2 Executive summary The report has been prepared for the Bellamy Australia and A2 Milk Company. In this, there is the consideration which is given to the funds which are collected with the use of various sources. The items of the equity have been taken into account and also the amounts which are collected with the help of debts and borrowings have also been taken into account. There are various changes which are made in them and the review of the same has been made in which all of them have been identified and considered in an appropriate manner. There is the determination of the reason for changes which have taken place. The conditions and the concepts which are involved for the large proprietary company and small proprietary company have been taken into account and in that the needs which will be required to be fulfilled with respect to the compliance have also been undertaken.
3 Table of Contents Executive summary.........................................................................................................................2 Introduction......................................................................................................................................4 Part A...............................................................................................................................................4 i) Items under owners’ equity......................................................................................................4 ii) Movement in each item of equity............................................................................................5 iii) Items under the liability section.............................................................................................6 iv) Changes in items involved in liabilities.................................................................................7 v) Merits and demerits of the sources of funds............................................................................9 Part B...............................................................................................................................................9 Large and small proprietary company-related concept...............................................................9 Compliance and reporting requirements....................................................................................10 Conclusion.....................................................................................................................................11 References......................................................................................................................................12
4 Introduction In the company, there is the need to manage all of the aspects in the best possible manner and one such concept is the maintenance of the funds which are required. This is done with the help of proper identification and arrangement of the funds. There will be consideration of the various sources which are available and then the decision is taken to choose the appropriate method. This will be requiring the analysis of the current situation. Due to this, the report will be made in which all of the funds which have been collected with different sources will be taken into account. There are equity funds which are created in the company and in that also there are several elements which are involved and will be taken into account. The debts which have been taken will also be ascertained and the changes which are taking place in them from the past 3 years will be provided for. There will be various impacts which will be faced by the company with their adoptions and all of them will be discussed. The manner in which the proper classification of the companies can be made will be considered and all the conditions in this respect will be provided. The company will have to face the implication of the same and that will, therefore, be taken into use. Part A i) Items under owners’ equity Equity is the main source which is used in the company for the arrangement of the funds and meeting the requirements in an effective manner. There are several other options also in which the complete equity is classified and all of them are discussed below. In them, there are different components which are involved and shall be understood. This will be helping the company in taking them in consideration for the making of the future decisions. Share capital:This covers the capital which is raised by the company with the use of the shares. In this company will be allowed to issue the shares to the public and they will be investing in the same (Warusawitharana and Whited, 2015). By the help of this, an amount will be collected which is identified to be the share capital. In this, the right on the company will be provided to the investors and they will be able to involve in the company’s actions.
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5 Retained earnings:The earnings are made in the business and it is the responsibility of the company to use them in the most adequate manner. There are various purposes for which the same can be used and the division of the same will be made in such manner that the best results are obtained by the company. In this, the company will be considering that emergencies may arise in the business and for that the amount shall be secured. This lead to the creation of the retained earnings which will be used by the company at the time of requirement. Reserves:They are the amounts which are kept to meet the expenses which are in relation to some particular task. The reserves are created for a specific task and will be used only for that. This is kept separately and will be providing the company with the security about that particular and important activity (Boubakri et al., 2012). They are also included in the equity as they are the funds of the company on which no charge is created. ii) Movement in each item of equity Bellamy's Australia Particulars201620172018 Owner's equity8322191259207358 Change in equity8038116099 201620172018 8322191259 207358 Bellamy's Australia Owner's equity There is the equity which is held by the Bellamy and the changes which are taking place in the same can be identified with the help of the graph. It can be noted that there is an increase which
6 is taking place in the same and more addition made in 2018 (Bellamy’s Australia limited, 2017). This is because of the increase in all the categories and there are more shares which have been issued and that raised the share capital of the company. The company has made a high income and due to that, the retained earnings which are made by the company have also increased. A2 Milk company Particulars201620172018 Owner's equity133078241482555709 Change in equity108404314227 201620172018 133078 241482 555709 A2 Milk company Owner's equity The increase is made by the company in relation to the equity and the same is represented in the graph in which there is more increase in the year 2018. The earnings in the company have increased and because of that, there is a rise in the retained earnings (A2 Milk Company, 2017). The reserves of the company have also increased and that has led to the overall increase in the owner’s funds. This will be good as the company will be having the sufficient owned funds which will be reducing the requirement of other sources. iii) Items under the liability section The company is allowed to borrow the funds from outside the company and they are considered the external sources. In this, there are various borrowings and other liabilities which are created and will be taken into account. The company will be required to make the payments in relation to them and the most important among them are as follows:
7 Borrowings:Under this, the company will be taking funds from the external financial institutes and there will be various laws which will be applicable in this respect (He and Xiong, 2012). They will be required to pay the interest at the fixed rate which is provided in the loan agreement. The repayment of the debt will be made as per the contract and there will be installments which will be involved in the same. Provisions:The Company is required to consider all of the risks which are involved in the business for the payments which will be received in the coming period. This is done with the help of the creation of the provisions in which an amount is secured in respect of the particular activity. This will be maintained by the company till the risk is not eliminated and once the same is done the provision will be written off. Income Tax payable:There are certain legal liabilities also which are to be met by the company and they shall be taken into account in the best possible manner. The earning which is made is the income o the company and on the same, it is required to pay the tax which is at the fixed rate and will be paid at the time they are due (Nassr and Wehinger, 2014). There will be an amount which will be required for the same and it will be provided in the accounts in relation to the same. Trade payable:There are various parties to whom the amount is payable on the purchases which are made from them. The company does not have that amount of cash to make all the purchases by the same. Due to the same, the company will be required to make the credit purchases and an amount will be due on them which are identified as the trade payables. With the help of this, the funds are available on a temporary basis or it can be said that company cam purchase without making the payment instantly. iv) Changes in items involved in liabilities Bellamy's Australia Particulars201620172018 Total liability602806538273454 Change in liability51028072
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8 201620172018 0 10000 20000 30000 40000 50000 60000 70000 80000 Bellamy's Australia Total liability There is an upward trend which is identified in the liabilities and this is increasing in a constant manner in every year. They will be required to manage them in such a manner that all of them are repaid in the provide time frame (Bellamy’s Australia limited, 2018). The increase is taking place because of the trade payables which shows that the company has made the credit purchases and the amount for the same is overdue. This will be required to be met on time and for the given period the company has financed its needs with the help of the same. A2 Milk company Particulars201620172018 Total liability77074102448166869 Change in liability2537464421 201620172018 0 20000 40000 60000 80000 100000 120000 140000 160000 180000 A2 Milk company Total liability The liabilities in A2 milk Company is increasing at a high rate in 2018. The company is
9 involving the accounts payable in its accounts and they are increasing rapidly. The company will be required to make the proper steps by which the situation can be controlled (A2 Milk Company, 2018). There is also the increase in the tax payable which is because of the increase in the earnings which is made by the company. v) Merits and demerits of the sources of funds The sources which are used by the company have several impacts on the business and that is required to be taken into consideration so that the decisions can be made by the company in relation to that. The consideration will be given and the source which will be providing the company with the additional benefits will be taken into account. There is the more use of the equity which is beneficial as there is no additional payment which needs to be made in the same. There will be the owner of the company but the company will need to maintain the appropriate level under this. If there will be more issue which will be made then the ownership of the business will be in danger (Abdulsaleh and Worthington, 2013). To control the same there will be adequate analysis and then the appropriate amount will be issues in public. If the liabilities an into account then the company will have to consider the coverage ratio and will have to identify the amount for which the liability can be borne in a proper manner. There is the payment of the interest which will be made and so the amount of the liability shall be such for which the interest can be paid with the available earnings (Chinaemerem and Anayochukwu, 2013). The company has the option to raise a high amount with this but this will be creating the liability for the company. All of these are the important parts and needs to be considered in the making of any decision. The company is required to choose the funds in a very correct manner and for that they will be required to take the advantages as well as the disadvantages in consideration. By that benefits will be made and there will be no issues which will be faced for the coming period. The decision shall be such which will be overall cost of the funds will be reduced and company will be able to save the additional funds.
10 Part B Large and small proprietary company-related concept The classification of the company is made in various categories and in that there is the need for the proper identification of the conditions which are responsible for the same. There are various laws which are applicable and in that the conditions are specified according to which the classification of the large proprietary company and the small proprietary company will be made (ASIC, 2019). The conditions which will be describing the large companies are as provided below: The revenue before 1 July 2019 should be 25 million or more and after this date, the revenue will be made at the $50 million or more. The employees count shall be more than 50 before 1 July 2019 and after that, it shall be maintained at 100 or more employees. The limit for the gross total assets is also specified and in that there will be the maintenance of the assets at or above the level of $25 million after 1 July 2019 and before that at $12.5 million. There will be the maintenance of the conditions which are provided above and with the completion of any of two, there will be the identification of the company as the large proprietary. If this will not be made possible then the company will be a small proprietary company. These conditions will be taken into account and decisions will be made accordingly. In the given the case, there is the fulfillment of the conditions and the company will be considered as the large proprietary company. Compliance and reporting requirements The company will be categorized in any of the class and with that, there will be various obligations which will be created on them. There are several requirements which need to be followed by the company and the compliance will be made when the identification of the reporting requirements will be made. It has been identified that the company which will be considered as the large proprietary company will be making all of the financial and director’s reports. They will be preparing them in an adequate manner and then the same will be provided
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11 to the specified authorities. There will be proper submission which will be made and the time limit is made which will be followed in relation to them for all the years. It will also be required to undertake the audit procedure which is mandatory and in that all of the accounts will be considered in the process of auditing (Yang and Jia, 2012). This will be required to be performed in a compulsory manner and the company will have to follow them until the relaxation is provided by ASIC. The conditions and compliance requirements which are specified will be applicable to the large company in a compulsory manner bur the small company has the option to consider them or not. If they wish to carry the provided procedure then no restriction is imposed but it will not be mandatory for them to undertake the provided process. It is always of the benefit for the company if the requirements are fulfilled and the accounts are kept in an appropriate manner. Due to this it shall be noted by all that there are various steps which are taken and by the help of them the best of the results will be attained. Conclusion The analysis of the equity and liabilities has been made in the report for the A2 milk Company and Bellamy Australia Company. In that, all of the elements which are involved have been identified and considered in the report. The categorization of them is made in an effective manner and the fluctuations which are taking place have been taken into account into an account in an appropriate manner. The reasons for the fluctuations have also been identified and given in the report. There is the description of all the liabilities which are involved and with that, the obligations which are faced by the company are incorporated appropriately. There is the identification of the concept which is applicable to the large and small companies. The compliance requirement for them which needs to be fulfilled has also been identified.
12 References A2MilkCompany.(2017)annualreport.[Online]Availableat: https://thea2milkcompany.com/wp-content/uploads/The-a2-Milk-2016-2017-Annual-Report- spreads.pdf[Accessed 24 September 2019] A2MilkCompany.(2018)annualreport.[Online]Availableat: https://thea2milkcompany.com/wp-content/uploads/A2M-Annual-Report-FY18.pdf[Accessed 24 September 2019] Abdulsaleh, A.M. and Worthington, A.C. (2013) Small and medium-sized enterprises financing: A review of literature.International Journal of Business and Management,8(14), p.36. ASIC.(2019)Areyoualargeorsmallproprietarycompany.[Online]Availableat: https://asic.gov.au/regulatory-resources/financial-reporting-and-audit/preparers-of-financial- reports/are-you-a-large-or-small-proprietary-company/[Accessed 24 September 2019] Bellamy’sAustralialimited.(2017)annualreport.[Online]Availableat: http://www.annualreports.com/HostedData/AnnualReportArchive/B/ASX_BAL_2017.pdf [Accessed 24 September 2019] Bellamy’sAustralialimited.(2018)annualreport.[Online]Availableat: http://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_BAL_2018.pdf[Accessed 24 September 2019] Boubakri, N., Guedhami, O., Mishra, D. and Saffar, W. (2012) Political connections and the cost of equity capital.Journal of corporate finance,18(3), pp.541-559. Chinaemerem, O.C. and Anayochukwu, O.B. (2013) Impact of external debt financing on economic development in Nigeria.Research Journal of Finance and Accounting,4(4), pp.92-98. He,Z.andXiong,W.(2012)Debtfinancinginassetmarkets.AmericanEconomic Review,102(3), pp.88-94. Nassr, I.K. and Wehinger, G. (2014) Non-bank debt financing for SMEs.OECD Journal:
13 Financial Market Trends,2014(1), pp.139-162. Warusawitharana, M. and Whited, T.M. (2015) Equity market misvaluation, financing, and investment.The Review of Financial Studies,29(3), pp.603-654. Yang, K. and Jia, X. (2012) An efficient and secure dynamic auditing protocol for data storage in cloud computing.IEEE transactions on parallel and distributed systems,24(9), pp.1717-1726.