BAP11 Group Assignment: Cash Flow & Ratio Analysis

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Principles of Accounting BAP11 - Assessment 3- Trimester 2 2019
Principles of Accounting
BAP 11
Assessment 3 (15%): Group Assignment
Group Number:
Trimester 2, Year 2019
Student ID Number Student Name
Instructions:
 This is a group assignment.
o This assignment must be written using MS Word.
o All group members full name and ID must be written (minimum 2 & maximum 4 members)
o Please ensure that your submission must be your own original attempt.
 Student answers and submissions are required to be completed in THIS answer booklet in the
space provided for every question.
.
 Due date for this assignment is Week 12, 5 August 2019 at 11:55 pm:
o Late submissions will be subject to a 25% reduction in marks
obtained.

Principles of Accounting BAP11 - Assessment 3- Trimester 2 2019
 ASSIGNMENT MARKING SHEET
 For use by Examiners only.
Question Student Mark
1. /15
2. /15
3. /15
Total /45= /15
Lecturer’s comments

Principles of Accounting BAP11 - Assessment 3- Trimester 2 2019
Question 1 (15 marks)

Principles of Accounting BAP11 - Assessment 3- Trimester 2 2019
Student Answer:
a. Statement of Cash Flows
Kosnkski Manufacturing Limited
Cash Flow Statement for the year ending 31st December 2016 using Direct Method
Particulars Amount ($) Amount ($)
Cash flows from operating activities
Cash receipts from customers (WN1) 64,18,000
Cash paid to suppliers (WN2) 39,47,000
Operating Expenses (WN3) 8,93,000
Cash generated from operations 15,78,000
Interest paid (WN4) -
Income taxes paid (WN5) 3,53,000
Net cash from operating activities 12,25,000
Cash flows from investing activities
Purchase of Machinery (WN6) 13,70,000
Sale of Machinery (WN9) 6,90,000
Net cash from investing activities 6,80,000
Cash flows from financing activities
Proceeds from issuance of long-term debt (WN4) 2,00,000
Dividends paid (WN8) 2,00,000
Net cash from financing activities -
Net increase in cash and cash equivalents 19,05,000
Cash and cash equivalents at beginning of period 1,30,000
Cash and cash equivalents at end of period 20,35,000
WN1 Cash receipts from customers:
Particulars Amount ($)
Opening Balance of Accounts Receivables 6,10,000
Sales for the period 65,83,000
Cash receipts from customers (Bal Fig) 64,18,000
Closing Balance of Accounts Receivables 7,75,000

Principles of Accounting BAP11 - Assessment 3- Trimester 2 2019
WN2 Cash paid to suppliers:
Particulars Amount ($) Amount ($)
Opening Balance of Accounts Payables 5,01,000
Purchases for the period:
Cost Of Sales 40,00,000
Opening Inventory 8,67,000
Closing Inventory 8,34,000 39,67,000
Cash paid to suppliers (Bal Fig) 39,47,000
Closing Balance of Accounts Payables 5,21,000
WN3: Operating expenses include warranty expenses that have been incurred in the current year.
WN4: No interest has been paid for the year and hence it has been assumed that the increase in the value of
the loan is due to the issuance of the new loan.
WN5: It has been assumed that the income tax has been paid in the current year itself.
WN6 Plant and Machinery:
Particulars Amount ($) Amount ($)
Opening Balance 24,00,000
Sale of Machinery 7,50,000
Purchase of Machinery (Bal Fig) 13,70,000
Closing Balance 30,20,000
WN7 Accumulated Depreciation:
Particulars Amount ($)
Opening Balance 8,00,000
Depreciation for the year 8,80,000
Accumulated Depreciation on Sale of Asset (Bal Fig) 33,000
Closing Balance 16,47,000
WN8 Dividends Paid:
Particulars Amount ($)
Opening Balance of Retained Earning 1,00,000
profit for the year 4,30,000
Dividends Paid (Bal Fig) 2,00,000
Closing Balance of Retained Earning 3,30,000
WN9 Sales Value of the Machinery:
Particulars Amount ($)
Cost of Machinery Sold 7,50,000
Accumulated Depreciation on Sale of Asset (WN7) 33,000
Loss on Sale 27,000
Sales Value 6,90,000
b. Reconciliation Statement for cash and profit
Kosnkski Manufacturing Limited

Principles of Accounting BAP11 - Assessment 3- Trimester 2 2019
Reconciliation of net income to net cash provided by operating activities
Particulars
Amount
($)
Amount
($)
Net income 4,30,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Revenue 65,83,000
Cash receipts from customers 64,18,000
Cost of sales 40,00,000
Cash paid to suppliers 39,47,000
Depreciation and amortization 8,80,000
Loss on Sale of Machinery 27,000
Total adjustments 7,95,000
Net cash provided by operating activities 12,25,000

Principles of Accounting BAP11 - Assessment 3- Trimester 2 2019
Question 2 (15 marks)
FINANCIAL REPORTING PROBLEM: Domino’s Pizza Enterprises Ltd
Refer to the financial statements of Domino’s presented in the link below.
http://www.annualreports.com/HostedData/AnnualReportArchive/d/ASX_DMP_2013.pdf
Required
Answer these questions:
a. What was the amount of net cash provided by operating activities for 2013 and 2012?
b. What was the amount of increase or decrease in cash for 2012 and 2013?
c. From your analysis of the 2013 cash flow statement, what was the amount of the change in borrowings
and was it a decrease or an increase?
d. What was the total (net) cash used for investing activities for 2013?
e. What was the amount of interest paid in 2013? What was the amount of income tax paid in 2013?

Principles of Accounting BAP11 - Assessment 3- Trimester 2 2019
Student Answer:
A. Amount of Net Cash provided by operating activities in Year 2012 amounts to $ 37678000 and
for Year 2013 amounts to $ 33180000.
B. Amount of increase in cash in Year 2012 is $ 14071 and amount of decrease in cash in Year
2013 amounts to $ 23779.
C. From the analysis of the cash flows of 2013 relating to the borrowings it can be seen that there is
a change in the borrowings as follows:
Analysis of Borrowings 2013
Proceeds from borrowings $ 43,721
Repayment of borrowings $ (20,506)
Change in amount of borrowings $ 23,215
Thus it can be seen that there is a positive change of $ 23215 in the borrowings of Domino’s for
the year 2013 as proceeds from borrowings are more than repayment from borrowings.
D. Total net cash used in investing activities for the Year 2013 is $ 30395 which states that there is
a negative cash flow and investment has been made by Domino’s Pizza Enterprises Ltd of $
30395 in the year 2013.
E. Amount of interest paid by Domino’s Pizza Enterprises Ltd in Year 2013 is $ 405 and amount of
income tax paid for the Year 2013 is $ 11796.

Principles of Accounting BAP11 - Assessment 3- Trimester 2 2019
Question 3 (15 Marks)
Your parents are considering investing in David Jones Ltd (DJS) shares. They ask you, an
accounting expert, to make an analysis of the entity for them. An extract from the five-year
summary included in David Jones Ltd 2013 annual report is presented below. All figures are
in thousands.
Required
a. Prepare a 5-year trend (horizontal) analysis of sales, gross profit, department store EBIT,
financial services EBIT and profit after tax using 2009 as the base year. Comment on the
significance of the trend results.
b. Calculate the following for 2013 and 2012:
1. Debt to total assets ratio.
2. Profit margin.
3. Asset turnover.
4. Return on shareholders’ equity.
5. Dividend payout.
c. How would you evaluate David Jones Ltd’s profitability, solvency and investment
potential?

Principles of Accounting BAP11 - Assessment 3- Trimester 2 2019
Solution
A. Trend Analysis
Trend Analysis of David Jones Ltd
Particular Actual Data
Increase/ Decrease ( In
Amount)
Increase/ Decrease ( In
Percentage)
2009
($'00
0)
2010
($'00
0)
2011
($'00
0)
2012
($'00
0)
2013
($'00
0)
2010
($'00
0)
2011
($'00
0)
2012
($'00
0)
2013
($'00
0)
2010
($'00
0)
2011
($'00
0)
2012
($'00
0)
2013
($'00
0)
Sales
$
1,98
5,49
0
$
2,05
3,08
7
$
1,96
1,74
4
$
1,86
7,81
7
$
1,84
5,01
2
$
67,5
97
$
(23,7
46)
$
(117,
673)
$
(140,
478)
3.40
%
-
1.20
%
-
5.93
%
-
7.08
%
Gross
Profit
$
786,
146
$
815,
729
$
767,
269
$
699,
830
$
706,
144
$
29,5
83
$
(18,8
77)
$
(86,3
16)
$
(80,0
02)
3.76
%
-
2.40
%
-
10.9
8%
-
10.1
8%
Departme
ntal Store-
EBIT
$
184,
377
$
204,
798
$
199,
003
$
104,
995
$
99,5
32
$
20,4
21
$
14,6
26
$
(79,3
82)
$
(84,8
45)
11.0
8%
7.93
%
-
43.0
5%
-
46.0
2%
Financial
Store-
EBIT
$
41,2
74
$
44,3
79
$
47,7
07
$
49,4
18
$
49,4
66
$
3,10
5
$
6,43
3
$
8,14
4
$
8,19
2 8%
15.5
9%
19.7
3%
19.8
5%
Total EBIT
$
225,
651
$
249,
177
$
246,
710
$
154,
413
$
148,
998
$
23,5
26
$
21,0
59
$
(71,2
38)
$
(76,6
53)
10.4
3%
9.33
%
-
31.5
7%
-
33.9
7%
Profit After
Tax
$
156,
522
$
170,
766
$
168,
139
$
101,
103
$
101,
554
$
14,2
44
$
11,6
17
$
(55,4
19)
$
(54,9
68)
9.10
%
7.42
%
-
35.4
1%
-
35.1
2%
Total
Assets
$
1,12
4,67
4
$
1,19
4,92
1
$
1,21
4,55
0
$
1,24
0,89
7
$
1,23
7,78
5
$
70,2
47
$
89,8
76
$
116,
223
$
113,
111
6.25
%
7.99
%
10.3
3%
10.0
6%
Total
Liabilities
$
439,
832
$
450,
683
$
429,
070
$
465,
193
$
436,
689
$
10,8
51
$
(10,7
62)
$
25,3
61
$
(3,14
3)
2.47
%
-
2.45
%
5.77
%
-
0.71
%
Total
Equity
$
684,
842
$
744,
238
$
785,
480
$
775,
704
$
801,
096
$
59,3
96
$
100,
638
$
90,8
62
$
116,
254
8.67
%
14.7
0%
13.2
7%
16.9
8%
Basic
Earnings
Per Share
$
31.5
0
$
34.0
0
$
33.0
0
$
19.4
0
$
19.2
0
$
2.50
$
1.50
$
(12.1
0)
$
(12.3
0)
7.94
%
4.76
%
-
38.4
1%
-
39.0
5%
Dividend
Per Share
$
28.0
0
$
30.0
0
$
28.0
0
$
17.5
0
$
17.0
0
$
2.00
$
-
$
(10.5
0)
$
(11.0
0)
7.14
%
0.00
%
-
37.5
0%
-
39.2
9%
Comments
 Sales: It can be seen from the above analysis that sales has increased in just year 2010 and after that it
has shown a decreasing trend in from year 2011-2013. Thus the sales are reducing continuously from
year 2015 to 2017 at a steep rate and have reduced up to 7.08% since 2009.
 Gross Profit: It can be seen from the above trend analysis that gross profit has increased by 3.76% in
the year 2010 but after that it has shown a decreasing effect in coming years and shown a steep downfall
in the year 2012. It has shown a slight increase in year 2013 in comparison to Year 2012 but it is not a
significant difference and can be ignored in comparison to the downward trend from year 2009.

Principles of Accounting BAP11 - Assessment 3- Trimester 2 2019
 Department Store-EBIT: Department store EBIT has increased in Year 2010 and year 2011 in
comparison to 2009 but the same has shown a decreasing trend since then and the EBIT has reduced
significantly in comparison to year 2009 which is a situation of worry for department store.
 Financial services EBIT: It can be seen from the above trend analysis that the financial service
department is performing good as the same is showing an increasing trend in the EBIT in comparison to
Year 2009. EBIT has been continuously increasing from year 2010 to 2013 which is a positive sign for the
finance service department.
 Profit after Tax: PAT has increased in the year 2010 and 2011 in comparison to year 2009 but the
increase is also showing a downward trend for the two years. However there has been a negative impact
in the PAT and it has decreased significantly in year 2012 and 2013 which is an alarming signal for the
company and company and its investors.
B. Computation of Ratios
Particulars 2013 2012
Debt to Total Asset Ratio
Debt 436,689 465,193
Total Assets 1,237,785 1,240,897
Debt to Total Asset Ratio 0.35 0.37
Profit Margin
Gross Profit 706144 699830
Revenue 1845012 1867817
Profit Margin 38.27% 37.47%
Asset Turnover
Revenue 1845012 1867817
Total Assets 1237785 1240897
Asset Turnover 1.4906 1.5052
Return to Shareholder's Equity
Profit after Tax 101554 101103
Total Shareholder's Equity 801096 775704
Return to Shareholder's Equity 12.68% 13.03%
Dividend Payout Ratio
Dividend Per Share 17 17.5
Earnings Per Share 19.2 19.4
Dividend Payout Ratio 88.54% 90.21%
C. Analysis of position of David Jones Ltd
Profitability Potential: It can be seen from the above analysis that profit margin has increased overall for the
company but the return to shareholder’s equity has reduced. Also it can be seen that both gross profit and net
profit has increased in 2013 in comparison to year 2012, however the same has decreased significantly in
previous years from 2009. Thus porofitability has however increased in 2013 then also the position of profit is not
good for the company.
Solvency Potential: Solvency can determined by the analysing debt to total assets ratio of the company for the

Principles of Accounting BAP11 - Assessment 3- Trimester 2 2019
two years. It can be seen from the above analysis that the company is able to cover its debt easily from the total
assets of the company which is a good sign from the perspective of solvency. However it should be seen that in
Year 2012 the debt to total asset ratio was 0.37 which decreased to 0.34 in the year 2013 which is again a good
sign for the company from the perspective of solvency
Investment Potential: After analysing all the financials, ratio and conducting trend analysis it can be seen that
profits along with earnings and dividend has reduced significantly since 2009 and the same is showing a
downward trend thus it is assumed that the same will continue for the coming years and it is not recommended
from the view of situation to make investment in the company as most of the financials are showing a downward
trend. Also EPS of the company has decreased significantly which shows that investors would not be earning as
per the expectation from the company.