:The organization can be more efficient by taking the depreciation in double declining method as it will write off the assets in less time and providing the funds and provisions adequately to the business. These funds can utilize in the proper growth and development of the business and organization. The process will be dynamic and reasonable after including these components.
c. Profitability: The profitability of the business can be increased by the various factors of financial analysis (Swamy, 2014). Organization should work on the cloud computing and ICT enabled technologies which will change the obsolete and legacy techniques and help the organization in cost effective procedures.
Lastly I would like to end the recommendations part with the implementation of the above discussed assumptions so that business can get adequate benefit and DMP organization can be more successful and developing. These measures will also provide them adequate and reasonable recognition where they can explore more opportunities for business. It will also help them in expansion of their business to different sites and locations.
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