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Report on Financial Statements of Caltex Australia Limited

   

Added on  2020-05-28

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Running head: ACCOUNTING FOR BUSINESSAccounting for BusinessName of the Student:Name of the University:Author’s Note:Course ID:
Report on Financial Statements of Caltex Australia Limited_1

1ACCOUNTING FOR BUSINESSExecutive Summary:The current report aims to evaluate the financial statements of Caltex Australia Limitedwith the help of horizontal and ratio analyses for three years ranging from 2014 to 2016. In orderto enhance the quality of analysis, Origin Energy Limited is chosen as the competitor to gain aninsight of the competitive position of Caltex Australia Limited in the Australian energy sector. Itcould be stated that in terms of profitability, liquidity and rate of return, Caltex is enjoyingcompetitive advantage over Origin Energy in the Australian energy sector. In addition, based onthe Australian regulations, the company develops its ethical standards by conforming to a greaterdegree of business risks. Thus, the investors are recommended to invest in the shares of Caltexfor maximising their overall return on investment.
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2ACCOUNTING FOR BUSINESSTable of Contents1. Introduction:................................................................................................................................32. Annual report analysis:................................................................................................................3a. Profit and loss analysis:...........................................................................................................3b. Balance sheet analysis:............................................................................................................5c. Cash flow statement analysis:..................................................................................................63. Ratio analysis:..............................................................................................................................7a. Profitability analysis:...............................................................................................................7b. Efficiency analysis:..................................................................................................................9c. Liquidity analysis:..................................................................................................................10d. Rate of return:........................................................................................................................124. Corporate governance and ethical standard:..............................................................................14a. Code of conduct:....................................................................................................................14b. Approach of the manager to the risks:...................................................................................145. Conclusion:................................................................................................................................14References and Bibliographies:.....................................................................................................16Appendices:...................................................................................................................................18
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3ACCOUNTING FOR BUSINESS1. Introduction:The current report aims to evaluate the financial statements of Caltex Australia Limitedwith the help of horizontal and ratio analyses for three years ranging from 2014 to 2016. In orderto enhance the quality of analysis, Origin Energy Limited is chosen as the competitor to gain aninsight of the competitive position of Caltex Australia Limited in the Australian energy sector.The organisation is established in 1990 and it is headquartered at Sydney, Australia. Theorganisation is involved in buying, refining, distributing and marketing of the petroleum goods inAustralia and Singapore. The main products of Caltex Australia Limited constitute of petrol,diesel, auto gas, motor oil and lubricants along with convenience stores (Caltex 2018). UntilMarch 2015, Chevron was the owner of 50% shares of the organisation and the Australianshareholders own the remaining 50%. However, after that period, Chevron sold its shares of theorganisation to the Australian shareholders. 2. Annual report analysis:a. Profit and loss analysis:In order to analyse the profit and loss position of Caltex Australia Limited, the horizontalanalysis of its income statements has been conducted and it is compared with that of EnergyOrigin Limited (Refer to Appendices, Appendix 7 and Appendix 8).
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4ACCOUNTING FOR BUSINESS-2000.00%-1500.00%-1000.00%-500.00%0.00%500.00%1000.00%1500.00%2000.00%2500.00%3000.00%Percent change in gross profit, operating expenses and net incomeGross profitTotal operating expensesNet incomeFigure 1: Percent change in gross profit, operating expenses and net income(Source: Caltex 2018; Originenergy.com.au 2018)According to the above figure, it could be stated that although gross margin of theorganisation increased by 43.95% in 2015; however, the decline is considerable in 2016 by -962.27%. This is because the cost of goods sold of the organisation has increased considerably,while it has failed to conduct adequate sales due to falling demand in the market (Alammar andKohn 2016). The trend is similar in case of Origin Energy Limited; however, it has positive grossincome over the years. On the other hand, the operating expenses of Origin Energy haveincreased, while Caltex has experienced operating income in the form of other operating income.Finally, the net income of Caltex has increased considerably over the three-year period, while thesituation is just reverse in case of Origin Energy due to greater operating costs. Hence, in termsof profitability, Caltex is enjoying competitive advantage over Origin Energy in the Australianenergy sector.
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5ACCOUNTING FOR BUSINESSb. Balance sheet analysis:In order to analyse the financial position of Caltex Australia Limited, the horizontalanalysis of its balance sheet statements has been conducted and it is compared with that ofEnergy Origin Limited (Refer to Appendices, Appendix 9 and Appendix 10). -40.00%-30.00%-20.00%-10.00%0.00%10.00%20.00%Percent change in total assets, total liabilities and total equityTotal assetsTotal liabilitiesTotal Stockholders' equityFigure 2: Percent change in total assets, total liabilities and total equity(Source: Caltex 2018; Originenergy.com.au 2018)In accordance with the above figure, it could be stated that the total asset base of Caltexhas fallen by 0.47% in 2016; however, it has increased by 3.88% in 2016. On the other hand, thesituation is just reverse for Origin Energy, in which the total assets have increased by 7.16% in2015; however, it has fallen to 13.39% in 2016. In case of total liabilities and total equity, thetrend is just the opposite, as the investors are interested to invest in the shares of Origin Energydue to higher returns on investment. Hence, in terms of financial position, Origin Energy isslightly in a better position in the Australian energy sector in contrast to Caltex AustraliaLimited.
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