Corporate Accounting: Share Prices and Profit Analysis, Impairment Charge Analysis

Running head: CORPORATE ACCOUNTING 1
Corporate Accounting
Name
Institutional Affiliation

CORPORATE ACCOUNTING 2
CORPORATE ACCOUNTING
Question 1:
A. Share Prices Analysis (2017-2019)
The year 2017 was never good for the shareholders of Retail Food Group Limited (ASX:
RFG). This is because the value of their shares plunged by over eighty-eight percent over that
year. However, in year 2018, the share price increased which might have seen as many people
scratching their heads as rejoicing. The RFG share price traded at nearly 40 cents in 2018
(August 15th) but rose up to almost 67 cents by August 22 (same year). This represented a gain of
over 50 percent.
The increase in the share price was hard to explain without any news from the Company.
This is because in June 2018, RFG announced it anticipated to record a net loss of 87.7 million
dollars for FY 2018. The share price of the Company at the time, already hit by news of the
problems of debt and continued sinking following such a news. Since June 2018, the RFG
seemed to be pursuing the measures to assist its ailing business to effectively recover (Yee &
Thaker, 2018). Apart from being able to get bankers ease off such a trigger, the Group had
reportedly involved consultants to assist in rescuing the firm. This was a move which might
ultimately see the Group selling off its assets that then (August 2018) included Donut King,
Michael’s Patisserie, Brumby’s Bakeries as well as Crust Gourmet Pizza Bar (Camilleri, Grima
& Grima, 2019).
The Group’s plunging share price in 2017 coincided with healthy gains which was
notched up by the rivals including Domino’s Pizza Enterprises (ASX: DMP as well as Costa
Group Holdings Ltd (ASX: CGC). This demonstrated that there was money to be effectively
made in the industry. Thus, it was feasible that investors had targeted the RFG’ price to plunge

CORPORATE ACCOUNTING 3
as an opportunity as well as remained confident the Group’s management could get the Company
fully recovered. Moreover, the 2018 reshuffle of the Group’s key players that saw Andre Nell
leaving his position as the MD and Richard Hinson stepping up to the position of the CEO a few
months to August 2018, had added such a sense of confidence. Indeed, more needed to been
known at any rate when the Group released its results.
As at July 8, 2019, the Group’s share price had risen thirty percent. Specifically, the share
price increased 29.40 percent on 8/07/2019, apparently following the news.com.au interview
with the CEO of the Group, Peter George which highlighted Mr. George’s future plans for the
Group. The ASX further issued a “please explain” to the Group following its shares jumping
from fourteen cent level it was the trading at opening on Friday to the high of twenty-two cents
hit on 8/07/2019, with exchange operator further noting a “substantial rise in the RFG’s
securities volume traded on that Friday of 5/07/2019. The Group reacted on 09/07/2019
afternoon by charging that it was not aware of the trigger or rationale behind the move and
pointed to the interview which got published on Friday as the potential trigger of the movements
in shares price. The Group’s share price have dropped nearly 98 percent since it record high of
7.56 dollars (hit in Feb 2015), following a sequence of revelations about franchise
mismanagement came to be known.
B. Retail Food Group (RFG Profit (Loss) Analysis (2017-2019)
According the income statements for the RFG, the company has had its ups and downs in
terms of profit and loss. For the period 2017, 2018 and 2019, the Company made a gross profit
of 69.24, 56.28 and 120.53. This shows that there was a decrease in gross profit between 2017
and 2018 and an increase between 2018 and 2019. However, the Company made net loss for all