Financial Statement Analysis of GTN Limited: A Comprehensive Report

This report presents a comprehensive financial analysis of GTN Limited, a major broadcast media advertising platform. It begins with an industry analysis using Porter's Five Forces to assess the competitive landscape, followed by an examination of GTN's competitive strategies, including cost leadership and differentiation. The report then delves into an accounting analysis, defining and evaluating the nature of the financial statements, including the statement of profit and loss, balance sheet, statement of changes in equity, and statement of cash flow. Performance analysis highlights key trends and areas of concern, such as the impact of discontinued operations. The report further examines the accounting strategy and evaluates the quality of the financial information, including revenue recognition and other accounting policies. Finally, it includes recasting of financial statements to provide a clearer picture of GTN Limited's financial position. The analysis concludes with a discussion of the company's overall financial performance and strategic direction.

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Finance
Name of the Student
Name of the University
Author Note

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Table of Contents
1. Introduction.........................................................................................................................2
2. Risk and profit potential of GTN Limited..........................................................................2
2.1 Industry analysis...............................................................................................................2
2.2 Competitive strategy analysis:.........................................................................................3
3. Accounting analysis...............................................................................................................4
3.1 Nature of the financial statement.....................................................................................4
3.2 Performance Analysis......................................................................................................5
3.3 Notes for the financial statement......................................................................................5
4. Accounting Strategy and Evaluation..................................................................................6
5. Recasting financial statements:...........................................................................................8
Statement of profit and loss:......................................................................................................8
Statement of cash flow:..............................................................................................................9
Statement of financial position:.................................................................................................9
6. Conclusion:.......................................................................................................................10
7. References list...................................................................................................................11

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1. Introduction
In this report, profit and risk potential and accounting analysis of GTN Ltd has been
illustrated. The evaluation of accounting strategy and recasting financial statement is also
presented in the report. GTN Limited is one of the largest broadcast media advertising
platforms. It mainly operates in Australia, Canada and United Kingdom. It provides the
advertisers with high impact campaigns. GTN began operations in Australia in 1997
(Gtnetwork.com.au, 2019). It provides a broad reach advertising platform that enables the
advertisers to reach large audiences effectively.
2. Risk and profit potential of GTN Limited
2.1 Industry analysis
Porter’s Five Forces is a strategic management tool. In these report five competitive
forces is used to effect viability and prepare a strategy for the development of GTN Ltd.
Rivalry between the existing competitors-The market in which GTN Ltd operates is
very competitive. Though it has concentrated competition amongst the present competitors in
Media sector, it has built a suitable distinction. The process of collaborating the competitors
is suitable, as it will result in increase of market size relatively than only opposing for the
minor market. By doing these, GTN Ltd does build up a scale and can compete better.
Threats of New Entrants- The way GTN Ltd tackle the threats is by inventing new
products and services. To attract new clients and to give old client a aim to purchase GTN
Ltd products. The economies of scale should be maintained in order to reduce the fixed cost
per unit. They have to spend money on exploration and expansion in addition to build
capacities. The opportunity for new applicants is very few as GTN Ltd keeps on defining the

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standards regularly and it has a huge market presence. Thus, it reduces the opportunity for the
new firms to earn extraordinary profits in the industry.
Bargaining Power of Buyers- GTN Ltd has a big network of clients. This can prove
a chance for the organization to simplify its revenue and production method and decrease the
negotiating power of consumers. It often gives reductions and contributions on the
recognized products to seek customers; and by inventing new products. If there is new
products in market than the negotiating power of the consumers becomes less (Campbell et
al., 2018). Therefore, the customers use to get attracted to new product launches and there is
less diversification of existing customers.
Bargaining Power of Suppliers- GTN Ltd has an efficient supply chain with
multiple suppliers. The company use to experiment with the new product designs and with
new diverse materials, so that if one of the raw materials values increases up it will shift to
another (Roslender and Nielsen, 2018). There are many suppliers whose firm is dependent
upon the firm; it is beneficial for the GTN Ltd as they has a less bargaining power compared
to other manufacturers.
Threats of Substitute Products or Services-The risk of substitute product is more as
a new products or services meet a comparable client required in numerous ways. The way
GTN Ltd tackles the threats is by rendering service and not only delivering products. By
realizing the basic needs of the consumers, it can develop an idea what the customer wants. If
the switching cost of the products is increased, then it will be easy for the company to control
the threat (Kihn & Ihantola, 2015).
2.2 Competitive strategy analysis:
i) Cost Leadership - The main generic strategy is to keep the position as market
leader used by GTN limited is cost leadership. It can be done through an efficient

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value chain management. This strategy allows the company to expand market
share, which makes an overall consumer market mix and it is done by targeting
middle class. Most of the consumers have a place high relevance to the pricing
factor. This strategy is the best strategy according to the customer segment. It
often give proposals of concessions and vouchers to attain higher turnover goals.
These strategies help in brand popularity (Liu & Wen, 2017).
ii) Differentiation – The adoption of this strategy allows GTN Ltd to expand the
customer base. It is used to differentiate the products by innovating and
addressing the customers demand. Through this process the product offerings is
used in way to stand out and be unique from the available alternatives. A unique
brand logo is used to establish a strong brand image in consumers mind.
Innovation is one of the important tool, which is used to differentiate from many
other brands (Williams & Dobelman, 2017). Through these, the customers
increase their preference of GTN Ltd over other brands.
3. Accounting analysis
3.1 Nature of the financial statement
i) Statement of profit & loss and other inclusive income for the time: This statement
displays the company’s incomes and costs for June 2018. The profit before income
tax was $34,204,000. As per the report, the loss for the year is $15,101,000. There
was a loss because of a loss from discontinued operation (Gtnetwork.com.au, 2019).
ii) Balance Sheet: The total asset was valued at $355,365,000 and a total liability was
valued at $106,667,000. Therefore, the net assets are $248,698,000. The total equity for the
report is $248, 698,000.

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iii) Statement of changes in equity: The issues capital was $444,981,000 and the
accumulated loss was $202,823.000. Therefore, the total equity as per the report is
$248,698,000.
iv) Statement of Cash Flow: The net cash from operational activities is $9987, 000,
net cash used in financing activities is $9200, 000 and from financing activities is
50,787,000. So, the cash and cash equivalent for the conclusion of the year is
$52,232,000.
3.2 Performance Analysis
From the profit and loss statement, it can be seen that in 2017 there was a profit of
$6205,000 but in 2018 there is a loss of $15,101,000. Therefore, it directs that the
company did not be able to control their expenses properly. It does not mean a poor
presentation because there was a loss from discontinued operation.
From the balance sheet, the net asset has been decreased from $272,341,000 in 2017
to $248,698,000 in 2018. The main reason of this situation happened because of a
decrease of the total assets. Because of this, there is also a decrease of total equity from
$272,341,000 to $242,698,000 (Gtnetwork.com.au, 2019).
From the cash flow statement, the cash flow from operating activities also decreased.
For the year 2017, it was $24,486,000. It mainly happened because of the discontinued
operation. The net cash from financing activities also decreased because of payment of
dividends and the repayment of borrowings (Gtnetwork.com.au, 2019).
3.3 Notes for the financial statement
Revenue Recognition- Two of the important revenue sources, which is recognized, is
advertising and the other is interest and dividend income. Advertising revenue is earned

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through commercial advertisements. Interest revenue and costs is stated on accrual basis and
from the investments in associates (Alewine et al,. 2016).
Trade receivables- Acknowledgement of debtors is done originally at fair value and
is reviewed on ongoing basis. The sum of impairment loss is recognized between the assets
carrying amount and the current value of projected cash flow. It is generally due for a
settlement period within 30 days (Klychova et al., 2015).
Goodwill- It represents the future economic benefits from a business amalgamation. It
is due for cash generating elements for the resolution of impairment annually. Some of the
groups is supervised for interior administration needs at a lower level, so that it can give a
better result in future.
Intangible assets- Initially, intangible assets are stated at cost and subsequently
carried at a cost less accumulated amortization and impairment losses. As per IAS 36, it
states that the assets will not recovered more than the recoverable amount, so that it can be
tested for impairment annually (Entwistle, 2015).
4. Accounting Strategy and Evaluation
The first question is that the company’s accounting policies compare to the norms of
the industry. The significant accounting policies that is used for the consolidated financial
statements are described below.
Basis of preparation: The Consolidated Financial statements of GTN limited is
prepared based on International Financial Reporting Standards (IFRS), which is issued by
International Accounting Standards Board (IASB). Historical Cost basis is used for the
preparation of financial statements. Financial assets and liabilities including derivative

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instruments, which is available for sale is measured at fair value. The assets, which is for sale
is measured at fair value less cost of disposal.
The company’s financial statement based on consolidation that is incorporates
financial statements of GTN Limited and all its affiliates. The transaction and stabilities
among the Groups are eliminated on alliance, which comprises uncollected incomes and
losses on transaction amongst Company and Subsidiaries. In the report, financial statement of
subsidiaries is accustomed to guarantee the constancy with the accounting procedures
accepted by company (Murphy, 2016).
Business Combination: The consideration, which is transported by the organisation to
tackle the management of the subsidiary, is premeditated as the sum of procurement time fair
values of assets shifted, liabilities ascending from a reliant deliberation preparation (Dubois
& Gadde, 2018). The organization distinguish the recognizable assets and liabilities, and it is
expected in a business grouping irrespective of whether it has been formerly documented in
the acquirer’s financial statement preceding to procurement.
Foreign currency translation- Usually, the combined financial statement is
presented in Australian dollars. These declarations are done in AUD, which is the operational
currency of the largest portion of the Company’s operations. By using the exchange rates, the
foreign currency transactions are translated. In the financial statements, a functional currency
is used other than AUD to denote all assets, liabilities and dealings of units and later
translated into AUD upon consolidation (Vitasek, 2016).
Revenue Recognition- The revenue from the advertising is earned and recognized at
the times commercial advertisements are broadcast. The payments received or the amount
invoiced in advance are deferred until the amount is earned. Thus, sales tax, goods and
services tax, value added tax are collected on behalf of the government authorities not

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included as a component of revenue. The interest revenue and costs are stated on
accumulation method by means of the operative interest method (Falkner & Hiebl, 2015).
Next query is whether administrators have inducements to control incomes with the
usage of accounting decision. The fixed remuneration of CEO was $966,809, with a
minimum 5% increase per annum thereafter. The other executive management range between
$516,600 and $623,276, with a minimum 5% increase per annum thereafter. The non-
executive directors obtain a fixed monthly fee for participating. The director’s fees are
inclusive of superannuation where applied. The base fees are $128,000 for chairperson and
for other independent and non-executive directors is $90,000. The Non-Executive director
gets the remuneration of around $6,666. For the performance, based remuneration the
executive director was awarded with 38% and the other key management people was
awarded with 39 % and 43 % (Gtnetwork.com.au, 2019).
5. Recasting financial statements:
Statement of profit and loss:

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Statement of cash flow:
Statement of financial position:

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6. Conclusion:
From the investigation of the financial performance of GTN limited in the current year, it can
be said that the company has performed poorly compared to last year. It is so because the
company incurred loss, however, total amount of comprehensive income increased
considerably. Success of the company can be attributed to the value proposition and their
ability to provide differentiated platforms assisted advertisers in reaching the audiences
effectively and frequently. Investors seeking investment in the company should hold as the
company in running in loss due to the combination of increasing expense and lower revenue.

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7. References list
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NAADzA/file/reports/annual/GTN-Annual-Report-2018.pdf
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Klychova, G., Antonova, N., Klychova, A., & Fakhretdinova, E. (2015). Development of
accounting and financial reporting for small and medium-sized businesses in
accordance with international financial reporting standards.

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Li, X. (2015). Accounting conservatism and the cost of capital: An international
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Retrieved 1 September 2019, from https://www.genequityco.com/insights/recasting-
financial-statements-vital-to-your-business-valuation
Williams, E. E., & Dobelman, J. A. (2017). Financial statement analysis. World Scientific
Book Chapters, 109-169.

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