Corporate Accounting Analysis: HI5020 Report on Healthcare Firms

This report presents a comprehensive analysis of corporate accounting practices, focusing on two publicly listed healthcare companies, RHC Ramsay Health Care and SHL Sonic Healthcare Limited. The report delves into key financial aspects, including owner's equity, examining the components and t...Read More

HI5020 Corporate Accounting

EXECUTIVE SUMMARY
This report defines the specific forms of the corporate accounting which are perceived with RHC
Ramsay Health Care and SHL Sonic Healthcare Limited. To analyse the owners equity, cash
inflow and outflow of cash, the different items of cash flow statements have been considered.
The report will be analysing the performances of the companies for the period of three years for
year 2015, 2016 and 2017. It also follows all the income statements to know the total revenue
and expenses which appeared in the organizations. It also calculates the tax rate by knowing the
tax expense. Into this report, there is comparison done between the debt and equity ratio. For the
betterment of understand the concepts of accounting, all these subjects are given under the
financial statements of accounts. This report analyses the owner’s equity of RHC as $2358686
and that of SHL was $3926130 in 2017.

Table of Contents
EXECUTIVE SUMMARY.................................................................................................................................2
INTRODUCTION...........................................................................................................................................4
OWNERS EQUITY.........................................................................................................................................5
I................................................................................................................................................................... 5
II..................................................................................................................................................................8
CASH FLOWS STATEMENT...........................................................................................................................9
III.................................................................................................................................................................9
IV...............................................................................................................................................................11
V................................................................................................................................................................13
OTHER COMPREHENSIVE INCOME STATEMENT........................................................................................15
ACCOUNTING FOR CORPORATE INCOME TAX...........................................................................................19
XI...............................................................................................................................................................19
XII..............................................................................................................................................................22
XIV.............................................................................................................................................................25
XV..............................................................................................................................................................26
XVI.............................................................................................................................................................28
CONCLUSION.............................................................................................................................................29
REFERENCES..............................................................................................................................................30

INTRODUCTION
The manager has selected two different organizations to understand in a better manner to
evaluate the form of corporate accounting. The provider of Healthcare in Australia, U.K is RHC
Ramsay Health Care which was established in 1964 in Australia. It practices in psychiatric,
rehabilitation, surgery, etc. SHL Sonic Healthcare Limited, has become the biggest diagnostic
company which is spread in different areas. It specializes in radiology, imaging, laboratory
medicine, pathology and gained a turn over revenue of $5,122 million in year 2017. It deals with
the different concepts to obtain the current position of organizations, when needed. They also
analyse the ratio of equity and debt to identify the statements of income for obtaining the amount
of expense and income and in respect of owners. A lot better position of the company can be
gained if the balance sheets depict the similar amount of assets and liabilities. Then it can be
recognized among all other organizations. Healthcare can lead to its objective if all these
accounts can be maintained in proper and systematic manner. This will lead the organization to a
good level of respect.

OWNERS EQUITY
I
Owner Equity can be explained as the difference among the assets of the company and its
liabilities. It shows the owner’s investment in the business minus the withdrawals made by the
owner in the business plus the net worth of the owner. It will be covered under a separate head in
the balance sheet. There are different items that can be recorded under the equity in Sonic health
care limited and Ramsay Health care (Ramsay Healthcare limited, 2017).
Treasur
y shares
Converti
ble
Adjusta
ble Rate
Equity
Securitie
s
Retained
Earnings
Reser
ves
Non-
controlling
Interests
Minorit
y
Interest
Contribu
ted
Equity
Parent
compan
y
Interest
The
concerne
d
business
orgaaizat
These
shares
are
converte
d into
It can be
found by
subtracting
the
liabilities
It is
the
profit
gain
which
It can be
termed as the
minority
interest in
which
It is a
part of
the
subsidiar
y
It
consists
of cash
and
assets
It is the
compan
y which
control
the

ion
habvebou
ght back
in
previous
year.
stock at a
price at
the time
of
issuance
of stock.
These
are the
security
whose
rate of
interest
is tied to
security
rates.
from assets
and the
remaining
portion is
equity(Ra
msay
Healthcare
limited,
2017).
is kept
aside
for the
specifi
c
purpos
e.
Also,
it can
be
used
to
purcha
se the
assets
and to
pay
the
bonus,
debts
etc.
stakeholders
owns the
lesser
amount of
shares that is
50% and
they do not
have the
power to
make
decisions(Ra
msay
Healthcare
limited,
2017).
corporati
ons
which
cannot
be
owned
by the
parent
firms.
which
can be
given by
stakehold
ers in
exchange
for stock
(Ramsay
Healthcar
e limited,
2017).
operatio
ns and
also has
control
over
interest
in
differen
t
compan
ies.

II
This question helps in clarifying the theory of debt and equity in health care limited. The debt
means the money that can be owed by one party to second party (Ramsay Healthcare limited,
2017). On the other hand, after observing the financial records the equity can be declared as the
source of a firm’s assets and it can be introduced as the book value as it is equal to the assets
minus liabilities.
It can be observed that the Sonic Health care Limited, raised the amount of equity to $3926130
in 2017 from $3732709 in 2016 which there is an increase in equity which denotes the profit
gains of organizations (Sonic Healthcare Limited, 2016). The owners equity of the company in
year 2015 was 3325998 which is raised to 3732709 in 2016. The main contribution in the
increase was retained earnings of $871612 and issue of new equity of $150674 (SHL, 2017). On
the other part, the liabilities becomes more as compare to the previous year. This reveals the
meaning that they have taken loans to which they have to pay in future (McCabe, 2018). The
owners equity of the company consists of contributed equity, reserves, retained earnings and
minority interests.
In relation to Ramsay Healthcare limited has the equity of $1837794 in year 2015 which is
raised to 2046061 in year 2016. Again, there is an increase in the equity results to $2358686 in
year 2017 which concludes to the point that there is an ascending trend in equity which implies a
good source of finance in organisations (Ramsay Healthcare limited, 2017). The company has
not issues any shares during the year indicate the increase in the share capital due to the retained

earnings and non-controlling interests. In the other part, the liability shows the descending trend
which is 6195421 in 2016 to 5976675 in 2017. This depicts the fact that there is less liability
they have to pay a lesser amount (Ramsay Healthcare limited, 2017). It is also identified that
there is no change in the issued capital and Convertible Adjustable Rate Equity Securities
(CARES) during the period of evaluation (RHC, 2016).
CASH FLOWS STATEMENT
III
The statements of cash flow includes all the financial statements that allows the data in relation
to the cash inflows which can be received from operations and investments and cash outflows
which can be paid by owners in the aspect of activities(Ramsay Healthcare limited, 2017). It
reports the cash which is spent and the cash generated for a specific period of time.
Activities Description
Investing activities It consists the amount of interest that can be received by owner,
acquisition of a business in terms of cash. This activity reports the
aggregate change in the firm position of cash that can be resulted from
the losses and gains and includes the amount that can be spend on the
investments(Ramsay Healthcare limited, 2017). The investing
activities of RHC include purchase of disposal of property, plant or
equipment, proceeds from sale of property and plant. The other
contributing areas are proceeds from sale of assets, interest received,
and acquisition of business and deferred payments in investments. The
investing activities in sonic healthcare limited were almost same some

of the additional activities performed by the company were payments
of investments, payments of intangibles and repayments of loan by
other entities (RHC, 2016).
Operating Activities It consists the items that arise in the normal business operations. As
such, it includes receipts from clients, payments to suppliers, along
with other items such as payment of interest rate and finance cost.
Basically, these are the functions of an organization which are related
to services and products to market.
Financing activities It includes all activities that are related to financial activities (Sonic
Healthcare Limited, 2016). The financing activities of SHL includes
proceeds from the issue of shares, proceeds from borrowings and its
repayments, non-controlling interest transactions and dividends paid to
shareholders and minority interest in subsidiaries (SHL, 2017).

IV
This question allows to analyse the comparison between different activities in the terms of
business profit and to understand meaning of the same. It can be given in the tabular form:
Ramsay Healthcare Ltd.

Particulars 2015 2016 2017 Change
2015-2016
Change
2016-
2017
Change
2015-2017
Cash flow
from
investing
activity
(1,115,069) (735,462) (423,511) 379607 311951 691558
Cash flow
from
operating
activity
746,235 904969 882187 158734 22782 135952
Cash flow
from
financing
activity
512,958 (156,848) (371481) 356110 214633 141477
Sonic Healthcare Limited

Particulars 2015 2016 2017 Change
2015-2016
Change
2016-2017
Change
2015-2017
Cash flow
from
operating
activity
512084 707,708 736365 195624 28657 224281
Cash flow
from
investing
activity
(288,989) (786,237) (673,492) 497248 112245 384503
Cash flow
from
financing
activity
(219,347) 131,849 88,558 87498 43291 130789

V
In Sonic Healthcare Limited, it can be determined that there is an ascending drift in operating
income which concludes that they manufacture a different range of medicines in relation to
different disease (Sonic Healthcare Limited, 2016). There is a descending trend in investing
activity which explains that they are investing lesser in medicines and also raises lesser amount
from different sources. While analysing the cash flow statement of the company, it is identified
that major contribution is due to receipts from customers amounting $8643216 where as the
payments to employees and suppliers amounting to 7432025 in year 2017. In addition to this, the
investing activities indicate as decline in the cash outflow by 311951. There is no sale of
property, plant or equipment in this year where as sales of other assets resulted to an inflow of
59729 (SHL, 2017). The main reason for fluctuation the acquisition of business and net cash
received which lead to out flow of 213718 in 2016 and just 24698 in year 2017 (SHL, 2017). The
financing activities also indicates an increase due to increase in hospital infrastructure payments
reimbursed amounting 27746, proceeds from borrowings amounting 1063516 as the same time
company has also made a repayment of borrowings 1090962.
The above mentioned table contents illustrates the deviation in different activities such as in
Ramsay Healthcare Limited there is a descending trend in the operating activities as compared
to previous years. This explains that they did not manufacture the medicines and pharmaceuticals
up to mark which was required as per the demands of the market (Ramsay Healthcare limited,
2017). It also reveals the decrease in trend of the financing activity which means they raise less
source of income. For the case of investing activities, they invested lesser as compared to the

past years. As per the analysis of the cash flow position of the company, the operating activities
in 2017 includes an increase in the receipts from customers $5219266 from year 2016 which is
$5082370. There is a payment to the employees and suppliers amounting $4322565. On the other
hand, investing activities indicates lower expense in payments of purchase of controlled entities
from 475257 in year 2016 to 267871 in 2017 (Ramsay Healthcare limited, 2017). The proceeds
from sale of non-current assets is also declined indicating less outflows $8193. The financing
activities of the company indicate issue of shares amounting $27991 in2017. The proceeds from
borrowings lead to increase the borrowings by $1508101. At the same time the company also
made a repayment of $1179868 and paid dividends of 275775 (Ramsay Healthcare limited,
2017). This is the reason the cash inflows from financing activities has declined in year 2017 to
88558 from 131849 in 2016.

OTHER COMPREHENSIVE INCOME STATEMENT
VI) The Health care Limited records certain things in the intensive pay announcements as they
are undiscovered in the current budgetary years. It consolidates certain things, for instance,
incident or gain on benefits outlines that is the assortment in among the annuity portions and that
are made by the business (Ramsay Healthcare limited, 2017). Remote money elucidation can be
used to change over the after effect of parent associations outside assistants to its enumerating
cash (Ramsay Healthcare restricted, 2017). Income supports can be credited to a specific risk
with assets and liabilities. This is recorded by Ramsay Healthcare obliged. The other Healthcare
organizations records the Exchange differentiates on translation of operations which are related
to foreign, mishaps on retirement advantage duties.
VII)
Besides statement of profit and loss, the financial statements also cover the comprehensive
income statement. The items covered in the comprehensive income statement primarily include
costs, livelihoods along with other items that will be affected or influenced by the estimation or
prediction. This particular segment has specific format and item covered in this statement are not
mentioned anywhere. (Ramsay Healthcare limited, 2017).
VIII) Comparison of items of comprehensive income statements
Ramsay Health Care Limited

te
The analysis of the comprehensive income statement depicts decline in the items reclassified to
net profit from 5528 to (2091) indicating as negative change of 7547 during the period of 2016-
2017. There is gain in cash flow hedges amounting to 26913 in 2017. There was loss of $54747
in year 2016. The company is facing losses in foreign currency transaction amounting to 14825
and $12138 in year 2016 and 2017 respectively.
Sonic HealthCare Limited

In the Sonic Health care Limited it has been seen that the sum has been diminished in the
extensive salary articulation which demonstrates that the benefit of the association is diminishing
and the piece of the pie is additionally lessening (Sonic Healthcare Limited, 2016). In the case of
Ramsay Health Care Limited there is by all accounts the varieties between the genuine sum and
the sum which demonstrates the decrease in patterns (Ramsay Healthcare restricted, 2017). Yet,
it has been seen that there is the addition in the measure of the data so it is said that the
responsibility and additionally the straightforwardness inside the association is likewise
expanding.
IX) Yes, it can be said that the other comprehensive income statement will be included while
analyzing the performance of the managers in the organization. This is due to the reason that it
will enable in understanding the various concepts and aspects related to various concepts and the
other strategies(Ramsay Healthcare limited, 2017). With this it also shows the changes in the

equity which in turn will increase effectiveness as well as efficiency so the overall performance
of the managers as well as the organizations can be increased.

ACCOUNTING FOR CORPORATE INCOME TAX
X) What are the tax expenses shown in the latest financial statements of the two companies
that you have selected?
The expenses are the expenses which are recorded in the income statement. It can be defined as
the tax amount which is owned in the current financial year by the organization.
In case of Ramsay Health Care Limited the amount which is recorded of the tax expenses in the
current financial year 2017 is ($198669). This amount will also have to be paid to the investors
as well as the contractors in the form of liability. In Sonic Healthcare Limited the amount which
is of the tax expense is ($133323)(Ramsay Healthcare limited, 2017). This is the amount of both
the organizations which is to be paid by them in the form of debts(Ramsay Healthcare limited,
2017).
These are the expenses which are treated as the income for the organizations due to the reason
that they helps in increasing revenues for the organization which in turn increases the overall
profitability of organization and thus helps in achieving growth and success. These also enable in
maintaining accountability as well as the transparency within the organizational systems so that
the success of the overall organization can be achieved four future growth and endeavours.
XI
Calculate the effective tax rate for both companies that you have selected. Which one of
the companies has the higher effective tax rate?

Effective tax rate is that tax rate at which the amount of income tax is paid to the income tax
authorities. Thus, it may be lower or higher than that of actual tax rate prevalent at that time
(Sonic Healthcare Limited, 2016).
Effective tax rate for Ramsay Healthcare Limited
Particulars Amount (in $ Million)
Income tax expense (a) (198,669)
EBT (Profit before tax) (b) 883053
Effective tax rate (c) = (a)/(b)
*100
22.4%
Effective tax rate for Sonic Healthcare limited
Particulars Amount $ Million
Income tax expense 133323
EBT 575743
Effective tax rate 23.15%

Interpretation:
It can be observed that effective tax rate of Sonic Healthcare Limited is higher than that of
Ramsay Healthcare Limited. Also, another interesting thing to note that effective tax rate of both
the organizations is lower than that of actual corporate tax rate i.e., 30%(Ramsay Healthcare
limited, 2017).

XII
Comment on deferred tax assets/liabilities that are reported in the balance sheet
articulating the possible reasons why they have been recorded.
Ramsay Healthcare Limited:
Deferred tax assets 2017 2016
Deferred tax liabilities

Sonic Healthcare Limited:
Deferred tax assets 2017 2016
Deferred tax liabilities
The above financial data has been taken from the financial statements of both these organizations
of same financial years, i.e., 2017 and 2016. Both the companies contain deferred tax assets
along with deferred tax liabilities. Besides, both these business enterprises record deferred tax
expenses on account of temporary differences. It can be observed that deferred tax assets as well
as liabilities of Ramsay Healthcare Limited and Sonic Healthcare Limited have increased in the
financial year 2017 as compared to its previous year 2016. Also, both the companies follow the

same concept in relation to recording of deferred tax expenses (covering both deferred tax assets
and deferred tax liabilities) (Edwards, 2017).
XIII
Was there any increase or decrease in the deferred tax assets or in the deferred tax liability
reported by each of your selected companies?
Comparing deferred tax expense is of utmost importance as it helps to determine the income tax
expense. This is because income tax expense is adjusted to current tax expense so that income
tax expense can be determined. It can be observed that deferred tax expense of Ramsay
Healthcare Limited has increased from 8241,482 to 8335,361(Ramsay Healthcare limited, 2017).
On the other hand, deferred tax liability has increased from 2046,061 to 2358,686. In the same
manner, deferred tax assets of Sonic Healthcare Limited have increased from 7370,619 to
7878,615. Similarly, deferred tax liability has increased from 3732,709 to 3926,130(Sonic
Healthcare Limited, 2016).

XIV
Please calculate the cash tax amount for both companies using the book tax amount,
changes in the deferred tax assets and deferred tax liability.
Cash tax amount indicates the amount that has been paid in cash to the appropriate income tax
authority. In the given case, the income tax expenses as depicted in the financial statements are
same and akin to cash tax amount (Ramsay Healthcare limited, 2017). This happens because
there are non-cash adjustments for income tax expense or provision apart from deferred tax
expense.
The measure of the money assess is spoken to as the duty paid by the association and is
accounted for under the working exercises segment of the income articulation. Comparative
exhibits the cash survey proportion of paid by the organization at any rate the book charge
aggregate has been as point by point in the declaration of advantage and mishap(Ramsay
Healthcare limited, 2017). There has been a qualification of in both the totals and thusly the same
are presented freely.
This is the sum which is spoken to by the organization in income articulation of the association
and the salary assess discounts are additionally given to the association. Along these lines, the
sum which is charge paid is $2.5 million and the discount sum is $10.1 in the budgetary year
2017.

XV
Calculate the cash tax rate for both companies. Which company has higher cash tax rate?
Determination of cash tax rate of Ramsay Healthcare limited
Particulars Amount ($) million
Cash tax amount (198,669)
EBT 883053
Cash tax rate 22.4%
Cash tax rate for Sonic Healthcare Limited
Particulars Amount ($) million
Cash tax amount 133323
EBT 575743
Cash tax rate 23.15%

It can be observed that cash tax rate of both the business organizations differ from each other.
Thus, while cash tax rate of Sonic Healthcare Limited is 23.15%, Ramsay Healthcare Limited is
only 22.4%. Accordingly, cash tax rate of Ramsay Healthcare Limited is slightly higher than that
of Sonic Healthcare Limited.

XVI
Why is the cash tax rate different from the book tax rate?
To understand the difference between cash tax rate and book tax rate, it is imperative to
understand the concept of both these rates. Book tax rate is applied to book income or income
computed as per accounting concepts. On the other hand, cash tax rate is applied on taxable
income computed as per the income tax provisions (Ramsay Healthcare limited, 2017). Thus,
book tax rate helps to determine the tax liability for which income tax provision needs to be
prepared. But, cash tax rate helps to determine the tax rate that needs to be paid adjusted for any
deferred tax expense. Accordingly, cash tax rate and book tax rate will never be same and akin.

CONCLUSION
The above report helps us to analyse the theory of corporate accounting. It is a compulsion for
the manager to adapt the better policies and standards for the better regulation of operations and
functions in the organization. By the help of a balancedsheet, they would be able to discuss the
financial performance of the organisation with their assets and liabilities. They can maintain their
transparency and consistency in organizations by maintaining the proper accounts. The income
statement stands for the items of revenues and expenses and also verifies their existence. All this
information helps to make the decisions and also helps in regulating the standards which are
adapted in the healthcare organizations.

REFERENCES
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Drake, K. D., Engel, E., & Martin, M. (2018) Money for nothing? Using Expectations of Loss
Persistence to Examine CEO Cash Compensation in Loss-Making Firms.
Dyreng, S.D., Hanlon, M., Maydew, E.L. and Thornock, J.R., (2017) Changes in corporate
effective tax rates over the past 25 years. Journal of Financial Economics, 124(3), pp.441-463.
Edwards, A. (2017) The deferred tax asset valuation allowance and firm creditworthiness. The
Journal of the American Taxation Association, 40(1), PP. 57-80.
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Lewellen, J. and Lewellen, K., (2016) Investment and cash flow: New evidence, Journal of
Financial and Quantitative Analysis, 51(4), pp.1135-1164.
Ramsay Healthcare limited, (2017) Annual report. [Online]. Available at:
http://www.ramsayhealth.com/common/emag/rhc/annualreport2017/pubData/source/
RHCAR2017.pdf [Accessed: 24 September 2018]

Ramsay Healthcare limited, (2017) Annual report. [Online]. Ramsay Healthcare limited.
(Available at: http://www.ramsayhealth.com/common/emag/rhc/annualreport2017/pubData/
source/RHCAR2017.pdf [Accessed: 24 September 2018]
RHC (2016) Annual Report 2016. [Online]. Available at:
http://www.ramsayhealth.com/common/emag/rhc/annualreport2016/pubData/source/RHC-
Annual-Report-2016.pdf [Accessed: 1 October 2018].
Sheets, N.C.B. (2018) Non-consolidated Financial Statements. Policy, 2017.
Sheets, N.C.B. (2018) Non-consolidated Financial Statements. Policy, 2017.
SHL (2017) Concise Annual report 2017. [Online]. Available at:
http://investors.sonichealthcare.com/FormBuilder/_Resource/_module/
T8Ln_c4ibUqyFnnNe9zNRA/docs/Reports/AR/sonic-healthcare-limited-2017-annual-report-
online.pdf [Accessed: 1 October 2018].
Sonic Healthcare Limited, (2016) Annual report. [Online]. Available at:
http://investors.sonichealthcare.com/FormBuilder/_Resource/_module/
T8Ln_c4ibUqyFnnNe9zNRA/docs/Announcements/3042/annual-report-2016-updated-for-
website-october-2016.pdf [Accessed: 24 September 2018]
Sonic Healthcare Limited, (2016) Annual report. [Online]. Sonic Healthcare Limited Available
at: http://investors.sonichealthcare.com/FormBuilder/_Resource/_module/
T8Ln_c4ibUqyFnnNe9zNRA/docs/Announcements/3042/annual-report-2016-updated-for-
website-october-2016.pdf [Accessed: 24 September 2018]