Discuss About The Brief Of Selected Accounting Organization?
The organisation that has been selected to fit the purpose of this assignment is Telstra Corporation Limited. The organisation has been previously known as Telecom, which has merged with the Overseas Telecommunications Operation, firstly cross-border in 1993 and domestically in 1995. Telstra has been privatised in three different stages “T1 ($3.30)”, “T2 ($7.40)” and “T3 ($3.60)” in 1997, 1999 and 2006 respectively. In T1, 1/3rd of the government shares have been sold to Telstra for $14 billion, which has helped the operations to list on the Australian Stock Exchange (ASX).
In 1999, additional 16% of the organisational shares had been sold to the public; thus, leaving the Australian government with 51% ownership. In 2006, there has been announcement of “T3”, which has minimised the ownership of the government to 17%. The organisation has been engaged in operating and building telecommunications networks along with markets voice, internet access, pay television and other entertainment services and products. The year under review for this assignment is 2017.
Sections dominating the report:
The major sections that dominate the annual report of Telstra Corporation Limited include the financial reports (income statement, balance sheet statement and cash flow statement), notes to the accounting policies and estimates along with segmental disclosures.
Names of the four main directors and summary of the report:
The four main directors of Telstra Corporation Limited constitute of Andrew Penn (CEO), John Mullen (Chairman), Peter R. Heart (Chairman of the Remuneration Committee and member of the Nomination Committee) and Nora L. Scheinkestel (Chairman of the Audit and Risk Committee). According to the report of the directors, the overall income of the organisation has been raised by 4.3% in 2017 to $28.2 billion along with increase in EBITDA by 2% to $10.7 billion. The main priority of the organisation is to enhance the experience of the customers and the Net Promoter Score, which is the main customer measure, has recovered effectively in the second half of 2017. Finally, the organisation has developed an effective audit and risk committee to deal with the unanticipated risks along with maintaining transparency in the financial statement disclosures.
Auditors, their opinion and summary of the auditors’ report:
The organisation has formed an effective internal committee and the external auditor of the firm has been identified as Ernst and Young. According to the opinion of the external auditor, the financial statements of Telstra have been prepared in compliance with the Corporations Act 2001, as it provides a fair and true revelation of the consolidated financial performance and financial position of the organisation. In addition, it complies with AASB and Corporations Regulations, 2001.
Increase or decrease in sales:
According to the annual report of the organisation, it has been found that the sales revenue of the organisation has increased from $25,834 million in 2016 to $25,912 million in 2017. Hence, the sales of the organisation have increased marginally by 0.30% in 2017. The possible reason behind such changes is the increasing demand in the market along with better quality services provided on the part of Telstra Corporation Limited.
Net cash inflow (outflow) from operating activities and change from the previous year:
According to the cash flow statement of the organisation, it could be observed that Telstra has experienced decreased cash inflow from $8,133 million in 2016 to $7,775 million in 2017. Hence, it has decreased by $358 million and the amount of percentage decrease is 4.40% in 2017.
Retained profit, loans and debentures:
The amounts of retained profit for Telstra Corporation Limited have been $10,642 million in 2016, which has decreased to $10,225 million in 2017. The organisation has short-term debt amounting to $2,537 million in 2016 and $2,369 million in 2017. On the other hand, the long-term debt of the organisation has been $14,378 million in 2016 and $14,574 million in 2017. However, Telstra has not issued any debenture in the financial years 2016 and 2017.
Ratio analysis for commenting on the financial health:
The profitability ratios of the years 2016 and 2017 have been depicted in the form of a table (Refer to Appendices, Appendix 4). It has been found that the gross margin of the organisation has declined from 71.95% in 2016 to 57.75% in 2017 due to the increasing cost of revenue in contrast to the overall sales. Moreover, the net margin of the organisation has fallen from 22.37% in 2016 to 15.02% in 2017 due to sharp increase in sales, general and administrative expenses.
The liquidity ratios of the years 2016 and 2017 have been depicted in the form of a table (Refer to Appendices, Appendix 5). It has been found that the current ratio of the organisation has declined from 1.02 in 2016 to 0.86 in 2017 and it is below the industrial standard of 2. In addition, the quick ratio of the organisation has fallen from 0.91 in 2016 to 0.70 in 2017, which is below the industrial average of 1. The possible reason is the increasing amount of short-term debt in relation to short-term assets, which has declined its solvency position.
Asset turnover ratio:
The asset turnover ratio of the years 2016 and 2017 has been depicted in the form of a table (Refer to Appendices, Appendix 6). It has been found that the asset turnover ratio of the organisation has declined management from 0.62 in 2016 to 0.61 in 2017. However, this turnover is quite low, which denotes that the organisation is struggling to generate sufficient return by utilising its assets (Weil, Schipper and Francis 2013).
The leverage ratios of the years 2016 and 2017 have been depicted in the form of a table (Refer to Appendices, Appendix 7). It has been found that the debt-to-equity ratio of the organisation has increased from 1.73 in 2016 to 1.90 in 2017. This implies that Telstra has focused on raising funds more through debt, instead of equity financing. . In addition, the interest coverage ratio of the organisation has fallen from 6.40 in 2016 to 5.41 in 2017 and this implies that the organisation has adequate capability to meet its interest expense with the help of operating income.
Telstra.com.au. (2017). Telstra - mobile phones, prepaid phones, broadband, internet, home phones, business phones. [online] Available at: [Accessed 15 Sep. 2017].Weil, R.L., Schipper, K. and Francis, J., 2013. Financial accounting: an introduction to concepts, methods and uses. Cengage Learning.