Analysis of Annual Financial Reporting and Company Capital Structure

This report analyzes the annual financial reporting of a company and its capital structure. It discusses the items in the statement of cash flow, company's performance based on earnings per share, material movements in the statement of changes in equity, and items recorded as non-current liabilities. It also explores the advantages and disadvantages of different sources of capital. The report emphasizes the importance of disclosure of financial information by public companies.

An analysis of annual financial reporting and a company capital structure.

EXECUTIVE SUMMARY
The project summary lists of financial elements found in the annual statement of the owner
and the liability portion of company WOW listed on the ASX. The report also summarise the
importance of disclosure of financial information by public companies as it enables investors to
make meaningful decision to make investment decision.

Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
PART A...........................................................................................................................................4
1. Analysis of items in the statement of cash flow and identify item(s) which relate to the
balance sheet...........................................................................................................................4
2. Company’s performance based on Earnings per Share (EPS)...........................................5
3. Discussion of EPS as a useful performance indicator........................................................6
4. Explanation of material movements in the statement of changes in equity.......................6
5. Items recorded as Non-Current Liabilities.........................................................................7
6. Discussion of potential advantages and disadvantages of each source of capital..............7
PART B............................................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
The word accounting plays an important role for effectively handling monetary operations
with each and every category of organization (Krasodomska and Cho, 2017). Corporate
accounting may be characterized as a form of accounting related to the compilation of all sorts of
financial information as well as the preparing of financial statements in order to handle the
financial capital (Crowther, 2016). It is necessary to note that businesses are legally forced to do
this form of accounting. Whereas financial accounting is linked to the order to prepare of
organizations' final accounts and becomes an essential proper management methodology. In
order to better understand the importance of corporate and financial accounting WOW
(Woolworth) have been selected.
In this report, part a comprise item of cash flow and balance sheet, EPS as performance
indicator, non-current liabilities and movement, benefits and drawbacks of capital sources. In
addition part b include discussion about the benefit of disclosing comparative information in the
annual financial reports to users, including key decision makers or external users, such as
investors.
PART A
1. Analysis of items in the statement of cash flow and identify item(s) which relate to the balance
sheet
From the annual balance sheet of Woolworth it has been determined that not all items of
cash flow are reported in the annual balance sheet. However there are some important items of
cash flow needed to prepare the annual statement in order to get the detail understanding about
the overall financial position for respective year. These items are Changes in Working Capital,
Capital Expenditures, Debt Issuance, Equity Issuance and also Opening Cash Balance (Prior
Period Balance Sheet). From the cash flow statement the balance of change in working capital
for both year shows the balance such as ($ 237 million for 2018) and ($ 845 million for 2019).
The capital expenditure was ($ 2668 in year 2018) and ($ 2714 for 2019). The statement of cash
flows is however correlated to the balance sheet, since at the start and finish of the year which
shows the results of adjustments in the interest income. The cash flow analysis reflects rises and
declines from: adjustments in equity capital reserves, improvements in net income or deficit
retained profits (from the statement of revenue), adjustments in long-term debt, capital

expenditures expressed in the balance sheet and increases in intangible assets from financial
operations. The annual statements present as well as document a summary of the firm's earnings
stability and very well-being at a time completely period or end point. They were developed and
designed to connect explicitly to one another in order to work together during the current period
and provide accurate financial details (De Klerk, De Villiers and Van Staden, 2015).
2. Company’s performance based on Earnings per Share (EPS)
Earnings per share are computed as the income of a business segregated by the absolutely
fantastic company's securities. The final value functions as a measure of productivity for a client.
It is normal for a firm to disclose EPS, which is balanced for exceptional items and future
dilution of equity. The stronger the EPS of a product, the more competitive it is seen as being.
Dividends per market valuation are measured because as net income split by the available shares
(also known as gains or dividends). A more precise equation changes the numbered and standard
deviation for securities that may be generated by way of shares, debt securities or securities. The
calculation numbered is even more important when modified for on-going operations. EPS is
among the metrics that you may be using to pick stocks. When company have an experience in
selling or investing in stocks, so the next move is to pick brokers that fits with the investment
style. Investors can not have any significance when contrasting EPS in absolute numbers because
common owners do not even have immediate access to earnings. Alternatively, investors should
equate EPS with the company's stock market to assess the return value and also how effect of
trade about potential growth. From the financial statement of Woolworth it has been determine
that in last few years that ratio or percentage of EPS have been reducing due to lower net income
in these respective year. The formula to calculate EPS is
Earnings per share= Net income- preferred dividend / Weighted Average common share
outstanding.
Ratio 2018 2019
Earnings Per Share -3.69 -1.13
From the above calculation, it has been determined that in year 2018 the EPS was more adverse
than of year 2019. The main reason for negative profitability performance is because of
decreasing net profit for both years. In 2018 the operating expenses for all activities investing,
financing and operating have higher cash outflows than inflows due to which figures of net profit

decrease as EPS was also negative. In the next year manager of WOW have made various
measures in order to reduce the outflows and increase cash inflows which easily covers cost and
maintain sufficient net profit which can further used to pay dividends (Donohoe, 2015).
3. Discussion of EPS as a useful performance indicator
Earnings per share (EPS) is the part of the spendable income that is assigned to each remaining
share (given value) of the corporation. This is considered to be a very great indicator of every
organization's performance, which is among the most commonly applied as profitability metrics.
As applied to other related firms' EPS, it provides an indication of the companies' comparable
earning power. Once averaged over a period of years, EPS shows that the company’s profit
capacity has increased or decreased. Investors normally look for businesses with ever-increasing
earnings per share. Often when measuring a completely diluted EPS and change to the numerator
is needed. For example, an investor may often offer a loan that enables them to turn the debt into
equity within certain circumstances. The shareholders which the debt capital will also generate
will be included in the dissolved EPS computation denominator, however if that occurred, then
the business owner would not have paid debt interest. For this situation, the corporation or
investor must re-insert the interest charged on convertible bonds into the EPS measurement
numerator so that the figure is not diluted. Thus in the context of WOW EPS is not a reliable
success metric, since it does not understand the financial opportunity expense and can be abused
by short-term behaviour (Jones, 2015).
4. Explanation of material movements in the statement of changes in equity
The Statement of Changes in Equity probably relates to the cash flow statement as well
as to the balance sheet. As, this statement is mainly prepared to record the exchange which have
been stated in the accounting records (Khan, Serafeim and Yoon, 2016). The increase of equity is
often recorded in the declaration of profits and also the benefit for the reassessment. The
statement of cash flows has mostly been linked to the of financial statements position, since at
the starting and closing balance it confirms the consequences of different in the cash balances.
From the balance sheet of company it has been determined that profit for the period in year 2019
was $ 2693 as a portion of retained earnings and $ 66 million non-controlling interests. The total
balance which was recorded in the cash flow statement for the respective period was $ 2759. The
profit and loss in the statement of revenue are documented on the cash flow statements. Net
benefit or loss is stated in stock adjustment statement. The Statement of Changes in Equity

contributes closely mostly to statement of cash flows as well as to the balance sheet. The
increase of equity is often recorded in the declaration of profits and also the surplus for the
market value.
5. Items recorded as Non-Current Liabilities
There have been different items which are recorded on non-current liabilities side such as
borrowings, other financial liabilities, provision and other non-current liabilities which are
reported in the annual balance sheet of Woolworth for the year 2018-19. In year 2018 the
balance of borrowing was $ 28529 million which reduces to $ 2199 million in 2019 due to
increase of profitability. This enables company to lower the debt amount and use funds from the
profit earned for the respective year. Other financial liabilities show a little increase in year 2019
as $ 61 million which was $ 24 million in the year 2018. Initially, borrowings are accepted at
market value with fewer interest charges due. Thereafter borrowings are available at amortized
cost. The integrated value considers the disparity in expense and repayment value profit or loss
declaration during borrowing time. Many obligations and conditions of $4.308 million were
down $40 million compared to the previous year. Unique big points related to BIG W network
Check and Cash Use of the provisions on significant items in F16, dismantling of other creditors
and the regulations were guided mainly by the a drop in direct accruals costs for the staff in shop.
There are a range of threats and challenges connected with the implementation of the plan,
particularly unfavourable trade adjustments conditions, economic climate and BIG W's
willingness to implement the program in accordance with its expectations (Pratt, 2016). The
calculation of the useable quantity reflects the best approximation for administrators, taking into
consideration risks, complexities and possibilities for company growth. Manager will seek to
monitor BIG W's success toward these initiatives forecasts and additional disabilities of assets
and restrictive contractual provisions may well be mandated in respect of the through subsequent
events BIG W will store and transmit network.
6. Discussion of potential advantages and disadvantages of each source of capital.
There have been different items which are used as a source of capital in WOW to manage
and run business operation in effective and desirable manner. Some of them with benefits and
drawbacks are discussed underneath:
Banks loans (Short or long term)
Advantages:

Bank loans are indeed a common form of financing for enterprises. Finding and visiting a bank
to negotiate a loan is usually simpler than finding prospective investment bankers (Sorensen and
Miller, 2017).
Disadvantages:
Nonetheless, before accepting a loan, banks will like to see accurate cash flow forecasts
for your company, and would, of course, extending and expect prompt reimbursement until a
loan is obtained.
Capital or owner investments
Advantages
Mostly on positive note, using own funds and reserves by the manager of WOW means
no constraints are connected: no interest paying back, no repayment plan, no running from sitting
to standing attempting to force people to turn over to some resources to fund of company. The
quickest and easiest option to secure financing is through money management within internal
channels.
Disadvantages
Rather, have to use internal own capital as a big investment in the company means
endangering WOW financial situation. This could totally ruin entire savings and, if they reached
into the bank account, it could have put some financial finances at risk. Naturally the same
applies to their business relationships.

PART B
Discuss the disclosure requirements for publically listed companies in the financial statements
in comparison to other non-listed companies
The public disclosure theory intends to protect every small investor investing in shares and
maintaining reasonable market regulation mostly with individual investors getting access to
equivalent details. This will ensure the efficiency of the industry and provide knowledge that
cannot be accessed by individual investors, and then all sorts of buyers on the market would be
capable of making a realistic estimation within the context of the material available. Due to this
assessment, investors will assess the publicly owned relationship and make their choices and
investors will influence their investment choices as per the details they already obtained.
(Watson, 2015). Of example, as a result of even a joint-stock company's performance, the owner
who feels their investment can influence the company's existence would be able to get hold of his
ownership stake via the stock market and switch to money market instruments. This condition is
of great significance in hopes of obtaining the confidence of investment banks through the
information release of investors operating in industries like pharmaceuticals and automobile,
where technology and R&D need funding. The right to educate as well as investigate investors;
personal, obtained and autonomous, usually complementing or validating one another is
important. Even if this same right to education and evaluation is wanted to exercise, the terms &
conditions or a compromise carried by a part of the body of the company pursuant to Article 437
of the TCC cannot be forced to cancel or constrained. Under Article 447 of TCC, decisions of
the national association shall become invalid if they limit the access to knowledge, inspection
and supervision of an investor above the constitutionally allowable degree. Under the context of
this privilege given to shareholders, knowledge and review can be obtained on the following;
• Reports and consolidated financial statements;
• Board annual operation summary
• Statement of income, and balance sheet,
• Results of the investigation,
• The board's proposal for a profit distribution,
• The organizational actions, technique and outcomes of inspection,
• The company's trade books and correspondence.

Investors and borrowers depend on financial statements to provide important knowledge on
corporate financial safety and risks. Availability to details is the most significant aspect of
financial accountability, and the advantage most emphasized by the Financial Accounting
Standards Board. The typical shareholder or creditor has no consistent internal information on
the company's daily operations-to-day activities. Rather, it depends on financial reporting to
provide reliable and practically equivalent statistics. Investors must be conscious of how well
about their investment does. Investors depend primarily on company-issued financial statements
to determine their investment's performance, value, and risk. Investors utilize accounting
documents to decide if an investment is indeed a suitable match for their portfolio, or whether
their contribution will be retained, raised, or decreased. It does not mean that the accountant
whom isn't within organization and is designated by the independent auditors has no
responsibility to provide knowledge to the investors. Within this law, in compliance with the
standards of transparency, fairness and integrity, the board of directors and the auditors are
obliged to advise the investors with respect. It is worth noting if any of the stockholders are
being notified of any issue besides the state legislature, the very same documentation should be
given in same framework and specifics to the other investors on recommendation, even just not
on the ideology, in consistent with the concept of fair opportunities.
CONCLUSION
According to the aforementioned report, it can be indicated that data regarding distinct
business transactions is included in the annual reports of the organisation. The article
summarizes issues which are found in the owner's segment on property and responsibility. In
fact, it also addresses the important assessment of the origins of funds used by selected firms.

REFERENCES
Books and Journals
Crowther, D., 2016. A social critique of corporate reporting: Semiotics and web-based
integrated reporting. Routledge.
De Klerk, M., De Villiers, C. and Van Staden, C., 2015. The influence of corporate social
responsibility disclosure on share prices. Pacific Accounting Review.
Donohoe, M. P., 2015. The economic effects of financial derivatives on corporate tax
avoidance. Journal of Accounting and Economics, 59(1), pp.1-24.
Jones, S. ed., 2015. The Routledge companion to financial accounting theory. Routledge.
Khan, M., Serafeim, G. and Yoon, A., 2016. Corporate sustainability: First evidence on
materiality. The accounting review, 91(6), pp.1697-1724.
Pratt, J., 2016. Financial accounting in an economic context. John Wiley & Sons.
Sorensen, D. P. and Miller, S. E., 2017. Financial accounting scandals and the reform of
corporate governance in the United States and in Italy. Corporate Governance: The
International Journal of Business in Society.
Watson, L., 2015. Corporate social responsibility research in accounting. Journal of Accounting
Literature, 34, pp.1-16.