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(Solved) Corporate Accounting - Assignment

   

Added on  2021-05-31

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Finance
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CORPORATEACCOUNTINGSANTOS LIMITEDSTUDENT ID:[Pick the date]
(Solved) Corporate Accounting - Assignment_1

The selected firm for this task is Santos Limited which is primarily an energy company. Therelevant analysis required is carried out below (Demello, 2005).CASH FLOW STATEMENT(i) The relevant changes in the operating cash flow are captured below.It is apparent that the customer receipts has shown an increase of about 18% which augerswell for the company and implies that the business is robust and witnessing rapid growth(Arnold, 2005). Further, it is interesting to note that despite the jump in the customer receipts,the increase in payments to suppliers and employees is quite minimal which hints at potentialexpansion of profit margins. The increase in borrowing cost paid may reflect higherborrowings but this is not the case as the debt on the books has actually come down for thecompany (Santos, 2017; 2018).The relevant changes in the cash flow from investing activities are highlighted below.It is apparent that the company has continued to invest in new oil and gas assets, which wasapparent in 2016 also. Also, assets related to exploration and evaluation has also drawnsizable investment in both 2016 and 2017. There is cash inflow arising from non-current asset
(Solved) Corporate Accounting - Assignment_2

disposal but it is significantly lesser in 2017 as compared to the corresponding figure in 2016(Santos, 2017; 2018).The relevant changes in the cash flow from financing activities are highlighted below.From the above, it is apparent that the company paid some dividends in 2016 but did not payany dividend for 2017. The key aspect is that the company has made a repayment of debt in2017 to the extent of $ 2.4 billion which augers well for the balance sheet strength coupledwith reduced financial risk owing to high debt. Also, the company has raised proceeds fromequity in both 2017 and 2016, however, the proceeds from equity are much lower in 2017 ascompared to 2016 (Santos, 2017; 2018). Thus, it is apparent that there is a deliberate attempton the part of the company to lower the debt and raise money through equity so as to reducethe overall leverage (Damodaran, 2015).ii) The three year summary for the three broad types of cash flows is highlighted below.The three years trend highlights an encouraging trend for the company and the shareholders.There is constant improvement in the operating cash flows from on y-o-y basis. Further, thecash outflow on account of investing activities seems to have slowed to some extent whichimplies that the company has acquired the requisite assets for future growth and perhaps hasnow started leveraging the assets leading to higher cash flow generation from operatingactivities. An additional positive for the company is that borrowings are on the decline and ashighlighted in 2017, the company intends to make repayments of borrowings so as tostrengthen the balance sheet (Bodie, et.al., 2013). For this endeavour, the company has alsoresorted to equity financing which has enabled deleveraging balance sheet which is clearlyapparent (Santos, 2017; 2018). Thus, the trends emerging from the cash flow statement seem
(Solved) Corporate Accounting - Assignment_3

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