Introduction To Accounting And Companies †Myassignmenthelp.Com

Question: Discuss About The Introduction To Accounting And Finance Group Of Companies? Answer: Introduction Pact group of companies manufactures packaging and other products and sells them in Australia, New Zealand and Asia. The company changes plastic resin and steel into packaging products. The products of the company are used in several industries namely food and beverage, personal care, household consumer, chemicals. Its products are also used in materials handling and infrastructure. Malcolm Bundey is the Managing Director and Chief Executive Officer of the company. Pacts packaging is for fresh food, chilled meat, frozen food, ready-meals, baked goods, dairy products, juice and bottled water, among others (Pact Group, 2017). Important things that are to be kept in mind for packaging is that it should keep the food product fresh and provide it protection from outside environment that might contaminate it. In personal care and health products the aesthetics, functionality, convenience and safety are all very important. Pact provides packaging for oral hygiene products, skin creams, hair products and pharmaceutical products. The companys products have latest decoration, patented designs and world leading medical dispensing systems (Pact Group, 2017). The industrial and chemical sector has highly varied packaging requirements that demand durability, reliability, safety and easy transit and storage. Pact provides packaging solutions for agricultural chemicals, surface coatings, lubricants and other petroleum products ranging from large bulk sizes to very small handheld packaging. Pacts materials and handling solutions are focused on the transport and storage of products using pallets, crates and other containers. Pact group of companies had net profit after tax of $ 85.1 million for the year ended 30 June 2016 and sales revenue of $ 1381.3 million for the same period. Its profit and revenue has grown compared to the previous year. Ernst Young were the auditors of the company. The auditor gave in their report that financial statements of Pact Group Holdings Ltd were in accordance with Corporations Act 2001. They gave a true and fair picture of the companys financial position as at 30 June 2016 and of its performance for the year ended 30 June 2016. Further, the financial statements complied with Australian Accounting Standards and Corporation Regulations 2001. In September 2017 share price of the company was $ 5.230 and dividend per share was 23.0 cps (InvestSmart, 2017). The ending date of its latest fiscal year was 30 June 2017. The company is based in Richmond, Australia Analysis of packaging industry The value of packaging in Australia is 10-10.5 billion dollars. About 30000 people are directly employed in packaging in Australia. Packaging of a product is very important. It determines the quantity in which food and other items are available. Australian consumers have the lesser spare time they buy products packaged in different quantities. Pouches have become more popular. More products like baby food and yoghurt are available in pouches. In case of pet care also pouches containing dog food are bought as the food in them is wet and fresh. Australians are becoming more health-conscious due to which they want to control their diet. This is the reason they want food in different sizes of containers. This is the reason why companies like Coca-Cola are now introducing containers in smaller sizes (Eliott et al., 2014). Australians want to buy high-quality premium products. The consumers want smaller and slimmer glass bottles containing drinks. They want products packaged attractively. Packaging of different types helps the brand owner in creating an image for its products. The packaging also has to be convenient, making the use of product easy. In case of packaged food, there is more demand for plastic pouches rather than cartons (Mordor Intelligence, 2017). The consumers are also more conscious about sustainability factor. They want to see if the packaging can be recycled without harming the environment. The companies also are using sustainable packaging as a marketing tool. More sustainable packaging like plastic made of sugarcane is in demand. There are many companies of food packaging like Centropak, Confoil, Linco food systems, Maxpak Australasia Pty Ltd and Olympus packaging (Ezilon, 2017). There are companies like Modbec and Synergy Packaging Pty Ltd which pack cosmetics. There are companies like Packmatic, Panda Packaging Pty Ltd, Walls Machinery Pty Ltd and Davis packaging which package equipment. The demand for plastic packaging is increasing despite adverse effect on the environment. There is pressure from the government due to which biodegradable and sustainable plastic is being used. Sellers of plastic packaging are Amcor, Rexam, Winpak, Aptar group and other companies. Future plans of Pact group of companies Pact group of companies would continue to focus on lowering the groups overall cost of production through efficiency program announced in 2015. The company would get growth by acquiring more business entities. But merger and acquisitions would take place after greater evaluation and if there is synergy resulting. The merger should result in business growth and keep the costs down (Asia Pacific Packaging, 2017). The group entered on 16 May 2016 into an agreement under which the group will construct, own and operate crate pooling, washing and storage facilities to service Woolworths. This is a long term project for the company. Pact believes in growth. It wants to have a diverse customer base with long term relationships with them. The company wants to continue with its policy of diversified product portfolio. The company wants to encourage innovation further. It wants to come out with more innovative products that provide it with a competitive edge. Pact group of companies wants to provide more sustainable products in future that do not cause harm to the environment. The company would try to remain ethical in future. The company would try to continue with good corporate governance. Financial Statement Analysis Statement of Financial Performance Particular 2014 2015 2016 Gross Profit 329.56 367.05 392.83 Income from operation 329.56-20.88=308.68 367.05-2.41=364.64 329.83-9.17= 320.66 Net Income 57.69 67.63 85.05 Interpretation of findings: On the basis of above table it can be observed that Pact Group Companys gross profit in 2015 is 367.05 and in 2016 is 329.83 (Pratheepkanth, 2011). It means company has increased its gross income in 2016, which is beneficial for the company. On the other hand, the companys operating income is increased from 2014 (308.68) to 2016 (320.66). It is favourable for the company. At the same time, the net income of the company has also been increased from 2014 (57.69) to 2016 (85.05). It is more favourable for the company because if the company generates more income, companys goodwill will be increased in the market. Common size financial statements: The common size statement is also known as the vertical analysis. The common size statement is conveying all point of the financial statement within the conditions of percentage, which is based on the parameter (Brigham and Houston, 2012). The basic items of common size are expenditure and income statement based on its factors, which obtained while generating revenue and sales. Pact Group Company has recorded its expenses and income in the financial statement. Trend analysis technique: Trend analysis is the unchecked practice of information collecting as well as it is an attempt to pattern the spot. In business, the trend analysis is used for forecasting the future events (Becker, et al., 2013). It is also mathematical technique, which used the historical result to forecast the future result. It is also known as the assignment management control device. It is accomplished with the differences within the scheduled performance or cost. Company adopts the trend analysis to recognize its future cost. Accounting policies for preparation the statement: There are various forms, which signified the accounting policies such as: Statement of compliance: Consolidate financial report has also fulfilled by the Australian Accounting Standards (AAS) and IFRS (International Financial Reporting Standards) which concerned with the IASB. Interpretations and Accounting standards that have been effective and are concerned: AASB 2012-3: AASB standards include relevance guidance for the AASB 132. Financial instruments presentation to address variation, which identifies at the time of applying of few outside norm of AASB 132 (Cairns, et al., 2011). It involves the descriptive significance of presently is a legally enforceable right to set-off as well as few gross settlement system might be considered equivalent to net settlement. As the same, the financial statement such as also affects some standers like AASB 1031, AASB 2014-1, and AASB 2013-9 etc. Identify trends and items that might be different from the industry norm: As per the financial performance, the gross profit of the company is growing in 2016. However, if compare with the industry ratio which is 57.21%, it can be said that it is profitable for the company. On the other hand, operating income for the company increased from 2014 (308.68) to 2016 (320.66). The industry ratio of the operating income is 9.37% (Sami, et al., 2011). If compare with industry ratio it has been overlapped for it and it is not good for the company. On the other hand, the net income of the company is increased from 2015 (67.63) to 2016 (85.05). It means the company has earned more income as compared with two previous years and it is profitable for the company. Statement of Financial Position: Assets = Liabilities + Stockholders Equity For 2014 1.21= 898.16 + 307.29 For 2015 1.18= 850.23 + 326.87 For 2016 1.37=1 + 369.19 Common-size statement analysis: A common size balance sheet is known as the balance sheet, which shows the relative and numeric value for total liabilities, equity accounts and total assets. It permits the comparative level of all accounts that are rapidly evaluated the liabilities, equity and assets accounts (Higgins, 2012). It is used in the external and internal forecasters as well as it has not recorded necessity of GAAP. In company context, the company also used this statement to analyze its balance sheet values. Trend analysis: Based on trend analysis it is collecting all the financial information and attempting to commercial outline. Pact Group Company has collected all the financial information and it records the trend analysis. Statement of cash flows: Compare operating cash flows with the net income for the past years Particular 2014 2015 2016 Operating Cash Flow 90.84 250.81 160.79 Net Income 57.69 67.63 85.05 On the basis of above table, it can be observed that the operating cash flow of the company has been increased from 2014 (90.84) to 2016 (160.79). It shows that it is profitable for the company. On the other hand, net income of the company has been increased in 2016. And it shows that the companys profitability ratio has been favourable for the industry. Is the company expanding through investing activities? Company uses many standards to make its legal policies and accounting policies to comply with these standards. Some standards are like AASB 2015-2, AASB 101, IFRS 18 (revenue and related Interpretations) etc. It is also used to signify accounts such as taxation, Impairment of non-financial assets and goodwill, net investment etc (Pact Group, 2015). Identify the companys most important source of financing Bank Loan: Bank loan can be considered as the most important source of finance for the company. Company can take loans from banks for the purpose of expanding the business. Bank charges a fixed rate of interest on it (Brauers and Zavadskas, 2011). Owner capital: Company can issue its share and securities in the market to raise funds. Overall, has cash increased or decreased over the past years? As per companys balance sheet, it can be concluded that cash for the company in 2014 is 25.6 and 2015 is 32.61, as well as 2016, is 51.89. As compared with previous years, company has increased its cash in 2016, which gives benefit to the company, because company requires cash for developing its business. Summaries discuss and report the major points of interest from your analysis As per this report, it can be analyzed that company has to increase its business as compared with previous years. Company has to improve its gross profit as compared with industry ratio. The company also uses the common size statement and trend analysis to record its business statement. On the other hand, it is also used the different types of AASB standards which help to the company to make its policies. Calculate the Ratio Analysis: Liquidity Ratio Ratio Formula 2014 2015 2016 Industry ratio Working Capital Current assets- Current liabilities 299.4-247.29 = 52.11 253.21-305.86= 52.65 321.01-352.81= -31.71 57 Current Ratio Current assets /current liabilities 299.4/247.29 =12.10 253.21/305.86=0.83 321.01-352.81= 0.90 1.09 Receivable turnover sales / total receivable 1.14/150.34 =0.007 1.25/93.69 =0.013 1.38/114.6 = 0.012 9.18 Average days sales uncollected (Average receivable / sale) *365 150.34/1.14*365 =48135 93.69/1.25*365= 27357.48 114.6/1.38*365= 30310.86 N/A Inventory turnover COGS/ Average Inventories 813.66/115.21= 5.35 882.11/117.49=7.50 988.5/146.63=6.74 4.09 Average day' inventory on hand Inventory/ Cost of sales * 365 115.21/813.66*365=51.68 117.49/882.11*365=48.61 146.63/988.5*365=54.14 N/A Profitability Ratio Ratio Formula 2014 2015 2016 Industry ratio Profit margin NP/ sales 57.69/1.14=50.60 67.63/1.25=94.58 85.05/1.38=61.63 5.20% Assets Turnover Net Sales / Total Assets 1.14/1.21=0.94 1.25/1.18=1.05 1.38/1.37=1.007 0.99 ROA(Du Pont Equation) Net Sales / Total Assets 1.14/1.21=0.94 1.25/1.18=1.05 1.38/1.37=1.007 5.13 ROE net profit/ shareholder equity 57.69-0=57.69 67.63-0=67.63 85.05-0=85.05 20.08 ong- Term solvency ratio Ratio Formula 2014 2015 2016 Industry ratio Debt to equity long-term debts/ shareholder Funds 589.85/307.03=1.92 472.9/326.56=1.44 561.44/369.19=1.52 174.81 Interest coverage EBIT / Interest Expenses 98.6/73.19=1.34 124.76/32.77= 3.80 136.34/27.28=4.99 N/A Cash Flow Adequacy Ratio Formula 2014 2015 2016 Industry ratio Cash Flow Yield Free cash flow per share/ current market per share N/A N/A N/A N/A Cash Flow to sales Operating Cash flow/ Net sales 90.84/1.14= 79.68 250.81/1.25=200.6 160.79/1.38= 116.51 N/A Cash flow to assets Cash from operations/ Total assets 120.4/1.21=99.50 163.97/1.18= 138.95 149/1.37= 108.75 N/A Free cash flow Net cash flow from operation- capital expenditure N/A Market strength ratio Ratio Formula 2014 2015 2016 Industry Ratio Price Price/ earnings per share N/A N/A 17.03 24.27 Earnings per share Net income-preference Dividend/ weighted Average common share outstanding 0.35 0.23 0.29 0.01 Dividend yield Annual Dividend / Current Stock Price N/A N/A 4.47 3.58 Companys trends, strength and weaknesses: On the basis of above table, it can be concluded that in liquidity ratio, the working capital of the company has been reduced from 2014 (52.11) to2016 (-31.71). If compare with industry ratio, it has been declined in both the years. At the same time, it can be analyzed that the current ratio of the company is 12.10 in 2014 and it is reduced in 2016. The industry ratio of the current ratio is 1.09. If compare with industry ratio of last year ratio, it has gone down, this is not beneficial for the company (Birks, et al., 2011). The receivable turnover ratio of 2015 is 0.013 and 2016 is 0.012. It shows that the turnover ratio is decreased. At the same, if compare with industry ratio the receivable turnover ratio is decline within last years. On the other hand, the average days sales uncollected in the year 2015 are 27357.48 days and 2016 is 30310.86 days. The Inventory turnover of the Pact group in 2014 is 5.35 and 2016 is 6.74. It means that the company has increased its inventory turnover and it is favourable for the company. The Average day' inventory on hand of the company has been increased from 2014 (51.68) to 2016 (54.14). It is beneficial for the company. If overall performance is calculated, sometimes company is growing in liquidity ratio and sometimes it is decreasing. If liquidity ratio has upper with given the industry ratio, it means it is the weakness of the company and if the company has grown with industry ratio it means it is the strength of the company (Abdullahi, 2011). On the other hand, the profitability ratio of the company has been increased as compared with the last two years. If compare with industry Ratio, Company has grown with it and it is the strength of the company. The debt equity ratio of the company has been reducing from 2014 to 2016. If compared with industry ratio the debt equity ratio is declining with it. At the same time, the interest coverage ratio has also decreased from 2014 to 2016. On the other hand, Cash Flow Adequacy ratio of the company has been growing in 2016 as compared with last two years. On the other hand, Market strength ratio of the company has been developed within last two years. If company marketing strength ratio is increased in the market, it is the strength of the company. But at the same, it is the weakness also because if a company develops its market price in the industry many barriers are entered in the industry. Conclusion: Summaries your findings and make recommendations as to what you think the company should do to enhance performance From the above analysis it can be examined that company can easily reduces its cost by using effective selling process. From the above findings, it can be recommends that the company can launch new product with effective features so that it helps to retain more customers. The company has to know that what its customer needs and what they want. Company has also renewed its product time to time and makeup gradations on their products, as a result, it helps to increase the firm value (Huo, 2012). Based on your analysis, would you consider the company to be a strong performer? On the basis of above analysis, it can be observed that company has the strong performer, because company is effectively improving its operations as compared with previous years. Along with this, company has also improved its gross margin, net income as well as operating profit as compared with the previous years. Apart from this, the company has also potential to perform very well in future because of availability of sufficient funds. References Abdullahi, A.A., 2011. Trends and challenges of traditional medicine in Africa.African Journal of Traditional, Complementary and Alternative Medicines,8(5S). Asia Pacific Packaging 2017. Pact CEO reveals future company strategy. Australia, https://www.asiapacificpackaging.net/News/3344,pact-ceo-reveals-future-company-strategy.aspx viewed 7 September 2017 Becker, A., Finger, P., Meyer-Christoffer, A., Rudolf, B., Schamm, K., Schneider, U. and Ziese, M., 2013. 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