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Accounting Concepts and Systems of Wesfarmers’
Accounting Concepts and Systems of Wesfarmers’
Student Name
Institutional Affiliation
Subject:
Instructor:
August 31, 2013
Wesfarmers’ cash and cash equivalents include demand deposits and cash on hand, together with highly liquid short term investments which are convertible readily to a known cash amount and which are subject to an inconsequential change risk in value. Wesfarmers’ help notes show that normally an investment meets cash equivalent definition when it has a three or less month’s maturity from the acquisition date. Equity investments are left out, except if they are in cash equivalent substance (for instance preferred equity share within three months of the detailed date of redemption (Wesfarmers Annual report 2012, page 177). Repayable on demand bank overdrafts that also form an important component of the cash management of the company are also incorporated as part of cash equivalent and cash.
The operating cash flow was to a tune of $1,472 million. The core revenue generating activities of the company which are not financing or investing activities are the operating activities and therefore, the operating cash flows comprised of cash paid to employees and suppliers as well cash obtained from customers. Investing activities included long term assets disposal and acquisition as well as other investments which are not viewed to be cash equivalents. The financing activities were entries that change the borrowing structure and equity capital of the company. Dividends and interest paid and received were categorized as financing, investing and operating cash flows because they were consistently classified as such the entire period.
The company used the direct method to indicate each major category of gross cash payments and gross cash receipts. The section of operating cash flow of the cash flow statement looked like the below illustration since they used the direct method (Wesfarmers Annual Report 2012 page 178).
Cash paid to employees 276,098
Interest paid 156,084
Customer’s Cash receipts 987,367
Cash paid to workers 28,746
“ to suppliers 65,976
Paid income taxes 256,865
Net operating cash flow 1,471,636
Cash flows from financing and investing activities were classified as gross by main cash receipts class and cash payment major class, apart from the below instances, that can be entered on a net basis.
Cash payments and cash receipts on customers behalf (for instance, repayment and receipt of banks demand deposit as well as receipts collected and paid over on behalf of the property owner).
Cash payments and receipts for particulars whereby the turnover is rapid, has shorter maturities and amounts are huge (Wesfarmers Annual Report 2012 page 179).
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The cash flows from investing activities were cash outflows and inflows associated to external financing sources (creditors and owners) for the investment. They included in this group were cash inflows drawn from bonds, mortgages, borrowing on notes, and proceeds from stock issuance and additional debt from other creditors. Succeeding transactions linked to these investing activities, for instance stock buyback, debt repayment and the shareholders dividend payments were also classified as investing activities (Wesfarmers Annual Report 2012 page 180).
Outflows
Cash payments made for:
Shareholders’ dividends
Stock repurchasing from owners
Principal payment to creditors (apart from interest that is of course an operating activity).
Inflows
They include Cash receipts from
Stock issuance to owners
Bonds, mortgages, borrowing notes, from creditors
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Financing activities comprised of owners or stockholders’ equity and liabilities. Financing activities are entered on its side of the financial statement referred to as cash flow statement. Long term liabilities examples of financing activities comprised redemption and issuance of bonds. Bonds payable increase in recorded as a positive figure of the financing activities. The positive figure implies a cash source or that the issuance of additional bonds provided that cash (Wesfarmers Annual Report 2012, page 181).
Entries of financing activities regarding owners’ equity comprised the issuance of preferred stock and common stock. When these stock accounts increase that was captured by the positive figures within the financing activities portion of the cash flow statement. The positive figure implies that cash provided through the issuance of more stock shares (cash source). Some of the uses of cash that were recorded in negative figures within the financing activities portion of the cash flow statement comprised the company’s purchase of its stock, as well as the dividends paid and declared on its stock.
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Free Cash Flow = Net operating cash flow minus expenditure capital minus cash dividends.
FCF = Operating Cash Flow {depreciation + NOPAT {EBIT (1-Tax rate)-Operating capital gross investment {depreciation + operating capital net investment {(inventories + A/R +cash)-(accruals +A/P) + long term operating assets (equipment & net plant).
N/B
NOPAT = EBIT (1-Tax rate)
EBIT – Income Tax Expense
(1,519, 138 – 497, 972)=1, 021,166 (NOPAT)
Operating cash flow = depreciation + NOPAT
= (339,299-1,021,166) = 1,360, 465
Operating capital net investment
= (3,186, 205 – 3,413, 731) = -227, 526
Operating capital gross investment
= (-227,526 + 339,299) = 111, 773
Free Cash Flow = (1,360, 465- 111,773) = 1,248, 692.
Value investors consider free cash flow to be more significant than earnings. The reason being that in principle, shareholders own the net cash, which can be taken from the entity. FCF can be utilized to reduce debt, grow business or return to shareholders in share buybacks and dividends. The calculation of FCF can be used to establish the intrinsic values of the firm.
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The retail to coal conglomerate recorded a net profit totaling $.2.26 billion within 12 months, from $2.13 billion that was recorded last financial year.
The company’s shares increased 1.8% to $42.72 after the announcement of the capital return and financial results. Liquor and food earnings before tax and interest at Wesfarmers’ Coles stores that account for nearly 40% of its total revenue increased 11.4% to 1.37 billion. Woolworths, Cole’s biggest competitor recorded a 4.3 % increase for the group’s total revenue, and this can be attributed to the fact that liquor and food sales momentum rose in the second quarter of FY 2012. Both firms which control almost 80% of the grocery market have cut the cost of basic commodities for instance toilet papers, milk and food to increase sales. From its resources component, EBIT declined by 66% to $148 this is because of the higher Australian Dollar and low export prices resulted in a considerable drop in the export revenue.
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I think that the statement means that business managers depend on correct financial information and materials to make sound decisions regarding the business. The cash flow statement and the balance sheet can all the used for this purpose. However, cash flow statement provides vital information regarding the cash that the company spends and takes in, as well as the amount of equity that belongs to the owner in the entity. Cash flow statement also provide information about the cash funds that the company has paid out or taken in from any other sources over a given time period. It is the same as the income statement only that it does not provide details for the accrued items that are recorded within the income statement. CFS is usually prepared by the close of an accounting duration and it provides details of all the cash activities for the particular time period.
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Lenders: Institutions that lend review the financial statement of a company when deciding on how much to lend, if to lend, for what collateral and at what interest rate.
Investors: The venture capital companies will look at the financial statements history to check the performance of the firm and to assess the capabilities of the management team. Venture capital Company as opposed to lenders in interested in the future of the company since the company anticipates a higher return on investment.
Executives and Owners: All owners have to look the financial statement of the firm every month. Revenue shortfalls, as well as expenses exceeding estimated budget levels have to be addressed. A combination of high expenses and low revenues can in the long run be deadly. Unit managers assess P & L of their departments. Chief operating officers and CEOs asses the P& L of every department as well as the balance sheet and company P & L.
Government: The internal income service does not assess firm financial statement, however the information regarding the loss and profit statement in included in the firm’s tax returns. A number of governments have laws that require tax returns to be completed. If the firm is listed, the financial statement must be reported on annual and quarterly basis to the Exchange and Securities Commission.
Shareholders: The financial annual report that comprises of balance sheet as well as profit and loss statement is sent to the shareholders, also known as stockholders of the companies that are established as corporations.
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Wesfarmers Board of Directors is a great supporter of good corporate governance. It is dedicated offering a suitable return to the shareholders and discharging its corporate governance responsibilities and obligations to the best interest on the organization as well as its stakeholder. The company conforms to the ASX second edition of the Corporate Governance Recommendations and Principles that was published in 2007 and amended in 2010. The company’s corporate governance activities for the financial year closing 30th June 2012 are detailed in the section of the corporate governance brief that makes up part of that annual report.
The framework for governance is entrenched within the Trust’s compliance structure (referred under the section Compliance and risk control, page 22) to reinforce transparency and ethical behavior and to protect the interest of unit holders. Wesfarmers corporate governance statement summarizes the fundamental practices of corporate governance of the responsibly company, that they accomplished the entire year. In compliance with the ASX guidelines, Wesfarmers being a responsibly entity has published its corporate governance practices on their website ( HYPERLINK “http://www.bwtrust.com.au” www.bwtrust.com.au).
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Business Sustainability
Wesfarmers includes sustainability in its financial statement. For instance, one of their unit operations (the target) is devoted to entrenching sustainability in the business and developing a culture reliable for becoming a sustainability leader. Regarding safety, the supermarket teams were involved through enlightening DVD to enhance safe work awareness practices, with the lost time injury rate FY2012 7.99% in comparison to 6.87 the previous year. The decrease in energy consumption resulting from air conditioning supermarkets went on with a progressive adoption of variable temperature control, which are connected to external conditions and regulated fresh air levels. Moreover, systems for automated controls for decreased lighting past trading hours have been put in place and in a number of outlets power factor correction facilities have been installed to enhance energy efficiency (Wesfarmers Annual Report 2012 page 30).
Reference
Wesfarmers Annual Report 2012 pdf.
Accounting- CISCO
(Name)
(Instructors’ name)
(Course)
(Date)
Cisco Systems Inc.
Company Background
Cisco Systems, Inc. is an American company that specializes in the production and design of various consumer technologies. With the head quarters in San Jose California, the company is well known is well known for its networking and communication technologies, and is one of the leading electronic company in the state at present (Cisco: The Network 1). Being a multinational company, Cisco Systems Inc serves the international market, as it manages production and the delivery of its company services in more than one country. The company’s operation activities take place in the competitive computer networking industry, and for that reason, the company has a variety of competitors both from within the company’s headquarter locations and outside. The key competitors of Cisco Systems Inc. include Alcatel-Lucent (ALU), Hewlett Packard Company (HPQ), Jupiter Networks Inc. (JNPR), ARRIS Group Inc., and the Aruba Networks Inc. among others (Yahoo Finance 1).
A closer examination of the company’s annual report reveals that the company’s business strategy revolves around market expansion and product value. As a company, Cisco Systems Inc. has managed to expand its market share over a short period of time and this has been through their innovative products and services. The company has managed to utilize al its resources in a way that ensures the company is up to date with the changing trends in the industry, hence providing their customers with what they need. Price Water House Coopers LLP has been charged with the duty of auditing Cisco Systems Inc., and their opinion regarding Cisco’s financial statement and internal control is substantial (Cisco: The Network 1). According to the most recent auditor’s report, the company’s financial statement and internal control illustrate that the company is well positioned financially and there are prospects for future growth. The company’s management report also supports the auditor’s report in that it records the possibility of future growth owing to Cisco’s ability to manage and control its finances accordingly. In addition to this, the managers’ report suggests that Cisco Systems Inc. has discovered a number of investment opportunities, which it has taken advantage of for profitability.
Activity Ratio Analysis
Based on the financial statements presented over the last three years, it is evident that as a company that seeks market expansion, growth and profitability, Cisco Systems Inc. is likely to achieve its financial goals and objectives. The operating efficiency of Cisco Systems Inc. in the last three years illustrates the company’s ability to generate sales and control operations costs (Cisco: The Network 1). Evidently, the company’s team of managers has developed appropriate business and operations strategies to assure the company of a proper operating efficiency. Seeing as Alcatel-Lucent is the company’s closest competitor, a comparison of Cisco’s operating efficiency and that of ALU reveals a large difference of the two companies (Yahoo Finance 1). At the outset, ALU’s financial records for the last three years illustrate a bit of inconsistency in the management of company sales against operations costs. Though the most current financial reports record more sales than the actual operations costs, the preceding two years illustrate a big difference in the two, hence a poor operations efficiency in the company. Accordingly, ALU is experiencing growth in its operations efficiency meaning that the managers have taken up strategies that favor the control of company sales and operations costs in each financial year.
Based on ALU’s financial records, it is safe to assume that the company is yet to reach to Cisco’s level in relation to operations efficiency. However, because the company has shown to have the ability to improve and increase its operations efficiency, then there exists a possibility of ALU and Cisco Systems Inc. being on the same level at one point. Some of the factors that distinguish Cisco’s operating performance and ALU’s operating performance include company employees, access to raw materials, and the company’s marketing strategies and efforts (Alcatel-Lucent 1). At the outset, a comparison of the two organizations reveals a difference in the number of employees, which is considered a key factor in determining a company’s operations efficiency. Having more employees, as in the case of ALU increases the company’s operation costs and because the sales are not high enough to compensate for the costs, the company experiences low operations efficiency. Secondly, access to raw materials for the production of goods also distinguishes the two companies’ operations efficiency. Whereas Cisco Systems Inc. has access to plenty of raw materials for their production activities, ALU relies on secondary sources thus increasing their operations costs (Alcatel-Lucent 1). An increase in the operations costs presents a variance in the operations efficiency as the sales do not match the company’s operations costs. Lastly, the companies’ marketing strategies also distinguish the operations efficiencies of the two companies. Cisco Systems Inc. has employed a proper marketing strategy that has allowed the company to make more sales for their products and services (Cisco: The Network 1). ALU’s marketing strategy, on the other hand, has failed to generate the company as many sales as Cisco’s thus lowering its operations efficiency. Cisco’s business environment and business strategy affects the activity ratios in that it determines the amount of money the company makes as income.
Profitability Ratio Analysis
A closer examination of Cisco’s profitability indicates that the company’s profitability has been on an upward spiral for the last three years. The company’s profitability can be estimated through an assessment of the current after-tax run-rate gross income (Cisco: The Network 1). This assessment is carried out both with the consideration of cash and non-cash financial records so as to estimate the actual value with relation to profitability. After adjusting Cisco’s financial statements, several return values were revealed in relation to the cost of funds and other financial activities in the company. For example, the company’s financial records reveal an increased firm value owing to the net invested capital and financial growth (Cisco: The Network 1). This, in turn, means with the same strategies employed in the years to come, the company is likely to experience more profitability in the following years. Additionally, the company is more likely to increase its firm value, hence the likelihood of more profit for the company in its industry.
Evidently, Cisco’s operating performance has been differentiated from that of its closest competitor ALU as a result of factors such as profit strategy, profit margins, and product mix (Alcatel-Lucent 1). In relation to profit strategy, Cisco Systems Inc. has successfully managed to employ a complex profit strategy that has allowed the company to make a considerable profit in the last three years. One of the profit strategies is the acquisition of companies and market expansion, a strategy that ALU has not employed in its operations activities. Cisco’s business environment and business strategy affect the profitability ratios in that they determine the amount of profit that the company makes with each financial year. For example, because the company has concentrated on product differentiation as their business strategy, it has managed to ensure the sale of its products hence profitability. Unlike, ALU, Cisco Systems Inc. has produced electronic equipment based on the changing trends in computer networking hence assuring the company of product sales.
Liquidity Ratio Analysis
Cisco’s liquidity in the past three years, as well as, the years before has been constant, as the company has managed to acquire assets that could easily be converted to cash over the years (Cisco: The Network 1). This is also one of the company’s business strategies for the assurance of having a return on capital investment throughout their business operations. Evidently, the company’s possesses plenty of cash to cover their daily operations activities such as production and sales. In addition to this, the company is also in possession of assets that can be convertible into cash to cover for the company’s cash requiring activities. Accordingly, Cisco’s possession of such cash assets assures the company of the ability to pay its debts and short-term obligations (Cisco: The Network 1). This means that Cisco’s liquidity ratios are appropriate for the company’s operations in the industry. When compared to ALU’s liquidity, Cisco’s liquidity is similar to that of ALU as both companies demonstrate the ability to pay their short-term debts and liabilities (Alcatel-Lucent 1). Cisco’s business environment and business strategy affect the liquidity ratios in that it provides access to the money required to sustain the company’s liquidity and liquidity ratios. Specifically, the business strategy increases the sales opportunities for the company, hence allowing the company to gain more income which they can maintain as cash assets or convert into other assets for the company.
Coverage Ratio Analysis
A closer examination of Cisco’s coverage ratios in the last three years reveals that the company has been able to meet is operational obligations as expected and with minimal disruptions. Because the coverage ratios encompasses certain types of financial ratios, the assessment was carried out by a comparison of the company’s assets and liabilities for the determination of the company’s actual coverage ratios (Cisco: The Network 1). Accordingly, the Cisco’s assets have the ability to cover for the company’s liabilities. When compared to that of its closest competitor, ALU, Cisco’s coverage ratios are considerably on the higher side in that the coverage ratios of Cisco Systems Inc. are much higher than those of ALU. ALU’s assets and liabilities reveal a margin between these two, and for that reason, the coverage ratios are much lower than those of Cisco Systems Inc. (Alcatel-Lucent 1). Some of the factors that contribute to the differences of coverage ratios between Cisco Systems Inc. and ALU include annual sales and revenue, as well as, operations costs. Cisco’s business environment and business strategy also affect the coverage ratios.
This is because the business environment and strategies determine the company’s ability to generate income, thus purchase assets, or operate on credit. Because the company has managed to generate enough income for itself, it has also successfully managed to use this income to maintain a proper balance in its coverage ratios. Conclusively, Cisco Systems Inc. has managed to finance its operating and investing activities in the last three years, as well as, the years before through shareholder’s investments, as well as, the daily operational revenue that the company makes (Cisco: The Network 1).
Work Cited
“Alcatel-Lucent Third Quarter 2011 Earnings”. Alcatel-Lucent. 4 November 2011. Web. 12
November 2011. <<http://www.alcatel-lucent.com/wps/portal/!ut/p/kcxml/04_Sj9SPykssy0xPLMnMz0vM0Y_QjzKLd4x3tXDUL8h2VAQAURh_Yw!!?LMSG_CABINET=Docs_and_Resource_Ctr&LMSG_CONTENT_FILE=News_Releases_2011/News_Article_002544.xml>>
“Cisco Reports Fourth Quarter and Fiscal Year 2011 Earnings”. Cisco: The Network. n.d. Web.
12 November 2011. <<http://newsroom.cisco.com/press-release-content?type=webcontent&articleId=456320>>
“Cisco Systems Inc.: Competitors”. Yahoo Finance. 11 November 2011. Web. 12 November
2011. <<http://finance.yahoo.com/q/co?s=CSCO+Competitors>>
The use of social media throughout all platforms
EXAM 1
Due Friday, March 19, 4:30 p.m. Send as a Word file email attachment to twhitcom@keene.eduDo not send as a PDF or a link to a cloud fileFile name: [Student’s last name] Exam 1. Example: Smith Exam 1
Questions
How does Voltaire’s Candide portray Western society on the eve of the French Revolution (1789), and how does it treat the attempts of its characters, especially Dr. Pangloss, Martin the Manichaean, and the Turkish dervish, to explain horrific human and natural events? (At least 500 words; 50 percent of grade.)
How do the topics treated in the Declaration of the Rights of man and of the Citizen reveal the nature of the ancien régime and the particular concerns of the socioeconomic class of the authors? What may be viewed as its contradictions or omissions? (At least 500 words; 50 percent of grade.)
Notes on Candide
The authorVoltaire (François-Marie Arouet): 1694-1778
French philosophe and prolific writer, known for his contradictions: Controversies as to his real thought
The historical and cultural context
The ancien régime, the era of absolutism before the French Revolution (1789)
After the Seven Years’ War and the Lisbon Earthquake, which stirred debate about the origin of evilThe era of the Enlightenment, with growing popular interest in political, economic, and social reform
Censorship: Candide published under a pseudonym and purportedly translated from German
The genre and purpose
Genre: Satirical novel
Purpose: To discredit Leibniz’s doctrine of optimism
Western society on the eve of the French Revolution
Class divisions and socioeconomic inequality: Clergy, nobles, and commoners
Absolutist Governments
Armies and war
Attempts to explain horrific natural and human eventsProfessor Pangloss: Optimism
“All is for the best in this best of all possible worlds”; “Leibnitz could never be wrong.”
Martin: Pessimism/Manicheanism (look up)
“‘But for what end has this world been formed?’ said Candide. ‘To plague us to death,’ answered Martin.”
The Turkish Dervish: Deism (look up)
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“When his highness sends a ship to Egypt, does he trouble his head whether the mice on board are at their ease?”
Candide’s reaction to the evil he saw and the attempts of others to explain it“We must cultivate our garden.”
An alternative to optimism and pessimism?
Action?
Acceptance?
Focusing on one’s own concerns?
Notes on the Declaration of the Rights of Man and of the Citizen
The authors
Abbé Emmanuel Joseph Sieyès and the Marquis de Lafayette, in consultation with Thomas Jefferson
Historical and cultural context
Adopted by the National Assembly, August 26, 1789, six weeks after the beginning of the RevolutionHad a major impact on the development of conceptions of individual liberty and democracy worldwideIncluded in the current Constitution of France
Genre and purpose
Genre: Proclamation of the National Assembly
Purpose: A statement of the values of the leaders of the first phase of the French Revolution
Topics treated in the Declaration reveal the nature of the ancien régime.
Unequal class system: The Three Estates
Absolutism: Officials not accountable
Arbitrary rule: No rule of law
Property not secure from expropriation without compensation
No freedom of speech
No religious dissent
Governance enforced through oppressionCriticism
Gender: Women were not citizens, subject to laws, but had no role in making them
Slavery
Sugar plantation slavery made Saint-Domingue the most profitable European colony
The authors may have omitted slavery because they profited from it through investments; cf. JeffersonThe omission inspired a slave uprising in Saint-Dominque and the creation of independent HaitiThe inequality caused by private property
The authors were all property ownersIgnored Jean-Jacques Rousseau’s theory that private property is the source of all oppression“Social distinctions can only be based on common utility” Article 1St).
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Writing Guide
Content
A clearly articulated thesis and a coherent supporting argument based upon evidence from the assigned sources.
Additional sources, if used, shall be limited to scholarly books and articles (most articles are available at jstor.org). Other material from the Internet (dot.com), encyclopedias, popular magazines, and newspapers shall not be used.
Documentation (sources and page numbers) for all word-for-word quotations and for all ideas, opinions, and facts from the works of others which cannot be considered common knowledge.
Compliance with the College’s Academic Honesty Policy, especially with regard to producing original work and citing and referencing the ideas and work of others.
Composition
Division into paragraphs, each beginning with a topic sentence or main idea, followed by supporting or detail sentences which explain or supply evidence.
Correct English, including grammar, syntax, usage, spelling, punctuation, and capitalization.
A formal, impersonal style without contractions, abbreviations, colloquialisms, slang, clichés, stale and irrelevant popular metaphors, and statements in the first and second persons (“I,” “we,” “you,” etc.)
Format
A conventional 12-point black font, white background, one-inch margins, double line-spacing.
Information on the first page (no title page): complete name of the author (no nicknames), number of the course and section, the title of the course, date, and “Exam 1.”
The method of documentation discretionary; consistent throughout.