Case Study Workbook: Freedom Foods Financial Analysis (BU1002/BU1902)

This case study workbook analyzes the financial performance of Freedom Foods Group Limited, based on its annual reports from 2016, 2017, and 2018. The assignment is divided into four parts, with Part 1 focusing on the company's background, operations, and corporate governance structure, inclu...Read More

BU1002/BU1902 CASE STUDY WORKBOOK
Introduction to Real-World Annual
Reports
Company explored in the case study:
Student Name and Id Number:
Table of Contents:
Overview:.....................................................................................................2
Part 1 – Introduction to Company Annual Report and Financial Statements5
Part 2 – Financial Statements.......................................................................6
Part 3 – Financial Statement Analysis Tools................................................8
Part 4 – Group Response Instructions........................................................11

BU1002/BU1902 – (BNE/SNG) CASE STUDY WORKBOOK
Overview:
The case study assignment is an assessment item worth a total of 30% of the final grade for
this subject. Note; this assessment is NOT a hurdle assessment; however, students are
required to attempt all assessments in order to pass the subject.
The case study provides students with the opportunity to:
1. explore subject topics using a real-world example;
2. develop skills required for financial analysis;
3. work collaboratively on a piece of academic work; and
4. learn from their peers regarding their own behavior in group work.
The questions in this case study workbook have been designed to introduce and prompt
students to answer questions based on the concepts and principles learned the topic content
throughout the study period. The workbook consists of;
» Part 1 – develop a background of the company and an overview of the company’s
corporate governance principles.
» Part 2 – familiarise students with the published annual reports and identify differences
between results over a period of time.
» Part 3 – conduct ratio analysis on the company annual report.
» Part 4 – prepare a comparative analysis of the 4 companies assigned to the group,
summarise the findings and present as a response to the investor.
In your first tutorial class, your tutor will assign you a company for the case study
assignment. You will work as an individual on the assignment completing all of questions
for parts 1, 2 and 3 in the case study workbook. Once census date has passed, your tutor will
assign you to a group with a maximum of 4 students. Each student in the group will be
assigned a different company, this means that there will be 4 different companies within each
group. Students may choose members for their group, but each member must have been
assigned a different company for analysis.
The purpose of the group work component is to conduct a comparative analysis of all 4
companies using the information prepared as individuals
Before starting the written response you should read over the marking criteria sheet. The
essay should be typed and APA referencing should be used (see
http://libguides.jcu.edu.au/apa ).
The written submission will be awarded a mark out of 100, which will in turn be
converted to a score out of 30. This will be awarded collectively to each group member
that has authored the group essay.
Group Process
The ability to “lead, manage and contribute effectively to teams” is a key JCU Generic skill
and an important skill sought by employers. An important function of this assessment is for
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BU1002/BU1902 – (BNE/SNG) CASE STUDY WORKBOOK
students to work effectively and on a collaborative basis. To facilitate this process, each
group will have its own dedicated BU1002/BU1902 Group site on LearnJCU.
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BU1002/BU1902 – (BNE/SNG) CASE STUDY WORKBOOK
Establishment of Group Site and Participation:
You will have access to your group site within the BU1002/BU1902 subject site on
LearnJCU once the groups have been formed after census date.
Each Group site on LearnJCU will incorporate links to the following facilities: group
Information, file exchange, group discussion, group journal and send emails. All students
are required to use their Group site to document all group activity relating to this
assessment. It is also expected that once the group site has been formed, each member of the
group will upload the answers for their company to the questions in Parts 1 and 2 of the case
study workbook. This is a progressive assignment, therefore students will need to continue to
prepare answers for their company to the questions in part 3 of the case study workbook to be
able to complete the group analysis. The academic staff on your campus will provide you
with memo stating the due dates when these answers must be uploaded to the group site.
Time will be allocated in tutorial classes for group work on the assignment to facilitate and
encourage group collaboration. These tutorial classes will be compulsory for all group
members to attend. The compulsory classes will be listed in the Subject Outline. Please use
the group site on LearnJCU to provide supporting documentation e.g. meeting agendas and
minutes and use the other facilities to communicate with group members regarding the
response in part 4.
Working in Groups
» Assessment Criteria and Skills Development: Assessment will be based on the criteria set
out in the Subject Outline and or LearnJCU.
» It should also be noted that the Group site will provide the lecturer with information on the
extent of each student’s contribution and how early, late and consistently they engaged with
the site. This information may in some instances, where there seems to be an imbalance in
contribution levels across a group and / or a formal complaint has been lodged, be used as a
basis upon which to rescale the marks awarded to individuals within the group.
» Team Conflict and Disbandment: Should you have conflict in your group or a group
member withdraws from your group or the subject, it is important to advise the lecturer as
soon as possible and well ahead of the due date. Failure to upload content by the stipulated
timeframes without reason may also be grounds for removal from the group. The lecturer
will retain the right (after hearing claims from students and reviewing the Group site) to
decide when a group should be disbanded. In exceptional circumstances, individual
assessment options are available to students only after a concerted effort has been made to
work with other team members. Where a student has been removed from a group, the
remaining members will prepare a comparative analysis on the remaining companies.
Students who will be asked to complete the assignment as an individual will be required to
complete a comparative assessment of their assigned company with another company
provided by the lecturer. The second company will be provided when the student has been
removed from the group.
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BU1002/BU1902 – (BNE/SNG) CASE STUDY WORKBOOK
» Working in groups, under proper conditions, encourages peer learning and peer support.
Individual students who do not collaborate within the specified timeframes may be removed
from the group and will be required to complete the assignment as an individual. The
comparative analysis will be based on the collaboration of remaining group members.
» Where a student has been removed from a group and will submit as an individual, the
maximum weighting for the assignment will be adjusted to 20% for failure to complete in a
group.
» Sometimes individual members of a group will not contribute equally to the task resulting
in some students carrying higher workload in the group. This subject uses a peer
evaluation sheet to alleviate student concerns about the contribution of individual group
members. The lecturer reserves the right to reject peer and self-evaluations that are deemed
inconsistent with the information obtained from the Group site.
Students who do not contribute to the group essay will receive zero marks for this piece
of assessment.
Resources:
Students will be provided with the following information:
 Case Study Workbook.
 Company Annual Reports for the past 3 years.
 Company financial data (excel spreadsheet) – to conduct ratio analysis.
 Link to the Company website on LearnJCU.
Students are not expected to research beyond these references for this assessment item.
The case study contains questions related to weekly study topics for weeks 1 – 6 inclusive.
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BU1002/BU1902 – (BNE/SNG) CASE STUDY WORKBOOK
Part 1 – Introduction to Company Annual Report and Financial Statements
The purpose of part 1 is to begin your exploration of your company’s annual report and
corporate governance structure.
Part 1 – Question 1:
Write a background summary of your assigned company including the following:
 When and why did your company first commence operation?
The company was established in the year 1986 in order to operates the business
in Dairy product and Supermarket products (Freedom Food Group, 2019a).
 What is the main or core business of the company?
Freedom Food is a company who provides food services to consumers. It was
brought to life with a focus on making nutritious food and beverages. It
expanded the business across paddock to plate (Freedom Food Group, 2019c).
 Some companies are diversified and have investments in other industries, for
example, Wesfarmers has diverse business operations that cover supermarkets,
department stores, home improvement and office supplies; coal production and
export; chemicals, energy and fertilizers; and industrial and safety products. Is your
assigned company diversified? What industries does the company operate in?
Yes, the company is diversified as it provides the dairy products and
supermarket products to consumers. It operates in food and Beverages Company
and Consumer good (Freedom Food, 2017b).
 Does your assigned company operate solely within Australia or does it operate
internationally? Identify the operational locations.
Yes, the company operates in Australia and also operates in China, South East
Asia and North America, and its head office in Taren Point, New South Wales
(Freedom Food Group, 2019a).
Part 1 - Question 2: (related content – topic 1)
What are the headings and sub-headings of the discussion on corporate governance? Note, if
not presented in the Company Annual Report, review the Company website.
According to the company website, the headings and subheading under the heading of corporate of
governance are discussed below:
 Whistleblower & Improper Conduct Policy & Procedure
 Securities Trading Policy
 Corporate Governance Statement August 2018
 Appendix 4G August 2018
 WGEA Report FY16
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 Board Charter
 Code of Ethics
 Continuous Disclosure
 Audit Risk and Compliance Committee Charter
 Risk Management Policy
 Charter of the Remuneration and Nomination Committee
 Statement of Delegated Authority
 Privacy Policy
 Diversity Policy (Freedom Food Group, 2019b).
Part 1 - Question 3: (related content – topic 1)
What are the page references for the discussion on corporate governance? (Hint – try the
table of contents at the beginning of the annual report or review the Company website.)
Briefly list the information included in the company’s corporate governance report. Does this
information differ from the corporate governance information covered in the content and
required reading for topic 1?
Page 74 of the annual report of the company contains it corporate governance statement. In this
statement, the rules and policies have been described related to the company operating structure. It
represents the structure in which the members of the company perform their duties and
responsibilities in the fiscal year (Freedom Food Group, 2019b).
Part 1 - Question 4: (related content – topic 1)
What position was held and what was the composition and total remuneration of the highest
paid board member? (Hint – try the Directors’ Report.)
The company paid the highest amount of remuneration to non-executive director. In the year 2018,
$125571 has been paid by the company to non-executive director which is the highest amount of
remuneration.
Part 1 - Question 5: (related content – topic 1)
How many “subsidiary companies” or “controlled entities” are in the group? Are the
subsidiaries/controlled entities located domestically and or internationally? Identify where
they are located. This will give insight into how widespread the company’s operations are
and may assist you with your background information.
There are 4 subsidiaries companies of Freedom Food those operates the business in Australia, South
East Asia, North America, and China. These are also provides the supermarket and dairy products to
consumer (Freedom Food, 2017a).
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BU1002/BU1902 – (BNE/SNG) CASE STUDY WORKBOOK
Part 2 – Financial Statements
Part 2 – Question 1 (Balance Sheet): (related content – topic 3)
What is the amount invested by the company in net assets for the current year? (Hint use
total assets less total liabilities). How does this amount differ from the value of net assets for
each of the previous three years? Can you identify any reason for the changes? (Hint: look at
the individual amounts that make up both the total assets and total liabilities, are there any
changes to individual items over this three-year period? Alternatively, you could perhaps
look at the notes to the financial statements in the annual report to see if there are any
changes in the breakdown of individual items in the reports.) Discuss.
According to the annual report of the company, the total asset of the company of 2018 is 529900. In
the last three years, the net asset of the company is 321436, 287818, 185929 in the year 2017, 2016,
and 2015 respectively. The main reason of increasing the net assets is that the company start
investing in current assets in order to operates the smoothly in daily routine activities. The amount
of current assets has been increases from the previous year’s such as it is 135591 in 2017 and now it
is 159269 in 2018 due to which the total assets of the company is high (Freedom Food, 2016b).
Part 2 – Question 2 (Balance Sheet): (related content – topic 3)
How much was the total equity for the current year? How does this differ from the total
equity in each of the previous three years? Can you identify any reason if there are any
changes? Discuss.
As per the excel spreadsheet, it has been seen that the amount of total equity is 529,900,000.00 in
the year 2018. In the previous years, it is 185,929,000.00, 287,818,000.00, and 321,436,000.00 in
2015, 2016, 2017 respectively. The main reason of increasing the total equity is that the company
issues the share in order to finance the operational activities instead of borrowing the money from
third parties(Freedom Food, 2016b).
Part 2 – Question 3 (Balance Sheet): (related content – topic 3)
How much was the total current assets for the current year and what are the components
classified under this heading? Is there any difference in the value of total current assets for
each of the previous three years? Can you identify any reason if there are any changes?
Discuss. (Hint: you may need to refer to the notes to the financial statements in the annual
report to review more detailed information.)
It has been seen that the current assets of the company is 245,174,000.00 in the year 2018. In the
year 2016 and 2017, the current asset of the company is 135,591,000.00 and 160,208,000.00
respectively. It depicts that the current assets of the company has been increases due to increasing
the amount of receivables and amount of inventories. The amount of inventories of the company
has been increases such as 46,213,000.00, 63,388,000.00, and 81,101,000.00 in the respective years
2016, 2017 and 2018. It depicts that the financial position of the company is improving due to
increasing the amount of total inventories (Robinson, Henry, Pirie, &
Broihahn, 2015).
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Part 2 – Question 4 (Balance Sheet): (related content – topic 3)
What are the items listed under non-current liabilities? Are there any new non-current
liabilities in the current year that were not there in the previous three years? (Hint: you will
need to look in the notes to the accounts to see the breakdown of non-current liabilities).
The non-current liability of the company is 124,874,000.00 in the year 2018. In the last three years,
the amount of non-current liabilities are 33,987,000.00, 78,271,000.00 and 24,096,000.00 in 2015,
2016, and 2017 respectively. It depicts that the amount of non-current liabilities has been decreases
which is beneficial for the company as it states that the company does not borrow the money. The
company starts issuing the shares in order to finance the operation activities instead of borrowing
loans from third parties (Zainudin, & Hashim, 2016).
Part 2 – Question 5 (Income Statement): (related content – topic 4)
How much was net profit for the current year? How does this compare to the net profit for
each of the previous three years? Can you identify any particular revenues or expenses that
may have led to changes in the profit figures over the three-year period? Discuss.
The net profit of the company is 19,846,000 in the year 2018. In the previous years of the company,
it has been found that the net profit is 27329000 and 8844000 in the year 2016 and 2017
respectively. The amount of net profit of the company has been fluctuated due to increasing the
amount of revenue from the previous year’s such as 170,444,000, 262,481,000 and 352,987,000 in
2016, 2017 and 2018 respectively. The increasing amount of revenue states that the volume of sales.
The amount of net expenses of the company is 1,151,000.00, 2,635,000.00, 3,471,000.00 has been
increases as it invests the large amount in increasing the volume of sale. It depicts that the company
has high amount of revenue instead of high expenses. Increasing amount of expenses affects the net
profit of the company.
Part 2– Question 6 (Income Statement) (related content – topic 4)
Is the total revenue in the current year greater or less than the total annual revenue recorded
in each of the previous three years? Discuss.
The total revenue of the company is 352,987,000 in the year 2018. It is observed that the company
total revenue amount has been increases from the previous year such as 262,481,000 in 2017. In
2016, the amount of total revenue is 170,444,000 which is less than the amount of total revenue in
2018. As per the last three years, it has been found that the amount of revenue has been increases
due to increasing the volume of sales and it also invest in selling amount of revenue.
Part 2 – Question 7 (Statement of Cash Flows): (related content – topic 4)
How much was the cash flows from operating activities for the current year? What was the
largest inflow item and the largest outflow item in the operating activities section? Does this
differ from the previous three years? Discuss.
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The amount of cash flow operating activities is 5693000, 5381000 and 24376000 in the year
2016, 2017 and 2018 respectively. It has been found that the amount of operating activities of the
company has been increases which represents that the commercial transactions of the company has
been increases as it invests and spent more amount to survive for long time.
Part 2 – Question 8 (Statement of Cash Flows): (related content – topic 4)
How much was the cash flow from investing activities in the current year? Has the company
had any new investing cash flows in the current year compared to the previous three years? If
they did, list the activities (Hint: it may be necessary to look in the notes to the accounts).
The current amount of net cash flow from investing activities is 72,978,000. It has been seen that
the investing amount of the company has been increases from the last years such as 18,028,000, and
213,030,000 in 2016 and 2017. As per the data, the company investing amount has been increases
which states that it invests in different or further activities which helps it to grow the business at the
international level. The investment purchased is an item that has been increases due to which the
cash flow from investing activities has been increasing (Freedom Food, 2017c).
Part 2 – Question 9 (Statement of Cash Flows): (related content – topic 4)
What was the net change in cash flows in the current year? How does this change compare to
the previous three years? Discuss.
The amount of cash flow has been increases from the previous years which states that the company
financial position has been improved. In the last three years, the amount of operating activities,
investing activities and financing activities has been increases. The increasing amount of cash flow of
all three activities states that the company financial position has been improved.
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Part 3 – Financial Statement Analysis Tools
Part 3 – Question 1 (Profitability): (related content – topic 5)
Has the profit margin changed over the past three years? Is this a good result for the
company? Briefly discuss what the change indicates. (Hint: as mentioned above, refer to
your horizontal and vertical analysis of the Income Statement and Balance Sheet to assist in
your analysis of this ratio.)
The profit margin ratio of the company has been decreases which state that the company is not able
to earn the real incomes. The profit margin ratio of the company is 16.03%, 3.37% and 5.62% in the
year 2016, 2017 and 2018 respectively. The increasing ratio of the company represents that the
company has huge expenses and less revenue due to which the real income has been decreases
(Freedom Food, 2015a).
Part 3 – Question 2 (Profitability): (related content – topic 5)
Can you identify a trend in the return on equity ratio over the past three years? Comment on
the trend. Briefly discuss possible reasons for this trend.
The profitability ratio of the company describes that its financial position in terms of generating
profit has been decreases. The ratio of return on equity has been decreases such as 11.54%, 2.90%
and 4.66% in 2016, 2017, and 2018 respectively. The decreasing ratio states that the company
decreases the amount of return to shareholders. Gross profit margin ratio of the company is 24%,
9%, and 11% in the year 2016, 2017 and 2018 respectively. This ratio states that the company
capability to generate the amount of gross profit has been increases from the last year 2017 (Faello,
2015).
Part 3 – Question 3 (Asset efficiency): (related content – topic 5)
Identify if the asset turnover ratio increased or decreased over the past three years? Is this a
good result for the company? Briefly discuss what the change indicates.
As per the asset efficiency ratio, it is observed that the ratio of the company is in the three years
such as 0.46, 0.50 and 0.52 in 2016, 2017 and 2018 respectively. It has been found that the company
takes more time to generate the revenue by utilising the assets. The capacity of the company to
generate the revenue has been decreases as the amount of total assets has been increases instead
of revenue (Williams& Dobelman, 2017).
Part 3 – Question 4 (Asset efficiency): (related content – topic 5)
Has the receivables turnover changed over the past three years? Is this a good result for the
company? Briefly discuss what the change indicates.
The ratio of receivables turnovers has been fluctuated in the last three years such as 75.98 , 77.58
and 66.5
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in the year 2016, 2017 and 2018 respectively. In 2018, the company collects the amount
in fewer days 66.5 as compare to the previous year which helps it to pay its liabilities of
short or long periods on time (Freedom Food, 2015a).
Part 3 – Question 5 (Asset efficiency): (related content – topic 5)
Has the inventory turnover changed over the past three years? Is this a good result for the
company? Briefly discuss what the change indicates.
The inventory turnover ratio of the company has been decreases such as 5.01, 4.40 and 4.45 in
respective years 2016, 2017 and 2018. The decreasing inventory turnover ratio states that the
company consumes the inventory in less time to generate the profit (Freedom Food, 2018d).
Part 3 – Question 6 (Liquidity): (related content – topic 5)
Has the current ratio increased or decreased over the past three years? Is this a good result
for the company? Briefly discuss what the change indicates.
According to liquidity ratio, it has been seen that the current ratio of the company is 1.63, 0.56 and
2.21 which is increasing from the previous years. The amount of current asset is high as compare to
current liabilities. The increasing amount of current assets states that it invests in current assets in
order to pay the short term obligations (Clear Tax, 2018).
Part 3 – Question 7 (Liquidity): (related content – topic 5)
Has the quick ratio increased or decreased over the past three years? Is this a good result for
the company? Briefly discuss what the change indicates.
According to quick ratio, it is observed that the amount of quick assets is high as compare to current
liabilities. It states that the company has the high ability to pay all obligations such as short term or
long term. The quick ratio of the company in the three years are 1.63, 0.56 and 2.21 in 2016, 2017
and 2018 in a respective manner.
Part 3 – Question 8 (Liquidity): (related content – topic 5)
Has the cash flow (to current liabilities) ratio increased or decreased over the past three
years? Is this a good result for the company? Briefly discuss what the change indicates.
The current liabilities of the company has been increases from the previous year’s such as 78271000,
24096000 and 124874000 respectively in 2016, 2017 and 2018. The amount of cash flow from
operating activities has been increases but it is less than the amount of current liabilities. It states
that the company has more liabilities to pay in its financial transactions (Freedom Food, 2017c).
Part 3 – Question 9 (Capital structure/Gearing): (related content – topic 5)
Has the debt to assets ratio increased or decreased over the past three years? Is this a good
result for the company? Briefly discuss what the change indicates.
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According to the debt to asset ratio, the ratio has been fluctuated as it is increases or decreases with
the different percentages. The amount of total asset of the company has been increases
464,138,000, 588,927,000 and 765,850,000 in three years 2016, 2017, and 2018 respectively
(Freedom Food, 2017c). The amount of assets is high as compare to liabilities which depicts that the
company has the ability to pay all the liabilities.
Part 3 – Question 10 (Capital structure/Gearing): (related content – topic 5)
Has the debt to equity ratio increased or decreased over the past three years? Is this a good
result for the company? Briefly discuss what the change indicates.
The debt to equity ratio of the company has been fluctuated by increasing or decreasing ratio such
as 61.26%, 83.22% and 44.53% in last three years. It states that the company uses the liabilities as
the source of money instead of issuing shares.
Part 3 – Question 11 (Horizontal Analysis): (related content – topic 6)
Conduct a horizontal analysis of the Income Statement for the past 4 years. Comment on any
trends.
According to the horizontal analysis of the company, it has been seen that the revenue of the
company has been decreases from the previous years with the different percentage such as 86% to
54% to 34%. The percentage of operating expenses has been decreases which is also a beneficial
trend for the company.
Part 3 – Question 12 (Horizontal Analysis): (related content – topic 6)
Conduct a horizontal analysis of the Balance Sheet for the past 4 years. Comment on any
trends.
As per the horizontal analysis, it is observed that the amount of total asset of the company has been
decreases which are not a beneficial trend as the percentage of total assets is 71%, 27%, 30%
respectively. The percentage of long term liabilities are also increases in the four years such as 107%,
52% and -12%. It is a beneficial trend for the company as the amount of liabilities has been
decreases (Freedom Food, 2015a).
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Part 3 – Question 13 (Vertical Analysis): (related content – topic 6)
Conduct a vertical analysis of the Income Statement for the past 4 years. Comment on any
trends.
As per the vertical analysis, it has been evaluated that the company operating expenses has been
decreases with the decreasing percentage in last four years such as 83%, 104%, 92% and 91% in
2015, 2016, 2017 and 2018 (Freedom Food, 2015a). Earnings before interest and tax states that the
company has been decrease which states that the company is not able to earn the high earning.
Part 3 – Question 14 (Vertical Analysis): (related content – topic 6)
Conduct a vertical analysis of the Balance Sheet for the past 4 years. Comment on any
trends.
The non-current assets of the company are always high as the percentage of non-current is high in
the 100% percentage of total assets. The percentage of non-current assets is 79%, 65%, 77%, and
68% in the year 2015, 2016, 2017 and 2018 respectively. The company total current liabilities
percentage is high 60%, 56%, 91% and 47% respectively.
Part 3 – Question 15 (Trend Analysis): (related content – topic 6)
Conduct a trend analysis of ‘Revenue’ and ‘Net Profit after Tax and Abnormals’ in the Profit
and Loss Statement for the past 3 years. Comment on any trends.
According to the analysis, it has been found that revenue of the company has been decreases from
the previous years. Apart from it, Net profit after tax has been fluctuated as it is decreases and
increases from the previous year’s such as 11%, 85% and 69% in 2016, 2017 and 2018 respectively.
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Part 4 – Group Response Instructions
Submission Requirements:
The four-page response will consist of:
1. Introduction: the main aim of this paper is to study the concept of financial analysis.
Atlas and Food Freedom have been taken into consideration.
2. Body: As per the analysis of both the companies, it has been found that the current
percentage of profit margin of Food Freedom is high as compare to Atlas. The profit
margin ratio of Food Freedom is 5.62% and Atlas has -6.79%. In terms of efficiency
ratio, Food Freedom has high amount of debtors as compare to Atlas Pearl. Efficiency
ratio states the Atlas is more effective as compare to Food Freedom. The liquidity
position of Atlas is good as compare to Food Freedom (Atlas, 2018).
3. Limitations of analysis: The main limitation of analysis is that it does not take depth
analysis. The vertical and horizontal analysis of the company is based on assumption
due to which it is not real (Schroeder, Clark, & Cathey, 2019).
4. Conclusion: It is concluded that the financial position of Food Freedom is stronger as
compare to Atlas Pearl.
5. Recommendation: It is recommended that Atlas has to focuses on its sales so that it
earns the high revenue as it net profit has been affected. For Food Freedom, it is
suggested that the company has to control the expenses so that its net profit has been
increases.
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6. Reference list:
Atlas. (2018). Atlas Pearls. Retrieved From: Retrieved From:
https://www.atlaspearls.com.au/
Clear Tax. (2018). Liquidity Ratio, Formula With Examples. Retrieved From:
https://cleartax.in/s/liquidity-ratio
Faello, J. (2015). Understanding the limitations of financial ratios. Academy of Accounting
and Financial Studies Journal, 19(3), 75.
Freedom Food Group. (2019b). Corporate Governance. Retrieved From:
https://ffgl.com.au/our-business/corporate-governance/
Freedom Food Group. (2019a). Our Story. Retrieved From:
https://ffgl.com.au/our-business/our-story/
Freedom Food Group. (2019c). We’re a little Type A, but we like it that way. Retrieved From:
https://freedomfoods.com.au/how-we-do-it/
Freedom Food. (2015a). Annual report 2015. Retrieved From: https://ffgl.com.au/wp-
content/uploads/2017/05/Annual-Report-2015.pdf
Freedom Food. (2016b). Annual Report 2016. Retrieved From: http://ffgl.com.au/wp-
content/uploads/2017/05/Annual-Report-2016.pdf
Freedom Food. (2017c). 2017 Annual report. Retrieved From: http://ffgl.com.au/wp-
content/uploads/2017/10/Annual-Report-2017.pdf
Freedom Food. (2018d). 2018 Annual report. Retrieved From: https://ffgl.com.au/wp-
content/uploads/2019/02/FFGL-AR-2018.pdf
Robinson, T. R., Henry, E., Pirie, W. L., & Broihahn, M. A. (2015). International financial
statement analysis. John Wiley & Sons.
16 | P a g e

BU1002/BU1902 – (BNE/SNG) CASE STUDY WORKBOOK
Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2019). Financial accounting theory and
analysis: text and cases. John Wiley & Sons.
Williams, E. E., & Dobelman, J. A. (2017). Financial statement analysis. World Scientific
Book Chapters, 109-169.
Zainudin, E. F., & Hashim, H. A. (2016). Detecting fraudulent financial reporting using
financial ratio. Journal of Financial Reporting and Accounting, 14(2), 266-278.
17 | P a g e

BU1002/BU1902 – (BNE/SNG) CASE STUDY WORKBOOK
Appendices:
Profitability Ratios:
2016 2017 2018
Return on Equity
Profit avail to owners / 27,329,000 8,844,000 19,846,000
Average Equity 236,873,500 304,627,000 425,668,000
Answer: % 11.54% 2.90% 4.66%
Return on Assets:
Net profit (loss) / 27,329,000 8,844,000 19,846,000
Average total assets % 367,571,500 526,532,500 677,388,500
Answer: 7.44% 1.68% 2.93%
Profit Margin
Net profit (loss) / 27,329,000 8,844,000 19,846,000
Sales Revenue (note used operating revenue) 170,444,000 262,481,000 352,987,000
Answer: % 16.03% 3.37% 5.62%
Gross Profit Margin
Gross profit / 41,402,000 24,680,000 38,632,000
Sales Revenue (note used operating revenue) 170,444,000 262,481,000 352,987,000
Answer: % 24% 9% 11%
Cash Flow to Sales Ratio
Cash Flow from Operating Activities/ 5,693,000 5,381,000 24,376,000
Sales Revenue (note used operating revenue) % 170,444,000 262,481,000 352,987,000
Answer: 3.34% 2.05% 6.91%
Asset Efficiency Ratios
2016 2017 2018
Asset Turnover Ratio
Sales Revenue / (note used operating revenue) 170,444,000 262,481,000 352,987,000
Average Total Assets 367,571,500 526,532,500 677,388,500
Answer: 0.46 0.50 0.52
Inventory Turnover (days)
Average Inventory / 35,344,000 54,800,500 72,244,500
Cost of Sales 176,967,000 241,357,000 321,319,000
Answer: (note the above needs to be x 365) # days 72.90 82.87 82.07
Inventory Turnover (times p.a)
Cost of Sales / 176,967,000 241,357,000 321,319,000
Average Inventory 35,344,000 54,800,500 72,244,500
Answer times p.a 5.01 4.40 4.45
Receivables Turnover (days)
Average trade debtors / 35,482,000 55,790,500 64,384,500
Sales revenue (note used operating revenue) 170,444,000 262,481,000 352,987,000
Answer: (note the above needs to be x 365) # days 75.98 77.58 66.58
Receivables
Turnover
18 | P a g e

BU1002/BU1902 – (BNE/SNG) CASE STUDY WORKBOOK
(times p.a)
Sales Revenue / (note used operating revenue) 170,444,000 262,481,000 352,987,000
Average Trade Debtors 35,482,000 55,790,500 64,384,500
Answer times p.a 4.80 4.70 5.48
Liquidity Ratios
2016 2017 2018
Current Ratio
Current Assets / 160,208,000 135,591,000 245,174,000
Current liabilities 98,049,000 243,395,000 111,076,000
Answer: 1.63 0.56 2.21
Quick Asset Ratio
Current Assets - Inventory / 160,161,787 135,527,612 245,092,899
Current Liabilities 98,049,000 243,395,000 111,076,000
Answer: 1.63 0.56 2.21
Cash Flow Ratio
Net Cash Flows from Operating Activities / 5,693,000 5,381,000 24,376,000
Current Liabilities 98,049,000 243,395,000 111,076,000
Answer: 0.06 0.02 0.22
Capital Structure Ratios
2016 2017 2018
Debt to Equity ratio
Total liabilities / 176,320,000.00
267,491,000.0
0 235,950,000.00
Total Equity 287,818,000 321,436,000 529,900,000
Answer: % 61.26% 83.22% 44.53%
Debt Ratio (to assets)
Total Liabilities / 176,320,000 267,491,000 235,950,000
Total assets 464,138,000 588,927,000 765,850,000
Answer % 37.99% 45.42% 30.81%
Equity Ratio
Total Equity / 287,818,000 321,436,000 529,900,000
Total Assets 464,138,000 588,927,000 765,850,000
Answer: % 62.01% 54.58% 69.19%
Interest Coverage Ratio
EBIT / 34,963,000 13,288,000 25,219,000
Net Finance Costs (used net interest expense) 1,151,000 2,635,000 3,471,000
Answer: times p.a 30.38 5.04 7.27
Debt Coverage Ratio
Non Current Liabilities / 78,271,000 24,096,000 124,874,000
Net Cash Flow from Operating Activities 5,693,000 5,381,000 24,376,000
Answer: times p.a 13.75 4.48 5.12
Vertical Analysis
19 | P a g e

BU1002/BU1902 – (BNE/SNG) CASE STUDY WORKBOOK
Balance Sheet
Balance Sheet 06/15 06/16 06/17 06/18
CA - Cash
2,329,000
.00 1%
63,908,00
0.00
14
%
4,184,000
.00 1%
98,106,00
0.00
13
%
CA - Receivables
25,303,00
0.00 9%
45,661,00
0.00
10
%
65,920,00
0.00
11
%
62,849,00
0.00 8%
CA - Prepaid
Expenses
2,094,000
.00 1%
3,281,000
.00 1% 0.00 0%
2,825,000
.00 0%
CA - Inventories
24,475,00
0.00 9%
46,213,00
0.00
10
%
63,388,00
0.00
11
%
81,101,00
0.00
11
%
CA - Investments
1,700,000
.00 1% 92,000.00 0%
382,000.0
0 0%
293,000.0
0 0%
CA - NCA Held
Sale 0.00 0% 0.00 0% 0.00 0% 0.00 0%
CA - Other 0.00 0%
1,053,000
.00 0%
1,717,000
.00 0% 0.00 0%
Total Current
Assets
55,901,00
0.00
21
%
160,208,0
00.00
35
%
135,591,0
00.00
23
%
245,174,0
00.00
32
%
NCA -
Receivables
13,136,00
0.00 5% 61,000.00 0%
900,000.0
0 0%
1,182,000
.00 0%
NCA -
Inventories 0.00 0% 0.00 0% 0.00 0% 0.00 0%
NCA -
Investments
77,050,00
0.00
28
%
6,163,000
.00 1%
7,634,000
.00 1%
17,428,00
0.00 2%
NCA - PP&E
103,430,0
00.00
38
%
224,351,0
00.00
48
%
340,356,0
00.00
58
%
388,883,0
00.00
51
%
NCA -
Intangibles(ExG
W)
16,274,00
0.00 6%
16,274,00
0.00 4%
43,407,00
0.00 7%
51,926,00
0.00 7%
NCA - Goodwill
5,214,000
.00 2%
54,161,00
0.00
12
%
59,204,00
0.00
10
%
59,204,00
0.00 8%
NCA - Future
Tax Benefit 0.00 0%
2,920,000
.00 1%
1,835,000
.00 0%
2,053,000
.00 0%
NCA - Other 0.00 0% 0.00 0% 0.00 0% 0.00 0%
Total NCA
215,104,0
00.00
79
%
303,930,0
00.00
65
%
453,336,0
00.00
77
%
520,676,0
00.00
68
%
Total Assets
271,005,0
00.00
100
%
464,138,0
00.00
100
%
588,927,0
00.00
100
%
765,850,0
00.00
100
%
CL - Account
Payable
18,779,00
0.00
22
%
49,577,00
0.00
28
%
65,629,00
0.00
25
%
88,069,00
0.00
37
%
CL - Short-Term
Debt
22,025,00
0.00
26
%
32,437,00
0.00
18
%
161,763,0
00.00
60
%
9,730,000
.00 4%
CL - Provisions
10,092,00
0.00
12
%
15,097,00
0.00 9%
15,964,00
0.00 6%
11,984,00
0.00 5%
CL - NCL Held
Sale 0.00 0% 0.00 0% 0.00 0% 0.00 0%
193,000.0
0 0%
938,000.0
0 1% 39,000.00 0%
1,293,000
.00 1%
60 98,049,00 56 243,395,0 91 111,076,0 47
20 | P a g e

BU1002/BU1902 – (BNE/SNG) CASE STUDY WORKBOOK
Total Curr.
Liabilities
51,089,00
0.00 % 0.00 % 00.00 % 00.00 %
NCL - Account
Payable 52,000.00 0% 52,000.00 0% 52,000.00 0% 0.00 0%
NCL - Long-
Term Debt
30,890,00
0.00
36
%
71,393,00
0.00
40
%
23,395,00
0.00 9%
124,461,0
00.00
53
%
NCL - Provisions
3,045,000
.00 4%
591,000.0
0 0%
649,000.0
0 0%
413,000.0
0 0%
NCL - Other 0.00 0%
6,235,000
.00 4% 0.00 0% 0.00 0%
Total NCL
33,987,00
0.00
40
%
78,271,00
0.00
44
%
24,096,00
0.00 9%
124,874,0
00.00
53
%
Total Liabilities
85,076,00
0.00
100
%
176,320,0
00.00
100
%
267,491,0
00.00
100
%
235,950,0
00.00
100
%
Share Capital
99,028,00
0.00
53
%
169,106,0
00.00
59
%
249,954,0
00.00
78
%
453,374,0
00.00
86
%
Reserves
3,398,000
.00 2%
-
2,274,000
.00
-
1%
-
56,397,00
0.00
-
18
%
-
55,019,00
0.00
-
10
%
Retained
Earnings
83,503,00
0.00
45
%
128,527,0
00.00
45
%
127,879,0
00.00
40
%
131,531,0
00.00
25
%
Other Equity 0.00 0% 0.00 0% 0.00 0% 0.00 0%
Convertible
Equity 0.00 0% 0.00 0% 0.00 0% 14,000.00 0%
SE Held Sale 0.00 0% 0.00 0% 0.00 0% 0.00 0%
Outside Equity --
-
7,541,000
.00
-
3% --
Total Equity
185,929,0
00.00
100
%
287,818,0
00.00
100
%
321,436,0
00.00
100
%
529,900,0
00.00
100
%
Income Statement
Statement of Profit or
Loss 06/15 06/16 06/17 06/18
Operating Revenue
91,460,0
00.00
10
0%
170,444,
000.00
100
%
262,481,
000.00
10
0%
352,987,
000.00
10
0%
Other Revenue
54,044,0
00.00
59
%
47,925,0
00.00
28
%
3,556,00
0.00 1%
6,964,00
0.00 2%
Total Revenue
Excluding Interest
145,504,
000.00
15
9%
218,369,
000.00
128
%
266,037,
000.00
10
1%
359,951,
000.00
10
2%
Operating Expenses
-
75,978,0
00.00
-
83
%
-
176,967,
000.00
-
104
%
-
241,357,
000.00
-
92
%
-
321,319,
000.00
-
91
%
EBITDA
69,526,0
00.00
76
%
41,402,0
00.00
24
%
24,680,0
00.00 9%
38,632,0
00.00
11
%
Depreciation - -
4%
-
6,439,00
0.00
-
4%
-
11,392,0
00.00
-
4%
-
8,177,00
0.00
-
2%
21 | P a g e

BU1002/BU1902 – (BNE/SNG) CASE STUDY WORKBOOK
3,354,00
0.00
Amortisation 0.00 0% 0.00 0% 0.00 0%
-
5,236,00
0.00
-
1%
Depreciation and
Amortisation
-
3,354,00
0.00
-
4%
-
6,439,00
0.00
-
4%
-
11,392,0
00.00
-
4%
-
13,413,0
00.00
-
4%
EBIT
66,172,0
00.00
72
%
34,963,0
00.00
21
%
13,288,0
00.00 5%
25,219,0
00.00 7%
Interest Revenue 0.00 0% 0.00 0% 0.00 0% 0.00 0%
Interest Expense
-
218,000.
00 0%
-
1,151,00
0.00
-
1%
-
2,635,00
0.00
-
1%
-
3,471,00
0.00
-
1%
Net Interest Expense
-
218,000.
00 0%
-
1,151,00
0.00
-
1%
-
2,635,00
0.00
-
1%
-
3,471,00
0.00
-
1%
Pretax Profit
65,954,0
00.00
72
%
33,812,0
00.00
20
%
10,653,0
00.00 4%
21,748,0
00.00 6%
Tax Expense
-
5,349,00
0.00
-
6%
-
6,483,00
0.00
-
4%
-
1,809,00
0.00
-
1%
-
1,902,00
0.00
-
1%
Net Profit after Tax
Before Abnormal
60,605,0
00.00
66
%
27,329,0
00.00
16
%
8,844,00
0.00 3%
19,846,0
00.00 6%
Horizontal Analysis
Income Statement
Statement of Profit or
Loss 06/15 06/16 06/17 06/18
Operating Revenue
91,460,0
00.00
170,444,0
00.00
86
%
262,481,0
00.00
54
%
352,987,0
00.00
34
%
Other Revenue
54,044,0
00.00
47,925,00
0.00
-
11
%
3,556,000
.00
-
93
%
6,964,000
.00
96
%
Total Revenue
Excluding Interest
145,504,
000.00
218,369,0
00.00
50
%
266,037,0
00.00
22
%
359,951,0
00.00
35
%
Operating Expenses
-
75,978,0
00.00
-
176,967,0
00.00
133
%
-
241,357,0
00.00
36
%
-
321,319,0
00.00
33
%
EBITDA
69,526,0
00.00
41,402,00
0.00
-
40
%
24,680,00
0.00
-
40
%
38,632,00
0.00
57
%
Depreciation
-
3,354,00
0.00
-
6,439,000
.00
92
%
-
11,392,00
0.00
77
%
-
8,177,000
.00
-
28
%
Amortisation 0.00 0.00 0.00 -
5,236,000
22 | P a g e

BU1002/BU1902 – (BNE/SNG) CASE STUDY WORKBOOK
.00
Depreciation and
Amortisation
-
3,354,00
0.00
-
6,439,000
.00
92
%
-
11,392,00
0.00
77
%
-
13,413,00
0.00
18
%
EBIT
66,172,0
00.00
34,963,00
0.00
-
47
%
13,288,00
0.00
-
62
%
25,219,00
0.00
90
%
Interest Revenue 0.00 0.00 0.00 0.00
Interest Expense
-
218,000.
00
-
1,151,000
.00
428
%
-
2,635,000
.00
129
%
-
3,471,000
.00
32
%
Net Interest Expense
-
218,000.
00
-
1,151,000
.00
428
%
-
2,635,000
.00
129
%
-
3,471,000
.00
32
%
PreTax Profit
65,954,0
00.00
33,812,00
0.00
-
49
%
10,653,00
0.00
-
68
%
21,748,00
0.00
104
%
Tax Expense
-
5,349,00
0.00
-
6,483,000
.00
21
%
-
1,809,000
.00
-
72
%
-
1,902,000
.00 5%
Net Profit after Tax
Before Abnormal
60,605,0
00.00
27,329,00
0.00
-
55
%
8,844,000
.00
-
68
%
19,846,00
0.00
124
%
Abnormal
-
3,974,00
0.00
23,302,00
0.00
-
686
%
-
1,305,000
.00
-
106
%
-
7,131,000
.00
446
%
Abnormal Tax 0.00 0.00 0.00 0.00
Net Abnormal
-
3,974,00
0.00
23,302,00
0.00
-
686
%
-
1,305,000
.00
-
106
%
-
7,131,000
.00
446
%
Reported NPAT After
Abnormal
56,631,0
00.00
50,631,00
0.00
-
11
%
7,539,000
.00
-
85
%
12,715,00
0.00
69
%
Outside Equity
Interests 0.00
-
139,000.0
0
-
88,000.00
-
37
% 0.00
-
100
%
Shares Outstanding at
Period End
154,761,
927.00
181,628,9
62.00
17
%
200,853,5
31.00
11
%
243,983,8
10.00
21
%
Weighted Average
Number of Shares
152,587,
346.00
171,052,8
44.00
12
%
191,441,7
29.00
12
%
212,525,8
02.00
11
%
EPS Adjusted
(cents/share) 38.52 15.37
-
60
% 3.86
-
75
% 9.14
137
%
EPS After Abnormal
(cents/share) 35.99 28.54
-
21
% 3.18
-
89
% 5.85
84
%
Balance Sheet
23 | P a g e

BU1002/BU1902 – (BNE/SNG) CASE STUDY WORKBOOK
Balance Sheet y 06/16 06/17 06/18
24 | P a g e

BU1002/BU1902 – (BNE/SNG) CASE STUDY WORKBOOK
CA - Cash
2,329,000
.00
63,908,00
0.00
264
4%
4,184,000
.00
-
93
%
98,106,00
0.00
224
5%
CA - Receivables
25,303,00
0.00
45,661,00
0.00
80
%
65,920,00
0.00
44
%
62,849,00
0.00 -5%
CA - Prepaid
Expenses
2,094,000
.00
3,281,000
.00
57
% 0.00
-
100
%
2,825,000
.00
CA - Inventories
24,475,00
0.00
46,213,00
0.00
89
%
63,388,00
0.00
37
%
81,101,00
0.00
28
%
CA - Investments
1,700,000
.00 92,000.00
-
95
%
382,000.0
0
315
%
293,000.0
0
-
23
%
CA - NCA Held
Sale 0.00 0.00 0.00 0.00
CA - Other 0.00
1,053,000
.00
1,717,000
.00
63
% 0.00
-
100
%
Total Current
Assets
55,901,00
0.00
160,208,0
00.00
187
%
135,591,0
00.00
-
15
%
245,174,0
00.00
81
%
NCA -
Receivables
13,136,00
0.00 61,000.00
-
100
%
900,000.0
0
137
5%
1,182,000
.00
31
%
NCA -
Inventories 0.00 0.00 0.00 0.00
NCA -
Investments
77,050,00
0.00
6,163,000
.00
-
92
%
7,634,000
.00
24
%
17,428,00
0.00
128
%
NCA - PP&E
103,430,0
00.00
224,351,0
00.00
117
%
340,356,0
00.00
52
%
388,883,0
00.00
14
%
NCA -
Intangibles(ExG
W)
16,274,00
0.00
16,274,00
0.00 0%
43,407,00
0.00
167
%
51,926,00
0.00
20
%
NCA - Goodwill
5,214,000
.00
54,161,00
0.00
939
%
59,204,00
0.00 9%
59,204,00
0.00 0%
NCA - Future
Tax Benefit 0.00
2,920,000
.00
1,835,000
.00
-
37
%
2,053,000
.00
12
%
NCA - Other 0.00 0.00 0.00 0.00
Total NCA
215,104,0
00.00
303,930,0
00.00
41
%
453,336,0
00.00
49
%
520,676,0
00.00
15
%
Total Assets
271,005,0
00.00
464,138,0
00.00
71
%
588,927,0
00.00
27
%
765,850,0
00.00
30
%
CL - Account
Payable
18,779,00
0.00
49,577,00
0.00
164
%
65,629,00
0.00
32
%
88,069,00
0.00
34
%
CL - Short-Term 22,025,00
0.00
32,437,00
0.00
47
%
161,763,0
00.00
399
%
9,730,000
.00
-
94
%
15,097,00 50 15,964,00 6% 11,984,00 -
25 | P a g e