Accounting for Managers - Metcash Limited

This presentation discusses the accounting practices and financial performance of Metcash Limited, a leading wholesale distribution and marketing company in Australia. It covers topics such as principle activities, revenue recognition, valuation of property, plant and equipment, audit, sustainability, efficiency, profitability, and debt position.

Accounting for managers
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Question 1 – Principle activities
Metcash Limited was established in the year 1920 in
Macquarie Park, Australia. It is based in is engaged in
wholesale distributing and marketing for liquor,
hardware segments, foods and grocery. The food and
grocery sector of the entity provides wide range of
services and products related to food and grocery to
convenient retail stores and independent supermarket.
Company’s liquor segment is engaged into distribution
of the liquor products to hotels and retail outlets
(Metcash | Australia’s leading wholesale distribution and
marketing company 2019).
Part A

Question 2 – Revenue recognition
The company recognizes the revenue to the extent it is
apparent that economic benefits will be inflow to the
entity and the amount of the revenue can be measured
reliably. Further, following recognition criteria shall be
met for recognising the revenues –
Sale of the goods – revenue generated from sales of
the goods are recognised after the significant risks and
the rewards related to ownership of goods are
transferred to buyer.
Rental incomes – rental income received are
accounted on straight line basis over the lease term
and are categorized as other income. It is recorded as
income under the period in which it was received
(Metcashannualreport.com 2019).
Supplier income – income received from the suppliers
on the basis of purchase volumes, marketing and
promotional or same kind of activities are recognised
under the income statement as income, after sales of
product.

Question 3 – valuation of property, plant and
equipment
All classes of the property, plant and the equipment are
valued at cost reduced by the amount of accumulated
depreciation and amount of accumulated impairment, if
any.
Question 4 – Audit
Audit for the year ended 2018 was carried out by Ernst &
Young.
Auditor shall declare the independence to ensure that
audit opinions expressed by them are not influenced by
any of the relationships among them. Auditors are
expected to express honest and unbiased professional
opinion regarding the financial reports.

Question 5 – Sustainability
Evidence that proves company’s commitments or
initiative towards sustainability –
As per the information given in page number 9 under
Strategic focus, the Successful Working Smarter
program is now in the final years and will be embedded
into the company’s focus for ensuring that they have
sustainable cost structure (Metcashannualreport.com
2019).
During 2017, Metcash and its independent retailers
decided to eliminate sale and distribution of plastic
bags with single use by 30th June 2018. During 2018
April, the entity joined Soft Plastic Working Group from
Australian Packaging Covenant to collaborate with the
industry partners and government for reducing soft
plastic usage.

PART B
Question 1
Efficiency -
Explanation of efficiency ratio
Account receivable ratio – it indicates the number of times
the entity is able to turn its account receivable into cash for
the particular period under consideration. As the number
reduced from 13.25 times to 12.29 times efficiency of the
company is reduced.
Asset turnover ratio – it measures the efficiency regarding
usage of assets for generating sales and hence, higher ratio
is better. As the number reduced from 3.88 to 3.78 efficiency
of the company is reduced (Miller-Nobles, Mattison and
Matsumura 2016).

Profitability
Explanation of profitability ratio
Both the ratios above are used for analysing the
profitability position. Though the gross profit has been
increased, the net profit for 2017 reduced to net loss for
2018. Hence, the profitability position of the entity
deteriorated (Ehrhardt and Brigham 2016).

Debt position
Explanation of debt ratio
As both the ratios shown in the above table is
indicating that the ratios have been increased it can
be stated that the debt position is deteriorated as the
company became more dependent on debt (Fitri,
Supriyanto and Oemar 2016).

References
Collier, P.M., 2015. Accounting for managers: Interpreting accounting
information for decision making. John Wiley & Sons.
Ehrhardt, M.C. and Brigham, E.F., 2016. Corporate finance: A focused
approach. Cengage learning.
Fitri, M.C., Supriyanto, A. and Oemar, A., 2016. Analysis of debt to equity
ratio, firm size, inventory turnover, cash turnover, working capital
turnover and current ratio to profitability company (study on mining
companies listed in bei period 2010-2013). Journal Of Accounting, 2(2).
Metcash | Australia’s leading wholesale distribution and marketing
company., 2019. Home - Metcash | Australia’s leading wholesale
distribution and marketing company. [online] Available at:
https://www.metcash.com/ [Accessed 4 Jan. 2019].
Metcashannualreport.com., 2019. [online] Available at:
https://metcashannualreport.com/images/pdf/2018_Metcash_AnnualRepor
t.pdf [Accessed 4 Jan. 2019].
Miller-Nobles, T.L., Mattison, B. and Matsumura, E.M., 2016. Horngren's
Financial & Managerial Accounting: The Managerial Chapters. Pearson.
Salas, O.A. and Campos, M.J.S., 2016. Finance and Accounting for
Managers (Vol. 28). Profit Editorial.