Business Analysis And Valuation Hampshire Essay

Question:

Discuss About The Business Analysis And Valuation Hampshire?

Answer:

Introducation

Complaint against Member A for false preparation of statements: The meeting held on 28 June 2017 in Sydney Australia of the Professional Conduct Committee of Chartered Accountants Australia and New Zealand (Chartered Accountants ANZ) concluded that Member A (name withheld) prepared the financial statements falsely and intentionally and therefore, implies a failure in compliance with fundamental principle of integrity APES 110, Code of Ethics and therefore, didn't act with due care (Berman, Knight and Case, n.d.).

The committee considered the acknowledgement of doing it wrongly by the member itself and took into account his self - reporting and made decisions on that basis that the member shall be disapproved as a member and he shall be liable to pay the respective costs incurred by the committee with respect to investigation of the matter and the case conference amounting to $1500.

Criminal Conviction : The meeting held on 28 June 2017 in Sydney Australia of the Professional Conduct Committee of Chartered Accountants Australia and New Zealand (Chartered Accountants ANZ) concluded that Member B (name withheld) was found guilty in case of criminal charges where he breached by law 40(2.1)(b) and thus took him to a sentence of imprisonment. He was found pleading guilty to two serious criminal convictions (Shim and Siegel, 2008). The committee considered the fact that the member himself reported about the nature of convictions that it do not relate to the accounting practices. The committee disapproved his existence as a member and made him liable to pay the costs incurred by the committee in relation to investigation made and dealings with the matter as demanded by the complaint amounting to $750.


Adverse Finding : The meeting held on 1 February 2017 in Sydney Australia of the Professional Conduct Committee of Chartered Accountants Australia and New Zealand (Chartered Accountants ANZ) concluded that Member C (name withheld) of Queensland work in auditing a trust account is found weak. Also, she has already been disapproved of conducting any further trust audits in future . The committee disapproved her being a member and made her liable for the costs incurred with respect to the investigations made in relation to this complaint (Bruner, Eades and Schill, 2017).

(b) The Professional Conduct Committee, Disciplinary Tribunal and Appeals Tribunal/Council are responsible for monitoring the professional conduct of the members so as to maintain the authority of the Institute. The Institute is a body of importance and everyone coming under the Institute is to be treated equally be it students, members or directors so as to maintain the equality and trust of people in it (Saltelli, Chan and Scott, 2008). Members must comply with the standards applicable, including professional & technical standards and Code of Ethics.

As a jurisdiction body, the focus of the complaints is only to investigate a member's professional conduct. The results are important in a sense it relates to a member's position and standing in the institution. However, such disciplinary bodies do not have the power of Court and therefore, cannot overturn or interfere in any court decisions. Such bodies are expected to work within the rules of natural justice or procedural fairness so as to ensure that fairness is followed throughout the Institute (Taylor, 2008).

Professional bodies are characterized by their acceptance of responsibility towards public. These 'public' consists of governments, employees, employers, investors, credit grantors, clients business & financial communities who trust on the integrity and objectivity of such professional bodies to maintain smooth functioning of Commerce. Such reliance poses a public interest responsibility on these bodies. These professional bodies plays an important role in society and the public relies heavily for sound financial decisions, accounting, reporting & effective communication & management of business and other matters. The Institute's attitude determines the impact of it on the economic well being of their both country as well as their community.

Such professional bodies voluntarily publish the complaints & their decisions and investigation as by providing such unique services, they can establish the fact that public confidence is firmly founded. It is the core part of the professional bodies to make known to its users that the performance is being executed at the highest level and the ethical requirements are being fulfilled to ensure such performance. These professional bodies consider the user expectations of the ethical standards of their professionalism and should take their opinions in account too (Clarke and Clarke, 1990). They publish their decisions for the sake of considering any 'expectation gap' between the standards expected and those levied and therefore, such grievances too can be addressed or dealt with.

Stakeholders are those persons who are directly or indirectly affected by the actions of the organization regarding policies, rules and regulations. Stakeholders are considered to be those sources through which the business draws its resources. They can be both internal as well as external. Some key stakeholders are creditors, debtors, employees, employers, government, investors, customers and public in general. Therefore, a company has some responsibility towards its stakeholders (Fairhurst, 2015).


The company's main responsibility lies in the preparation & presentation of financial statements such as Income statement, balance sheet, cash flow statement, etc. Though these financial statements record the past events, it is frequently referred by the stakeholders for the sake of making decisions. Considering the financial statements, let us discuss them in brief:

Income Statement & Balance sheet: This statement reflects the financial performance and position of the company and shows a growth in both revenue & net income in case of income statement and changes in the major elements of balance sheet such as loan amount, assets, inventories, etc. Net income reflects the fact that how successfully a business has made use of all of its resources and made profits during that particular accounting period. Also, a part of this income statement reflects the amount spent by the business for carrying out its operations. A company is required to prepare a statement with previous year's data so as to reflect the major changes in the elements. For example, a rise in administrative expenses but with no change in sales revenue shows an unusual expenditure and therefore, the management is to look into this matter (Galbraith, Downey and Kates, 2002).

Cash Flow Statement: Cash flow statement is the true indicator of cash in hand and reflects the cash inflows and outflows. It reflects the actual money paid or actual money received and therefore, serves as a source of capability of the company to pay its short term obligations instantly, if required.

The changes in these statements can be both positive & negative. For example, increase in sales with cost reduction reflects the fully utilized efficiency of the business operations. These financial statements are referred for different purposes. Some of the examples are:

The operating results of the company such ad sales, stock turnover ratio, etc serves as a source of reliability to creditors who can then be comfortable with the credit terms provided by them as the probability of receiving their amount after a period of time becomes confirmed (TULSIAN, 2016).

The balance sheet serves as a source of information to both investors & bank lenders. Such information reflects the credibility background of the company and on the basis of that, the investors decide whether it would be profitable to make an investment in the company or not. After all, it's their money that would be used in business operations. In a similar way, bank would refer such information before granting any loan to the organization as it is important to determine whether the company is capable of generating enough income or not as well as whether the operations of the business are for the well being of the community as a whole.

The financial statements serve as a source of satisfaction to employees & employers both as they are the key role models behind the success of an organization. An idea becomes a reality only if it had been implemented in the best possible manner and these employees & employers are the key implementers of such plans (Galbraith, Downey and Kates, 2002).

According to Institute of Management Accountants, 'management accounting is a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization's strategy'.

As per the given case, the plant manager seems to be really proud of his position as he made a statement that he doesn't want any bean counter to poke his nose in his daily operations as he is well acquainted with his responsibilities (Holland and Torregrosa, 2008). However, a bean counter is that accountant who is responsible for keeping an eye on the expenditures so as to control unnecessary expenses and work according to the set budget. Being the new management accountant, it becomes my duty to make the plant manager realize that his role isn't an independent role and it does depends on the management accountant's role as he plays a key role for setting up the budgets and make estimates about the business expenses as going by the definition, it is the management accountant who is not only responsible for planning & performance of the entity, but also involves reporting on such operations carried out and whether the strategies formulated have been implemented in the best possible manner or not. These self-reports goes not only to the management but also to the shareholders, the actual savior of the company as it is their money which is being used for carrying out such operations and to the tax authorities, that would take an entity into legal obligations, if such reports are found not true and fair (Khan and Jain, 2014).

Thus, the management accountants are the actual corporate accountants whose role is to perform a series of related tasks apart from accounting work so as to assure a company's financial security and handling all such related matters and to formulate & implement the management's strategy. They are the key role models for determining the status & success of a company. Their work includes cost accounting, management issues and financial matters, preparation of budgets, handling tax related matters, management of assets, determination of compensation and other beneficial packages, strategic planning & implementation (Reilly and Brown, 2012).


It is to be stated here that no individual in an organization can play an independent role. The different levels of management, though well distinct from each other, are dependent upon each other as top management decisions would be useless if there is no middle level or lower management to execute it. Similarly, the lower management wouldn't be able to work if there would be no middle level management to guide them and provide them a direction towards goals. Also, communication gap would widen up if there would be no middle level management in between. Thus, the plant manager would have to depend on the management accountants even for the approval of the expenditures to be made as one wrong step by the plant manager could drag the entire organization into heavy losses including loss of revenue, increased expenditures, increased wastage, etc.

It is a challenging task for the management accountants to represent their information in the most represent able manner so as to provide qualitative information. However, it now becomes questionable that how the performance measures and information that reflects the quality is being completely disclosed through general ledger system that is limited to debits and credits of amounts solely. For the past years, management accountants have been able to produce the qualitative information through general ledger system of financial accounting. However, with emergence of new systems such as JIT, Increased competition in the market, has enumerated the issues on the quality & timeliness making the general ledger system difficult to use. Therefore, the organizations have to mandatorily switch to computerized information technology to track & represent any kind of information. Now, it becomes a real challenge to the current as well as the future management accountants to organize the large amount of data so as to support decision making without creating an overload of information. Thus, it gets included in the definition of management accountant and therefore, they are required to understand the use & Importance of current technology (Palepu, Healy and Peek, 2016).

Therefore, a management accountant has to develop the skills & knowledge in computerized technology which may even require them to take additional courses of study for the future business of the organization. The goal of adoption of such technology would be providing of framework of cost, quality & timeliness information that supports the managerial processes and to support & add competitive value to the organization.

Following is the table for all the relevant ratios:

RATIO ANALYSIS OF MobileNet :

PARTICULARS

AMOUNT ($)

CURRENT RATIO

CURRENT ASSETS

20000

CURRENT LIABILITIES

9000

CURERENT RATIO (CURRENT ASSETS/CURRENT LIABILITIES)

2.22

RETURN ON ASSETS

NET EARNINGS

7000

TOTRAL ASSETS

72000

RETURN ON ASSETS (NET EARNINGS/TOTAL ASSETS)

9.72%

RETURN ON SHAREHOLDER'S FUNDS

NET EARNINGS

7000

OWNER'S EQUITY

47000

RETURN ON SHAREHOLDER'S FUNDS= NET EARNINGS/OWNER'S EQUITY

14.89%

DEBT-EQUITY RATIO

LONG TERM LIABILITIES

16000

OWNER'S EQUITY

47000

DEBT-EQUITY RATIO (LONG TERM DEBTS/OWNER'S EQUITY)

0.34

Referring to the ratios calculated, Evaluation of company's financial status:

Current Ratio: Current ratio is a liquidity ratio that shows a company's ability to pay its short term obligations instantly if required. It is calculated by dividing current assets by current liabilities as current assets are those assets that can be converted into cash readily and current liabilities includes short term provisions & creditors for goods & expenses. In the current case, the current ratio is 2.22 that show the current assets are double of current liabilities which is a good indicator. However, the current ratio is not a true indicator as the current assets includes non cash items which cannot be converted into cash at all and inventories, which may not be able to be converted into cash readily.

Return on Assets: The percentage return on assets is an indicator of efficiency of the business operations as it shows how efficiently the management is using its assets to generate the net income. However in the present case, the % return on assets is 9.72% which is not a good sign as the company that owns assets worth $72000 is generating an income of just $7000. The company is may be lagging behind in the proper utilization of its assets as the income in comparison to its assets is quite low.

Return on Equity: The investors are the key members of any organization as the money used to carry out business operations are their investments. Thus, it is important for the investors to know the income generated by the company so as to determine their possible return from the company as equity shareholders receive their return only when the company generates enough sufficient income. Thus, the return on equity percentage is a reflection of such concern as it is important to know that whether the investments made into the company are being used for the well being or not. In the current case, the % return on equity is 14.89% which is again not a good indicator signifying towards either no use or wrong use of investor's money.

Debt to equity ratio : The debt to equity ratio is the calculation of how much times the debt is of equity and whether the company owns enough equity to pay back to their debt holders if in case required. The debts are an obligation over the company while the equity fund is considered to be own capital. Thus, this ratio analyzes the whether the company is supported by enough investments to handle the burden of debts over it. In the current case, the debt to equity ratio is 0.34 indicating towards the goodness of the company. As the financial statements are considered risky is debts exceeds equity funds. Thus, 0.34 indicates that the company owns investments way more than the burden of debts over the company.

References:

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Bruner, R., Eades, K. and Schill, M. (2017). Case studies in finance. Dubuque, IA: McGraw-Hill Education.

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Fairhurst, D. (2015). Using Excel for Business Analysis A Guide to Financial Modelling Fundamenta. John Wiley & Sons.

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