ACC5502 Assignment 1: Financial Analysis of Supermarket Underpayments

This assignment analyzes the underpayment of workers at Coles and Woolworths, two major Australian supermarket chains. It examines the circumstances leading to underpayment and the amounts involved, referencing articles from The Guardian, News, and Inside Retail. The assignment then applies principles of business sustainability, particularly stakeholder theory, to evaluate the companies' actions. It identifies key stakeholders (customers, suppliers, employees, investors, government, and shareholders) and discusses their interests in the context of the scandal. Ethical theories, including utilitarianism and deontology, are applied to assess the companies' decisions. Furthermore, the assignment explores corporate governance principles, including risk management and ethical conduct, and analyzes financial statements, including balance sheets and profit and loss statements, to assess the financial health of Virgin Airlines. The assignment concludes with a balance sheet for Happyland Toys Pty Ltd and a discussion of accounting practices.

Financial
Management

FINANCE 1
Question 1
A. Coles and Woolworths have been taken into consideration to understand the concept of
underpayments. According to the article of The Guardian, Coles is the retailing company that has
been caught up in the scandal of underpayment. It has been seen that Coles has been caught by
underpaid workers by $20 m over the six years (The Guardian, 2019a). In this company, Coles
has been decided to pay the $20 million to underpay. It has been seen that 5% of managers of
supermarkets and liquor stores are underpaid due to which the company has to pay large amount
that is why; it decided that the amount will change and till it is postpone (The Guardian, 2019b).
And according to the article of Woolworths of The Guardian, Woolworths underpaid the
thousands of workers by upto $300 m. According to News, Woolworths have to pay $315m to its
worker from its profit (News, 2020a). As per the inside retail, Coles has underpaid the staff with
$20 million (Inside Retail, 2020). There is one ore article which is written by Jose, and Kaye for
Coles that it provides the less amount of payment to its workers.
B. There are many principles of business sustainability performance such as diversity,
modularity, openness, matching cycles, slack resources and many others. It has been observed
that the principle of diversity is not implemented as the company does not provide the full
payment to supervisor and workers. It is observed that the companies do not use the resources
properly due to which its financial position has been affected which directly decrease the wages
of employees. The principle of modularity states that the company has to give the importance to
its employees and their support by giving them wages as per their efforts. It is observed that the
principle of Openness’s is not followed by the company as it did not analyze the external
environment to perform its services (Barral, 2018).

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C.
i. Customers, Suppliers, employees, investors, government and shareholders are the six the
stakeholders of the supermarket. It is observed that the stakeholders of the company have their
own interest while spending their time and money into it. According to the Investors,
shareholders and government, it is beneficial to gets the high return due to high amount of profit
by decreasing expenditures and Coles and Woolworths has high amount of net profit with the
high brand value that is it is beneficial for the stakeholders to take interest into the publicity
company. Apart from it, the stakeholders also wants the publicity in the market that is why; it is
suitable for the company to invest in it as nowadays, the supermarkets has huge publicity in the
market due to their underpaid payment.
ii. Yes, I think the supermarkets might be prioritizing the investors, shareholders, suppliers,
consumers and government stakeholders over the employees. In all of the stakeholders of the
company, it collects the money but in terms of employees, it has to pay the amount of salaries
and wages to them due to which their net profit has been decreases that is why; it is correct for
the company to priorities the others stakeholders instead of employees.
D. Utilitarianism and Deontology are the two ethical theories those helps the companies to take
the decision. According to Utilitarianism theory, the company has to take the decision in order to
bring the happiness in the life of consumers, and its other stakeholders. In the scenario of
underpayment, it is required for the companies such as Woolworths and Coles have to bring the
happiness in the life of employees by paying them wages with the different facilities. As
Woolworth already announce the enhancement of wages of old employees but it denies after
earning the revenue which is a wrong step. As per the Deontology theory, the company has to

FINANCE 3
take the right decision that is why; it is suggested that Woolworths and Coles has to provide the
salary according their announcements.
E. Right ownership, use of information, no implied, liability and Governing Law, Severance,
Waiver are the five points that either board of directors and manager have to take from this
article in order to correct the payment method especially for staff. Use of information means the
company has to provide the correct information to employee’s weather it has the capacity to pay
the payment or not. Governing law, severance, waiver is the other point that board of directors
have to implement in order to reduce the payments such as the company has to implement the
rules and regulation for payment of employees.
F. Being the manager, I always emphasize on the some areas in which the number one is that the
company can provide the extra benefits to employees as a free services or incentives so that their
wage rate managed. The other point is that I will provide the flexible hours to the employees so
that they are able to manage their personal life with the work life. And the last point that the
company has to be take care is it can provide the allowance such as house allowance, medical
facilities so that the impact of underpayment has been reduce.
Question 2
1. There are major difference between corporate governance and corporate social
responsibilities. Corporate Governance is the combination of rules, laws and policies in which
businesses has to operates, regulate and controlled. But corporate social responsibility is the type
of social services that the business have their own aims to contribute in the social groups to attain
the global presence in the market. As both the terms have different meanings and concept to
increase the brand value of the company. The other difference between both the terms is that the

FINANCE 4
it is compulsory for the company to follow or implement the corporate governance structure and
policies to operate effectively. But in Corporate social responsibility, there is no compilation for
the companies to provide the services to the society. The main difference between both the terms
is that the company follows the structure of Corporate Governance for their own brand image or
smooth operations but in the corporate social responsibility, the company provides the services
for the benefit of the society instead of making their own money. The company has to implement
the structure of corporate governance but it develops the policies of corporate social
responsibility (TechTarget, 2020).
2. Risk management, Act ethically and responsibly, safeguard integrity in corporate reporting,
respects the rights of security holders and remunerate fairly and responsible are the five key
principle and rules of corporate governance of the company in order to operates the business
smoothly and effectively.
3.
A. There are four financial statements that have been prepared by the companies to states the
financial situation of the organization. These four financial statements help the company to
reduce the frauds and mistakes. The four financial statements those are prepared by the company
are profit and loss statements, balance sheet statement, cash flow statement and shareholders’
equity statements.
Profit and Loss statement- Profit and Loss statement contains the revenue and expenditure of
the company. By evaluating the revenue and expenditure helps the company to measures its
financial situation.

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Balance Sheet Statement- Balance Sheet Statement contains all assets, liabilities and equity at a
specific period of time that states the value of the company.
Cash Flow Statement- This statement provides all the aggregate date related to the cash inflows
in terms of receiving and paying the amount of operations. It specifically states the cash and cash
equivalent of the company.
Shareholders’ Equity- It shows the amount that how company can finance its operation with the
help of common share and preference shares.
B. The accounting equation of the company is Assets= Liabilities + Equity. In terms of Virgin
Airlines, the accounting equation of the company at the end of the year is
Assets= Liabilities + Equity
6468.2= 5849.3+618.9
C. The two largest source of revenue for Virgin is Airline Passenger and Loyalty program
revenue. The revenue of Airline Passenger has $5317.7 and Loyalty Program has 383.8 (Virgin
Australia Group, 2019).
D. The revenue of the company has been evaluated by increasing or decreasing amount from the
past years. In profit and loss statement of the company, the transactions of both the years have
been recorded due to which it is easy to measure the increasing amount of revenue. However,
total of all the incomes has been added which is the only way to measure the revenue. All the
incomes have been recorded in financial statement at the end of the year that is why; revenue is
recognized at the end of the year on 30th June 2019 (Virgin Australia Group, 2019).

FINANCE 6
E. It has been seen that the Airline Passenger has biggest increase in international market as the
passengers has been increases across the world. Apart from it, total liabilities of the company
have been increases from 2018 to 2019.
F. At the end of 2019, the cash and cash equivalent has been increases from 1415.5 to 1740 from
2018 to 2019 respectively. It means the cash flow of the company has been increases.
G. The biggest single expense item in Virgin Airline in 2019 is Labour and Staff related
expenses which is increases from 1246.7 to 1346 from 2018 to 2019.
H. Property, Plant and Equipment is the largest non-current asset of the firm as it opening value
is 3031 and closing value is 3202.1 (Virgin Australia Group, 2019).
I. Straight Line Method is method of depreciation that has been used by the company to write off
property, plant and equipment.
J. Yes, Virgin Airline has intangible assets with the name of intangible asset. The amount of
intangible asset is 580.7 million in 2019 (Virgin Australia Group, 2019).
K. Virgin Airline reduces the carbon emission which is the most significant environmental issue
for the airline industry.
L. KPMG is the accounting firm that audited the financial statement and according to KPMG,
the financial position is strong and all the evaluations are fare.
M. The company finances its operating activities through two ways and these are debt and
equity.

FINANCE 7
N. The company suffers with the loss due to which it is suggested that I will not invest in the
company.
Question 3
A. Effects of notes in terms of acceptable accounting practice and its actual figures in balance
sheet and these are:
Motor Vans- The amount of depreciation has been written off from motor vans in the balance
sheet. Depreciation is the beneficial amount for the company that has been recorded in balance
sheet.
Inventory- Inventory is measured on cost price but it realizable value is $38000 which means
inventory has been recorded at the same price $52000.
Bank Overdraft- Band Overdraft is the liability of the company which increases the liability site
of balance sheet.
Net profit- Net profit of the company has been added in the capital amount as it directly
enhances the capital amount.
Goodwill-The value of goodwill of the company is maintained in order to balance the balance
sheet.
Interest Payable- The amount of interest payable is recorded in liability which increases the
liability amount.
GST paid- GST paid is the adjustment that has been deducted from the purchasing of goods. It
affects the net profit (Robinson, 2020).

FINANCE 8
B.
Happyland Toys Pty Ltd
For the month ended 31st March 2020
Balance Sheet
Amount Amount
Assets
Current Assets
Cash $5,000
Accounts Receivable
$
15,000.00
Inventory
$
52,000.00
Prepayments
$
10,000.00
Total Current Assets $82,000
Fixtures and Fittings
$
42,000.00
Motor Vans
$
61,000.00
Goodwill
$
12,200.00
Total Non-current Assets
$
115,200.00
Total Assets
$
197,200.00
Liabilities
Accounts payable
$
19,000.00
Interest payable
$
3,200.00
Bank Overdraft
$
4,000.00
Wages Payable
$
11,000.00
GST Control (5000-2400) 2400
Current Liabilities
$
39,600.00
Loan
$
64,000.00
Non-Current Liabilities $

FINANCE 9
64,000.00
Total Liabilities
$
103,600.00
Shareholder's Capital
Capital
$
65,000.00
Net profit
$
28,600.00
$
93,600.00
Total Shareholder's Liabilities and
Equity
$
197,200.00
C. The three limitations of Balance Sheet as financial report and these are discussed below:
Historical cost: It has been seen that the company records all the transaction on historical basis
but the prices of the assets have been fluctuated which is not considered while preparing the
balance sheet (Vogel, 2016).
Revenue and Expenditure: In Balance Sheet, revenue and expenditure is not included due to
which it is difficult for the company to measure the financial position.
Different cost: It is observed that assets have been recorded on different cost as per the different
rules that is why; the company face the difficulty to measures the assets in different ways (Ward,
2019).

FINANCE 10
References
Barral, V. (2018) The principle of sustainable development. In Elgar Encyclopedia of
Environmental Law (pp. 103-114). Edward Elgar Publishing Limited.
BrainMass. (2019) The nine principles of corporate sustainability performance. Available From:
https://brainmass.com/business/human-resources-management/nine-principles-corporate-
sustainability-performance-399006 [Accessed 20/4/2020].
Carey, A. (2018) Woolworths owes workers at least $315 million amid profit drop. Available
From: https://www.news.com.au/finance/business/retail/woolworths-owes-workers-at-least-315-
million-amid-profit-drop/news-story/bf133ec8ac9d116064be62ddc38a220b [Accessed
20/4/2020].
Inside Retail. (2020) Coles has underpaid staff an estimated $20 million. Available From:
https://insideretail.com.au/news/coles-has-underpaid-staff-an-estimated-20-million-202002
[Accessed 20/4/2020].
Jose, R. and Kaye, B. (2020) Australia's Coles reports staff underpayment, flat first-half profit.
Available From: https://www.reuters.com/article/us-coles-grp-results/australias-coles-reports-
staff-underpayment-flat-first-half-profit-idUSKBN20C06U [Accessed 20/4/2020].
News. (2020) Coles admits underpaying staff and sets aside $20 million for repayments.
Available From: https://www.abc.net.au/news/2020-02-18/coles-underpays-employess-20-
million-review-reveals/11974984 [Accessed 20/4/2020].
Robinson, T.R. (2020) International financial statement analysis. John Wiley & Sons.

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Schroeder, R.G., Clark, M.W. and Cathey, J.M. (2019) Financial accounting theory and
analysis: text and cases. John Wiley & Sons.
TechTarget. (2020) Corporate governance. Available From:
https://searchfinancialsecurity.techtarget.com/definition/corporate-governance [Accessed
20/4/2020].
The Guardian. (2019a) Coles underpaid workers by $20m over six years. Available From:
https://www.theguardian.com/business/2020/feb/18/coles-underpaid-workers-by-20m-over-six-
years [Accessed 20/4/2020].
The Guardian. (2019b) Woolworths underpaid thousands of workers by up to $300m. Available
From: https://www.theguardian.com/business/2019/oct/30/woolworths-underpaid-thousands-of-
staff-by-up-to-300m [Accessed 20/4/2020].
Virgin Australia Group. (2019) Annual Report 2019. Available From:
https://www.virginaustralia.com/cs/groups/internetcontent/@wc/documents/webcontent/~edisp/
fy19-annual-report.pdf [Accessed 20/4/2020].
Vogel, H.L. (2016) Travel industry economics: A guide for financial analysis. Springer.
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https://www.thebalancesmb.com/balance-sheet-definition-2946947 [Accessed 20/4/2020].