Corporate Accounting: Surfstitch Ltd

Added on -2020-02-19

| 12 pages| 2984 words| 33 views

Trusted by 2+ million users,
1000+ happy students everyday

Showing pages 1 to 4 of 12 pages

Running head: CORPORATE ACCOUNTINGCorporate AccountingName of the Student:Name of the University:Author’s Note:
CORPORATE ACCOUNTING1Table of ContentsPart I:...............................................................................................................................................21. Identifying the recent financial predicament facing Surfstitch Ltd:............................................22. Identifying the 2015 goodwill, investment in subsidiary and cash position................................23. Identifying the 2016impairment costs, selling & distribution and administrative expenses inthe profit and loss statement:...........................................................................................................24. Recommending whether to buy, hold or sell Surfstitch Ltd shares and why:.............................3Part II:..............................................................................................................................................4Discussing about: Why is it necessary to have a continuous reporting regime for disclosureentities and is it effective?................................................................................................................4Abstract:...........................................................................................................................................4Introduction:....................................................................................................................................4Literature Review:...........................................................................................................................5Conclusion:......................................................................................................................................9References:....................................................................................................................................10
CORPORATE ACCOUNTING2Part I:1. Identifying the recent financial predicament facing Surfstitch Ltd:Surfstitch Ltd overall financial predicament mainly started with the exit of JustinCameron in 2015, who was one of the founders of the organisation. This forced the managementof Surfstitch Ltd to write down the assets, which directly increased its financial losses. Thisincrement in the overall financial losses was also conducted due to the high-end cost of sales,and selling & distribution expenses conducted by the organisation. These irrelevant expenses didnot allow Surfstitch Ltd to generate the required revenue to support its revenue growth.Therefore, in both 2015 and 2016 financial year the company faced major losses (Market Index2017).2. Identifying the 2015 goodwill, investment in subsidiary and cash positionSurfstitch Ltd during 2015 mainly portrayed goodwill of $73,832,000 in its books, whilethe investment in subsidiary stood at $70,197,000. In addition, during 2015 Surfstitch Ltd cashand cash equivalent position mainly portrayed $40,837,000 in its annual report (Market Index2017).3. Identifying the 2016impairment costs, selling & distribution and administrativeexpenses in the profit and loss statement:There were no impairments expenses during 2015 fiscal year, while in 2016 the overallimpairment costs mainly rose to $88,999,000. In addition, the selling and distribution cost during2016 mainly rose to $101,268,000 levels from $44,683,000 in 2015. Moreover, the
CORPORATE ACCOUNTING3administrative expenses of the organisation increased exponentially in 2016 to the levels of$49,237,000 from $7,424,000 in 2015 (Market Index 2017). Therefore, it could be understoodthat the organizations overall profit and loss statement depicted the loss in revenues, as theoverall expenses increased in fiscal year. However, the revenue of the organization alsoincreased, which was not adequate to support its rising expenses.4. Recommending whether to buy, hold or sell Surfstitch Ltd shares and why:The evaluation of the financial records of Surfstitch Ltd mainly helps in identifying theoverall loopholes in the organisations financial condition. The overall Goodwill of theorganisation in 2015 was recorded to be $73,832,000, which in 2016 amounted to $6,609,000.This mainly indicates that irrelevant valuation method was used by the organisation to inflate itsfinancial condition by increasing the Goodwill value. The second weakness in the financialstrength was found from the overall inclining administrative expenses, selling & distributionexpenses and impairment cost, which directly rose to new levels in 2016. The mainly states thatthe organisations overall financial condition declined when one of its co-founders exited theorganisation and took the relevant capital with him. The exit of the co-founder made theorganisation financially vulnerable and reduced its ability to comprehend with the risingexpenses (Hatch 2017).Moreover, in the current scenario the organisation’s share value is priced at 6.6 per cent.This mainly indicates that any kind of investment conducted in the organisation will directlyresult in loss for the investors, as the management is not able to cope up with the rising expensesincurred from its operations. Therefore, selling shares of the organisation is much advisable foran investor who is currently holding the stocks of Surfstitch Ltd. However, for any new investor

Found this document preview useful?

You are reading a preview
Upload your documents to download
or
Become a Desklib member to get accesss

Premium

$45

Q&A Library Access

Chat support

12

Document Unlocks

4

Answer Unlocks

Students who viewed this