Accounting for Managerial decision making PDF
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Added on 2021-06-18
Accounting for Managerial decision making PDF
Added on 2021-06-18
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ACCOUNTING FOR MANAGEMENT DECISIONMAKING1
ContentsIntroduction......................................................................................................................................31.Outline the method used in presenting the statement of cash flows for each company. If thedirect method is used, identify whether an appropriate reconciliation has been reported in thenotes to the accounts........................................................................................................................32. Examine the information in relation to cash flow from operating activities, cash flow frominvesting activities and cash flow from financing activities retrieved from the Wesfarmers Ltdand Woolworths Ltd financial reports.............................................................................................43. Undertake an analysis of the cash flow information given for Wesfarmers Ltd and WoolworthsLtd. Include in this analysis the computation of measuring Cash Adequacy Ratio, Cash FlowRatio (Liquidity), Debt Coverage Ratio (Solvency), Cash Flow to Sales Ratio (Profitability)......64. Based on the analysis, you are required to make conclusions and recommendation which willanswer the following questions:....................................................................................................11a. Which business would you expect to be a bettershort-termcredit risk?...............................11b. Do you think both companies have adequate cash resources?..............................................11c. Assess both companies’ ability to survive in the longer term...............................................11d. Which company is better at generating cash from their sales revenue?................................12Conclusion.....................................................................................................................................12References......................................................................................................................................142
Introduction In this report analysis of financial position and financial performance of Wesfarmers Limited andWoolworth Limited has been undertaken. Financial statement analysis helps in deciding financialposition of business organisation by using ratio analysis. Australian retail industry is very vastand fluctuating in nature. In this report, ratio analysis has been used to analyse financialperformance by using financial statements i.e. income statement, statement of financial position,cash flow statement and notes to accounts. In this report, analysis of cash flow statement hasbeen done and method used to prepare cash flow statement has been identified... In this report,different a type of ratios has been calculated i.e. liquidity ratios, solvency ratios, profitabilityratios and cash ratios to analyse both the companies3
1. Outline the method used in presenting the statement of cash flows for eachcompany. If the direct method is used, identify whether an appropriatereconciliation has been reported in the notes to the accounts.The cash flow statement of both companies divulges all the inflow and outflow in the presentyear irrespective of the fact that whether it relates to the present year or not. Cash flow statementis the statement which reflects flow of cash (i.e. both inflow and outflow) in the businessorganisation. Wesfarmers Limited and Woolworth Limited both the companies are operatingtheir business operation in retail industry which shows high amount of cash inflow. These both companies Wesfarmers and Woolworths have been flowing direct method to preparetheir cash flow statement (Woolworths, 2018).Wesfarmers Limited: Indirect Method and Woolworth Limited: Indirect MethodThe cash flow from the operative activities is calculated by adjusting the non-cash expenses,losses and profit impaired by company which cannot be counted in cash terms. In addition tothis, disclosure of the all these three activities named, operating, financial and investing activitiesare made with a view to make business more transparent to stakeholders. The notes to financialstatements also contain several other details which reflect the key information which needs to bedisclosed to stakeholders. 2. Examine the information in relation to cash flow from operating activities,cash flow from investing activities and cash flow from financing activitiesretrieved from the Wesfarmers Ltd and Woolworths Ltd financial reports. AnalysisAfter analysing the cash flow statement of Wesfarmers Plc, it is evaluated that the maincash outflow from the business is made for the payment to suppliers for the goods andsalary paid to staff and employees (Wesfarmers, 2018).Depreciation, amortisation and impairment of assets have also been considered in theoperative activities of company. 4
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