Assignment Accounting for Decision Making
Added on 2020-05-28
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Running head: ACCOUNTING FOR DECISION MAKINGINDIVIDUAL TASK COVER SHEETStudentPlease sign, date and attach cover sheet to front of assessment task for all hard copy submissionsSUBJECT CODESTUDENT FAMILY NAMEStudent Given NameJCU Student NumberASSESSMENT TITLEDUE DATELECTURER NAME TUTOR NAMEStudent Declaration1.This assignment is my original work and no part has been copied/ reproduced from any other person’s work or from anyother source, except where acknowledgement has been made (see Learning, Teaching and Assessment Policy 5.1).2.This work has not been submitted for any other course/subject (see Learning, Teaching and Assessment Policy 5.9).3.This assignment has not been written for me.4.I hold a copy of this assignment and can produce a copy if requested.5.This work may be used for the purposes of moderation and identifying plagiarism.6.I give permission for a copy of this marked assignment to be retained by the College for benchmarking and course review andaccreditation purposes.Learning, Teaching and Assessment Policy 5.1. A student who submits work containing plagiarised materialfor assessment will be subject to the provisions of the Student Academic Misconduct Requirements.Note definition of plagiarism and self plagiarism in Learning, Teaching and Assessment Policy:Plagiarism: reproduction without acknowledgement of another person’s words, work or expressed thoughts from anysource. The definition of words, works and thoughts includes such representations as diagrams, drawings, sketches,pictures, objects, text, lecture hand-outs, artistic works and other such expressions of ideas, but hereafter the term‘work’ is used to embrace all of these. Plagiarism comprises not only direct copying of aspects of another person’swork but also the reproduction, even if slightly rewritten or adapted, of someone else’s ideas. In both cases, someoneelse’s work is presented as the student’s own. Under the Australian Copyright Act 1968 a copyright owner can takelegal action in the courts against a party who has infringed their copyright.Self Plagiarism: theuse of one’s own previously assessed material being resubmitted without acknowledgement orciting of the original. Student Signature............................................................ Submission date ......../......../........
ACCOUNTING FOR DECISION MAKING1Table of ContentsContent Development & Analysis:............................................................................................4Introduction:...............................................................................................................................4Data Manipulation & Presentation:............................................................................................4Comparative ratio analysis:........................................................................................................4Profitability analysis:.................................................................................................................4Asset efficiency Analysis:..........................................................................................................5Liquidity Analysis:.....................................................................................................................6Capital Structure ratios (Gearing):.............................................................................................7Limitations:................................................................................................................................7Conclusion & Recommendations...............................................................................................8Conclusion:................................................................................................................................8Recommendations:.....................................................................................................................9Reference List:.........................................................................................................................10Appendix:.................................................................................................................................11Ratios:......................................................................................................................................11Site Group International:..........................................................................................................11National Storage Australia:......................................................................................................13Horizontal analysis of income statement:................................................................................16Horizontal Income Statement Analysis:...................................................................................19National Storage Australia:......................................................................................................19Horizontal analysis of balance sheet:.......................................................................................22Vertical analysis of income statement: Site Group International Ltd......................................25Vertical analysis of balance sheet: Site Group International Ltd.............................................27
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ACCOUNTING FOR DECISION MAKING3Content Development & Analysis:Introduction: The current report is based on the assessing the financial performance of the twocompanies namely the Site Group International Ltd and National Storage Australia. Theprimary reason for considering the ratio is to determine the overall performance of both theorganization. The profitability ratio, liquidity ratios, asset efficiency ratio and capitalstructure ratio will be calculated along with the horizontal and vertical analysis will be carriedout to summarize the overall conditions of the organizations. The report will be evidentlyputting forward the profit and loss situations to express the present state of affairs. National storage Australia is considered as one of the leading self-storage providers ofAustralian and New Zealand having more than 110 centres offering solutions of storage tomore than 35,000 residential and commercial customers throughout both the nations(nationalstorage.com.au, 2018). During the year 2013 the national storage Australia waslisted on the Australian stock exchange and the company was better known as Storage Reit.On the other hand, the site group international limited offers training, education andworkforce services to the government, corporate and individual clients in Australia andacross the world (site.edu.au, 2018). The company functions in a segmental manner andassess candidates in the areas of mining, processing, etc through the site institute.Data Manipulation & Presentation: Comparative ratio analysis: Profitability analysis: The profitability ratio helps in measuring the overall profitability situation of theorganization for a certain period (Williams, 2014). The profitability ratio is based on theassessment of the gross profit margin, net profit margin and return on equity. An organizationprofitability situation or the in sufficient liquidity helps in determining whether the firm canobtain sufficient amount of debt and equity t finance its business and maintain the position ofliquidity. The return on equity represents the measurement of the profitability, whichdetermines the amount of profit generated from one unit of equity. The return on equity helpsin reflecting every dollar of sales represented by its profit and the same is computed by
ACCOUNTING FOR DECISION MAKING4dividing the operating income from net revenue (Deegan, 2016). As evident from thecomputation the return on equity for Site group International represents the negative trend asthe company reported the net equity of 24% during the year 2016 which subsequently stoodnegatively in 2017 to -186%. Hence, for investors making an investment in this firm couldturn out to be risky since the company has posted a fluctuating trend of return on equity. On the other hand, National Storage Australia reported a positive return on equity of14.1 in 2017. Though the company reported a negative profit in the year 2015 of -6%however, it gained strength in 2017 as it reported a gross profit of 6%. A marginal fall inprofitability does not creates large impact on the return on equity since National storageAustralia is making sufficient amount of profit to provide return to its shareholders. The profit margin represents the measure of value of every dollar of sales that resultsin profit. The proportion of higher net profit generated by a firm represents that the firm hasbeen sufficiently its sales in profit (Warren & Jones, 2018). The gross profit margin of Sitegroup international ltd represented a positive trend however, the gross profit margin in theyear 2017 declined from 87.8% to 75.2%. On the other hand, National storage Australiarepresented a better trend of profit margin with the gross profit margin reported stood 85.6%in 2017. Overall, it can be stated that even though National Storage Australia reported amarginally declining return on equity but the company reported a better profit than SiteGroup International. Asset efficiency Analysis: The asset efficiency ratio is regarded as the ratio that helps in determining theorganizations ability in converting its assets in to the assets and simultaneously convertingthe sales in cash (Bushman, 2014). The asset efficiency ratio generally varies industry wisesince it is relative to the investment made by an organization in its current and fixed assets.Following the detailed analysis, the asset turnover ratio for Site group represented a strongtrend with the ratio standing 0.97 in 2016. However, the ratio declined in 2017 to 0.48 but thecompany has been successful in making an efficient use of its assets. The national storage Australia on the other hand represented that the company hasbeen generating sales from its assets but the ratio stood relatively lower as the asset turnoverratio for National Storage Australia stood 0.1 in 2017. The inventory turnover ratiodetermines how quickly an organization convert its inventory into sales. Similarly, theinventory turnover for Site group international reported an inventory turnover of 175.65 and
ACCOUNTING FOR DECISION MAKING5156.1 in 2016 and 2017 respectively. While National Storage Australia reported a lowerinventory turnover of 25.91 and 29.0 respectively. It can be said that National Storage hasbetter inventory conversion rate than Site Group international.The receivables turnover places emphasis on how quickly and efficiently anorganization converts its accounts receivable in cash (Henderson et al., 2015). Thereceivables turnover helps in determining the efficiency of the relative strategy of anorganization to debt. The accounts receivables generally arises from the credit sales made byan organization and requires greater attention since it is directly related to the cash flow. Thereceivables turnover for Site group international reported during 2016 and 2017 stood 140.92and 340.86 respectively. This represents that the company has not be effective in collectingcash from its customers and consequently resulting in lower inflow of cash. National Storage Australia reported a better accounts receivable turnover of 25.91 and29.0 in 2016 and 2017 respectively. This represents that the National storage Australia hasbetter collection period than Site group International. Based on the analysis a conclusiveevidence suggest that Site Group International has better asset turnover but have not reportedbetter receivables turnover. Whereas, National Storage Australia has better accountsreceivable turnover with moderate asset turnover. Liquidity Analysis: The liquidity analysis measures the organizations ability in paying its short-term debtobligations and meeting the uncertain need of cash (Pratt, 2016). Focus of liquidity analysis ison the working capital of a firm representing the excess value of current assets and currentliabilities. Current ratio, quick ratio and cash flow ratio is regarded as important tool indetermining the liquidity position of an origination. The firm prefers a higher current ratio buta much higher current ratio will not be considered efficient since it represents the pile ofunprofitable assets, receivables or inventory (Macve, 2015). The current ratio for Site groupinternational for the year 2016 and 2017 stood 1.29 and 0.42 representing a falling trend ofcurrent ratio. The quick ratio too represented a falling trend as the quick ratio reported by thefirm stood 1.28 and 0.38 respectively. On the other hand, the current ratio for National Storage Australia for the year 2016stood 0.68 and 0.88 respectively with the company showing a positive trend of growth. Thequick ratio too represented a similar trend of growth with ratio standing 0.59 and 0.67respectively. Considering the cash flow ratio Site group International reported an inferior
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