Corporate Governance The Bega Cheese Limited issues a Corporate Governance Statement that outlines the measures put into place to ensure organisational integrity and transparency of data in the financial statements that are published in the annual report. It would appear that Bega exert extreme effort to ensure that the risk of misstatements is minimised. In effect, is by assigning risk management and oversight responsibility to specific groups/personnel within the organisation using systematic approach. The board is held accountable for assessing, approving and checking the Group’s risk management systems, assessment of the adequacy of the internal compliance, policies and procedures and control mechanisms. Furthermore, board also approving Inherent Risk 1 Net cash flow- investing activities relate to the acquisition and disposal of non-current assets. Bega appears to be purchasing non current assets (usually an indication the industry is expanding and in good health). Bega Cheese is in a significant positive situation for all three years. Its net position for 2016 indicates it has sold $34.0 million more of current assets compared to the purchase of non-current assets. Such significant activity suggests an inherent risk of cash flow problems- sale of assets to meet short-term obligations (ASA570). Inherent Risk 2 Debit ratio-the ratio of liabilities to assets indicates that their liabilities are increasing as a proportion of total assets. This is having an affect on the Times Interest Earned ratio, which is deteriorating rapidly. It also indicates their obligations are growing- another indication of potential cash flow problems and an inherent risk to a going concern issue that might influence the potential manipulation of the financial This indicates an increased reliance on barrowed funds from creditors of financiers (e.g. banks). This is further evidence that Bega is experiencing cash flow problems and there is an inherent risk of going concern problems. The results of the ratios all point towards going concern issues as per ASA570. Although the company has been profitable since 2015, the ratios indicates there are severe problems with cash flows and there are growing concerns about their ability to continue as a going concern (ASA 570) Inherent Risk 4 The Accounts Receivable Turnover- trend indicates that number of days collect accounts receivable has deteriorated. This indicates slower collection of debtors and potential cash flow problems. Of concern is trend that indicates that the allowance for doubtful accounts is actually become a lower proportion of the accounts receivable balance, suggesting that there is an inherent risk that ha e company is attempting to ‘window dress’ its financial statements by lowering the allowance to make the financial statement position look better. These also point toward a potential going concern problem under
By insuring its outstanding accounts receivable, Hydrogenics had less write-off of bad debts. Based on its past experience of not collecting its receivables from customers, the company made a larger allowance for bad debt in 2013 than 2012. The result is the higher growth rate in allowance for doubtful accounts and decrease in accounts
Accounts Receivable has good separation of duties and strong internal controls such as control numbers and reconciliations to sales and bank statements. One weakness in the Accounts receivable system is the accounting supervisor approves summary entries and reconciles the general ledger account, which could indicate a weakness with segregation of duties. We recommend that the controller approves of summary entries to segregate these duties.
In Be Our Guest, Inc.’s scenario, we can see that the total cash flow from operations increased from 1995, $168,000, to 1997, $229,000, by 37%. This increase to the CFO is a result of a few different accounts. Although net income decreased 22.8% from 1995 to 1997, because depreciation increased 25.8% from 1995 to 1997, the total net income adjusted for non-cash charges increased by 4% from $250,000 to $259,000, from 1995 to 1997. The changes to Accounts Receivable over the years reduce cash flow from operations by $75,000, $46, $42,633 in 1995, 1996, and 1997, respectively. These increases in accounts receivable cause the cash flow from operations to decrease because Be Our Guest, Inc. collected less money from their customers compared to the sales. Whereas, the changes in Accounts payable & accruals of, $5,768, $19,063, and $14,859, in 1995, 1996, and 1997, respectively, caused the cash flow from operations to increase because Be Our Guest, Inc. is paying their suppliers less, indicating they are retaining more cash for
Looking at the individual ratios seen in exhibit 1 and comparing it to the industry average shown in exhibit 2 gives a sense of where this company stands. Current ratio and quick ratio are really low and have been decreasing. For 1995, the current ratio is 1.15:1, which is less than the industry average of 1.60:1, however to give a better sense of where this stands in the industry, as seen in exhibit 3, it is actually less than the average of the bottom 25% of the industry. The quick ratio is 0.61 is less than the industry is 0.90. Both these ratios serve to point out the lack of cash in this company. The cash flow has been decreasing because, it takes longer to get the money from customers, but the company still needs to pay for its purchases. Also, the company couldn’t go over the $400,000 loan limit, so they were forced to stretch their cash.
This statement is used to report cash payments and cash receipts of an organization’s during a certain period. During 2015, the Group had operating free cash flow amounting to 606 million euros, versus a negative 164 million euros a year earlier (Air france-klm group, 2016). The statement displays the relationship of the net income to the changes in the cash balances. It is important to understand that cash balances can wane despite and increase in net revenue or vice versa Horngren, 2014, p. 674). The statement also aids in the evaluating management’s use of cash and management’s generation, defining a company’s capability to pay dividends and interest to pay debts when the time comes to pay them, and forecasting upcoming cash flows (Horngren, 2014, p. 674).
The oversight responsibilities of the board, the CAE lacking of expertise or broad understanding of financial controls and responsibilities, and the understaffed internal audit functions lacking of independence and direct access to the board of directors contributed to the absence of internal controls. To begin with, the board should be retrained to achieve financial literacy to review financial reporting. Other than attending formal meetings, the board of directors should be more involved with the management. For the Audit Committee, the two members who were recruited as acquaintances to Brennahan need be replaced with experts who are more sufficiently knowledgeable about accounting rules beyond merely “financially literate”. Furthermore, the internal audit functions need to expand with different expertise commensurate with the expanded activities of the organization, testing financial reporting rather than internal controls from an operational perspective. The CAE should be more independent and proactive to execute audit plans, instead of following orders from the CFO, and initiate a direct and efficient communication between internal audit and audit
After analyzing the financial statement, I was able to determine several interesting aspects: a .52 debt ratio shows appeal to lenders; a current ratio of 6.31 is very impressive. Seeing that inventory is so unstable and subject to many natural extraordinary events, the more important acid test shows Mondavi has a comfortable, but less impressive ratio of 1.54.
Measuring the liquidity through the current ratio, with 2.74 in the year 2009,0.74 above the standard, with the decline in the following year meeting exactly the standard at 2% in the year 2010, and a steep decline in the year 2011-2012 as compared to its standard.Resulting in the decline in firm’s ability to meet its day-to-day operating expenses. The current liabilities from 2009 to 2012 have increased by 27.03 billion whereas the investments in current assets have increased just by 26.09 billion, which causes the decline in the current ratio. To cope up with this problem the company should invest more in current assets and should reduce its current liabilities.
Identify the potential risks which affect the company and manage these risks within its risk appetite;
Sometimes it’s not easy to say that a company is in good or bad health. It would be extremely difficult to just look at a company’s financial statement and tell that the company is doing well. To make it easier to compare company’s health, we have to associate number values known as ratios that are calculated from a company’s financial statements. These number values or ratios can then be compared to other company’s ratios, in the same industry, to show which company has a better health. The ratios that are being spoken about are called financial ratios. Very common types of financial ratios are liquidity ratios, profitability ratios and leverage ratios.
The current ratio and quick ratios for the year 2003 are at 2.5 and 1.3, which are both higher than the industry average. The company has enough to cover short term bills and expenses. Both the current and quick ratios are showing an upward trend compared to 2001 and 2002. The current assets decreased by $ 20,264 to $ 1,531,181 and the current liabilities also decreased considerably by $255,402 to $616,000, a 29.3% decline, thus making the current ratio jump to a 2.5. The biggest decline was seen is accounts payable which decreased by $170,500 to $230,000, a decline of 42.6 %.
Debtors turnover ratio is concluded when the average debtors divides net credit sales. If the company has the high ratio it shows us that the company functions on cash basis and compilation of account receivable is efficient and if the company have the low ratio they should change their credit strategy.
The investigation revealed that the company had improved its position compared to previous years. The profitability of the company was significantly better whilst the liquidity had remained reasonably steady. The solvency of the company had declined however, which affected the long-term obligations of the business.
This report contains information that is calculated under accrual accounting principle. Because all transactions are recorded at the time when they are made rather than when actual money has been made or received, there is a likelihood that transactions are shown on one accounting period but actual change has not be made it, and it may deliver biased information about the company’s true financial position.
5 - 16). In element I, for management accountability, managers are directly responsible for encouraging the adoption of corporate initiatives within their direct area of control, which is essentially a trickled-down approach (Exxon Mobil, n.d., para. 5). In element 2, for risk management, qualified and experienced individuals must continuously review and assess risks, and suggest mitigating actions to mitigate the risk or solve the issue entirely (Exxon Mobil, n.d., para. 6). Then, the acceptable risk moderating changes and innovations require documentation on the risk ledger (Exxon Mobil, n.d., para. 6). In element 3,