Analyzing Financial Performance: A Comprehensive Report

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Manage Finances
1

Table of Contents
Assessment 1..............................................................................................................................................3
1...............................................................................................................................................................3
2...............................................................................................................................................................3
3...............................................................................................................................................................3
4...............................................................................................................................................................4
5...............................................................................................................................................................4
6...............................................................................................................................................................4
7...............................................................................................................................................................5
8...............................................................................................................................................................5
9...............................................................................................................................................................5
10.............................................................................................................................................................6
11.............................................................................................................................................................6
12.............................................................................................................................................................6
13.............................................................................................................................................................6
Assignment 2..............................................................................................................................................7
1. Finance Report...............................................................................................................................7
2. Budgets...........................................................................................................................................9
3. Statutory Requirements..............................................................................................................12
Assessment 3............................................................................................................................................13
Financial Performance Report...........................................................................................................13
Assessment 4............................................................................................................................................16
Debtor Management Report...............................................................................................................16
References................................................................................................................................................18
2

Assessment 1
1
Financial Probity for Business means that there is an ethical, honest and fair practices that is
applied on the monetary aspects of the business activities. The requirements for Probity in the
business are:
 Involvement of skilled and knowledgeable officers in the firm.
 Appropriate checks for the balances of the financial activities.
 Transparent and consistent communication with the suppliers.
 Confidentiality of the supplier information (Christensen, et.al., 2016)
2
Examples of Fraudulent Behavior in regards to the company finances are stated as below:
 Tax Avoidance: An organization can modify its tax returns for the purpose for revealing
less taxable income. This results in lowering the tax remittance.
 Skimming: Inappropriate recording of accounting transactions in known as Skimming.
This is a very big fraud as there is possibility of skipping of important financial data.
 Financial Statement Fabrication: Falsifying the fiscal statements to give excellent
results is considered as a fraud. There are various ways which are used to make
intentional changes in the statements.
 Asset Theft: There are certain employees that are responsible for stealing assets like cash
from the firm. Weak controls are the reason for such kind of issues.
3
The requirement of an auditor’s report is to provide an independent views about the financial
statements to the shareholders. The auditor’s report whether or not, the statements have been
framed in accordance with the Company’s Act and all the compliances are being followed
properly or not (Elder, et.al., 2015).
The audited reports are required for presentation of the key fiscal statements like Balance Sheet
and Profit and Loss A/c in front of the investors and the stockholders.
3

4
Principle of Cash Accounting
 Revenue Recognition Principle: It states that the revenue earned by the firm is correctly
recognized win the income statement of the firm. It devoid of other expenses.
Advantage of Cash Accounting
 Liquidity: It is easier for the investors to know about the liquidity ratio of the firm as the
accounting deals with Cash transactions (Goel, 2016).
Disadvantages of Cash Accounting
 Not Recognized by Companies Act: Only few business follow this accounting, as it is
not recognized by the companies Act. Therefore it cannot be practiced in big firms.
5.
Principle of Accrual Accounting
The principle of accrual accounting states that the firm should record transactions in the period in
which the transaction is supposed to occur, rather than the period in which the cash flow related
to them occurs.
Advantage of Accrual Accounting
 Provides accurate picture of cash flow: Accrual accounting states that the income and
expenses that is generated in a month can be carry forwarded to the next month.
Disadvantages of Accrual Accounting
 Taxes: There is a fixed time under which the taxes have to be paid. Under accrual
accounting the transaction has been reported before it has commenced, which means that
there is a chance of paying additional taxes.
6.
Four main taxation and superannuation Obligations for business are:
 Australian Business Number: An organization is supposed to have an ABN number, so
that they can manage their taxes easily (Salim, et.al., 2016). It is also used for dealing
with other businesses.
4

 Goods and Service Tax: It is a broad-based tax imposed on goods and services that are
being sold in Australia. It is mandatory for the firms to register for GST depending upon
their turnover.
 Business Activity Statement: The statement that describes your undertaken activities. It
is to be reported to the ATO.
 Pay as you Go (PAYG): Certain companies fail to pay their taxes in one go. PAYG is a
system that allows the firm to pay the taxes in installments (Bryce, et.al., 2015).
 Fringe Benefits Tax: If the employer is providing any benefits to the employees, then
they are required to pay Fringe Benefit Tax.
7.
The act that details requirements for financial reporting and auditing is the Corporations Act
2001. The requisites for companies for preparing and lodging financial reports under this act are:
 Substantial amount of money involved.
 Investment from General public in the firm.
 Firm has earlier lodged reports with ASX, NSX, SIM VSE.
 Statement of Financial Statements, Cash Flows to be filed.
8.
Requirements for registered foreign companies regarding preparing and lodging financial reports
are:
 Required to lodge annual return (Form 406) without the Financial Statements with ASIC
(Safari, et.al., 2015).
 Financial Reports should be framed in accordance with the company’s origin law.
 It should be audited
 Prepared in agreement with Ch 2M of the Corporations Act 2001.
9.
The tax rate of Companies are determined on the basis of aggregated turnover threshold, which is
$ 25 million.
The tax rate for larger companies is 30%, whereas the tax rate for smaller firms is 27.5%.
5

10.
The process of GST Reporting is provided as under:
 Monthly: The GST is paid if the turnover is $20 million or more.
 Quarterly: It is reported is the turnover is less than $20 million.
 Annually: If the trader has voluntarily registered, and the turnover is under $ 75,000.
11.
If the supplier does not provide an ABN, provided in the case that the total payment for the
goods and services is more than $ 75, after excluding GST, then the company will withhold the
top rate of tax from the suppliers and will pay that amount to the ATO (Al-Shattarat, 2016).
12.
A non-profit organization needs to register for GST after it has a turnover of $ 150,000 per year
or more than that.
13.
Difference in Pay As You Go withholding obligations for employees and contractors:
Basis of Difference Employees Contractors
Employment Laws They are covered under a
number of federal, state
employment and labor laws.
They are not covered under any
type of employment laws.
Value of Contract Salary is provided at the rate of
per hour.
Contract is created on whole
amount. It can be segregated on
hourly, daily, weekly or monthly
basis.
6

Assignment 2
1. Finance Report
Introduction
The purpose of this report is to analyze the company’s performance for the year 2016-17 through
its Profit and Loss Statement. The aim of the analysis is to evaluate the revenue generated, the
cost of goods sold, cost of sales and the gross profit/loss margin ratio the net profit/loss margin.
The report will shed light on the areas that had aided the organization in generating profit and
examine the areas that are moving towards loss. The main agenda of this act is to improve the
performance of the firm. The report also analyzes the Cash Flow Statement and reports the
income generated from the overall business of the firm, the goals and priorities of the business
and trends of the cash flow statements.
2016/17 Performance
Analysis of Profit & Loss Statement: The firm earned revenue of $ 613,805. The total sales
registered by the company was $ 1,321,600 and the total expenses were $ 707,795. The net profit
margin of the firm is 2.15%. The areas that have enhanced the profitability are Consulting Fees,
Workshops, and Publications. The areas that had brought loss to the firm are Contract Writer,
Marketing (Excess Expenditure more than the Estimated).
Analysis of Business performance: The overall performance of the business is very well. The
firm earned great revenue and this can be further improved by focusing on making strategic
budgets, keeping in mind that the actual expenses does not surpasses the estimated budget.
Though the firm needs to plan and strategize its collection from debtors. The firm should restrict
the TAT period to 90 days.
Reasons for Profit: After analyzing the profit and loss report, it was seen that the reason for the
profit of the firm was a planned budget that was responsible in reducing the expenses of the firm.
It is also noted that the sales generated were higher and this can be attributed towards skillful
marketing techniques and tactics. This is a good sign for the growth and enhancement of the
business and the firm needs to continue with same practices in order to achieve the similar
pattern of profits.
Strategic Goals and Priorities: The goal of the firm is to enhance its productivity and
profitability. There are certain areas that needs to be focused. The firm needs to focus on
improving its debtor’s collection period as this can result in losses that will get carry forwarded
to next financial year. There has been increase in the revenue generated by the Consulting fees
and this needs to be enhanced further so the firm should build marketing strategies that will
increase the sales.
7

8

Cash Flow Statement Analysis: The cash flow of the firm suggests that there are certain areas
where the firm has had expenditure more than the estimated budget. This is responsible for loss
in the business as the when the expenses are more, than the revenue decreases. The firm should
consider the cash flow for the next year. The trends of the cash flow states that there are few
areas under which the expenses determined were less as the actual expenses surpassed them.
This needs to be taken care of for the coming years.
Financial Software: In today’s era, various firms are opting for financial software that will help
them in easing the tasks of compiling, reporting, analyzing and summarizing the financial
statements. These software are responsible for providing accurate reports about the profit or loss
incurred by the firm according to the data fed into the system.
Provided below are review and analysis of three different software that are used or can be used
by firms:
Financial Software
Packages
Advantages Disadvantages
Quicken It has a clear user Interface. It lacks details in Investment
Report.
Expensr It easily generates several
types of budgets.
It is time consuming and
takes time in processing data
GNU Cash It is very easy to use and can
be accessed from any place.
Some features are non-
intuitive.
MYOB It is very easy to use, it is
properly detailed and can
easily add any number of
transactions
It is incapable of performing
a recurring transaction.
9

2. Budgets
Sales Budget
SALES
BUDGET 2017/18 Qtr 1 Qtr 2 Qtr 3 Qtr 4
Revenue - 86 96 85 82
Sales 1,321,600 286,475 380,850 321,625 332,650
– Cost of Goods
Sold
258,43
6
64,60
9
64,60
9
64,60
9
64,60
9
Gross Profit 1,063,164 221,866 316,241 257,016 268,041
Gross Profit % 19.55 22.55 16.96 20.09 19.42
Expenses
– Accounting
Fees
6,82
3 - - 6,82
3 -
– Interest
Expense
84,50
8
21,12
7
21,12
7
21,12
7
21,12
7
– Bank Charges 1,60
0
40
0
40
0
40
0
40
0
– Depreciation 170,00
0
42,50
0
42,50
0
42,50
0
42,50
0
– Insurance 12,87
5
3,21
9
3,21
9
3,21
9
3,21
9
– Store Supplies 3,60
5
90
1
90
1
90
1
90
2
– Advertising 280,00
0
70,00
0
70,00
0
70,00
0
70,00
0
– Cleaning 15,65
6
3,91
4
3,91
4
3,91
4
3,91
4
– Repairs &
Maintenance
61,80
0
15,45
0
15,45
0
15,45
0
15,45
0
– Rent 2,538,95
0
634,73
8
634,73
8
634,73
8
634,73
6
– Telephone 14,42
0
3,60
5
3,60
5
3,60
5
3,60
5
– Electricity
Expense
25,75
0
6,43
8
6,43
8
6,43
8
6,43
6
– Luxury Car
Tax - - - - -
– Fringe Benefits
Tax
28,00
0
7,00
0
7,00
0
7,00
0
7,00
0
– Superannuation 61,73
8
15,43
5
15,43
5 15,435 15,43
5
10

– Wages &
Salaries
1,905,50
0
476,37
5
476,37
5
476,37
5
476,37
5
– Payroll Tax 90,51
1
22,62
8
22,62
8
22,62
8
22,62
8
– Workers’
Compensation
38,11
0
9,52
8
9,52
8
9,52
7
9,52
7
Total Expenses 5,339,84
6
1,333,25
6
1,333,25
8
1,340,08
0
1,333,25
4
Net Profit
(Before Tax)
(4,276,68
2)
(1,111,39
0)
(1,017,01
7)
(1,083,064
)
(1,065,21
3)
Income Tax (1,283,00
5)
(333,41
7)
(305,10
5)
(324,919
)
(319,56
4)
Net Profit (2,993,67
8)
(777,97
3)
(711,91
2)
(758,144
)
(745,64
9)
Profit Budget
2017/18 Qtr 1 Qtr 2 Qtr 3 Qtr 4
Net Profit (Before
Tax)
2,584,36
9
(206,48
3)
422,07
9
736,36
2
1,364,92
9
Income Tax 809,35
3
(61,94
5)
126,62
4
220,90
9
409,47
9
Net Profit 1,854,22
4
(144,53
8)
295,45
6
515,45
4
955,45
1
Cash Budget
CASH
FLOW
ANALYSIS
– GST
2017/18 Qtr 1 Qtr 2 Qtr 3 Qtr 4
GST
Collected
1,571,41
1
314,28
2
377,13
9
408,56
7
471,42
3
Less GST
Paid
296,30
6
74,82
6
74,82
7
74,82
7
74,82
6
GST
Payable
1,275,10
5
239,45
6
302,31
2
333,74
0
396,59
7
11

Working Note:
–
Accounting
Fees
6,82
3 - - 6,82
3 -
– Insurance 12,87
5
3,21
9
3,21
9
3,21
9
3,21
9
– Store
Supplies
3,60
5
90
1
90
1
90
1
90
2
–
Advertising
280,00
0
70,00
0
70,00
0
70,00
0
70,00
0
– Cleaning 15,65
6
3,91
4
3,91
4
3,91
4
3,91
4
– Repairs &
Maintenanc
e
61,80
0
15,45
0
15,45
0
15,45
0
15,45
0
– Rent 2,538,95
0
634,73
8
634,73
8
634,73
8
634,73
6
– Telephone 14,42
0
3,60
5
3,60
5
3,60
5
3,60
5
– Electricity
Expense
25,75
0
6,43
8
6,43
8
6,43
8
6,43
6
Total 2,959,87
9
738,26
4
738,26
5
745,08
8
738,26
2
12