The paper "Accounting for Decision Making" is a wonderful example of a case study on finance and accounting. The assets of the company are financed by the shareholders and company revenue. It is also noted that no significant breach on the company’ s controlled assets was reported which is very commendable. Company profitability and financial position. The company had a net profit of $59.6 million for the financial year ended 30th June 2010. This was despite the cessation of M4 concession. There was an increase in toll revenue by 0.9% to 684.4 million which reflected a traffic growth in all the company’ s assets.
The financial position is stable as the management continues to focus on cost control. The necessity of reading the annual reports. Annual reports should be read thoroughly and understood as they give the actual company’ s position and its future. It shows the company’ s ability, what the company own and how it operates Non financial information contained in the financial report. A-List of company directors. Statements from the key company executives. B. statement of cash flows 1. Cash from operating activities Cash from operative activities = 355,782,000 Operating profit (loss) after tax = 59, 605,000. They are not similar and can only be similar when the operating profit after tax is adjusted.
The adjustment can be made by adding a depreciation charge for the year and also provision created in the year and deducted provision released in the year. The adjustment is made to; non-cash expenses and noncash revenue, non-operating items, and timing difference between net profit and cash flow. 2. Cash from operating activities for 2009 and 2010. 2009 320,027.000 2010 355,782,000 Cash from operating activities in 2010 is higher than in 2009 Operating activities are activities that bring revenue to the company while operating cash flow is close to net profits.
Examples include receipts from the sale of goods, tax commissions, royalties, payment to employees and suppliers. An increase in cash from operating activities in 2010 shows an increase in the activities. 3. Money was spent on investing activities. 2009 338,508,000 2010 175,383,000 The amount of money spent on investing activities dropped in 2010 compared to 2009 Investing activities are the acquisition and disposal of a long-lasting tangible and intangible asset. Cash flow from investing activities indicates a downsize or expansion of operating capacity.
There was a downsize in operating capacity in 2010. 4. Financial activity undertaken. The financial undertaken in the financial year included; issues of stapled securities, sale of treasury securities, borrowings, Repayment of borrowings, Loans to associates, paying group’ s security holders, and paying non-controlling interests. There was an increase in the activities undertaken compared to the previous year. 5. Amount paid to shareholders. The amount paid to the shareholders was $295,901,000. activity2: financial Extracts Vertical analysis from the income statement extract The percentage figures for each year are expressed in terms of total sales for the year.
The cost of sales for 2010 is calculated as [(261,000 / 555,000) × 100 = 47.03] common-size percentage 2010 2009 2008 sales 555000 465000 405000 100 100 100 cost of sales 261000 210000 174000 47.03 45.16 42.96 interest 25500 13500 6000 4.59 2.9 1.48 income tax other expenses 90000 84000 81000 16.21 18.06 20 Balance sheet trend percentage trend percentage assets 2010 2009 2008 current assets inventory 27000 22500 25500 105.88 88.23 100 accounts receivable 93000 61500 46500 200 132.25 100 Total current asset 135000 90000 75000 180 120 100 noncurrent asset plant and equipment 210000 180000 165000 127.27 109 100 Total non current asset 315000 285000 225000 140 126.67 100 Total assets 450000 375000 300000 150 125 100 liabilities and equity current liability accounts payable 45000 25500 18000 250 141.67 100 total current liabilities 75000 60000 45000 166.66 133.33 100 total ncl 165000 120000 45000 366.67 266.7 100 total liabilities 240000 180000 90000 266.67 200 100 total shareholder fu 210000 195000 210000 100 92.85 100 The base year is set as 2008. The figures in the other years are expressed in percentage with the base year. The trend of the base year is 100%. A trend percentage greater than 100% means increase while a trend percentage of less than 100% shows a balance decrease (Asx Release 2010). Ratios Financial Strength and Liquidity: Working Capital: Current Assets - Current Liabilities 2008 75000-45000=30000 2009 90000-60000=300000 2010 135000-75000= 60000Working Capital Per Dollar of Sales: Working Capital /Total Sales 2008 30000/405000=0.074 2009 30000/465000=0.06451 2010 60000/555000=0.108Current Ratio=Total Current Assets / Total Current Liabilities 2008 75000/45000=1.6 2009 90000/60000=1.5 2010 135000/75000=1.8 Acid Test / Current Ratio: Current Assets minus inventory ÷ Current Liabilities 2008 (75000 – 25500)/45000= 1.1 2009 (90000 – 22500)/60000=1.125 2010 (135000 – 27000)/75000=1.44 Company's EfficiencyInventory Turnover: Cost of Goods Sold ÷ Average Inventory for the Period 2008 174000-25500= 148500 2009 210000-22500= 187500 2010 261000-27000= 234000 Management Report The above analysis shows a decline in the company’ s performance in 2009 compared to 2008 and this can be linked to the management.
There is also a recovered performance in 2010 from the decline in 2009 which can only be credited to the management. According to Sebastian (2000), the first role of the management in a company is to forecast, plan, and perform a variety of analyses. The management should review and control all the costs in the company. The decline in company performance in 2009 must have been a failure by the management to control cost-related factors.
Another role of the management is to prepare financial reports, report risks, and regulations which help them come up with useful financial reports. This must have been the case in the 2009/2010 financial year which saw a recovery from the previous year. The management should also ensure financial stability, through controlling the budget and giving profit-generating ideas. The managers should also be good motivators, team builders, be dynamic and be the overall in business growth and development (Goessl 2008).
Asx Release, 2010, Transurban Group 2009/10 Full-Year Results, viewed 3 September
Goessl, L. 2008, The role of management in business, viewed 3 September
Sebastian, N, 2000, Taking Control of IT Costs. London: Financial Times / Prentice Hall.