ACCT2213/2189 Accounting in organisations and Society

Assignment - Melbourne semester 1 2020

Due date: End of Week 10

Stage 1- Analysis of annual reports and calculations.

Stage 2- Recommendation report.
( Both stages ( 1& 2) are to be submitted together as one file word/pdf )

A client wants to invest a substantial amount of money in either Telstra Ltd or a new competitor a listed
company Australian communication Ltd which is same Industry as Telstra Ltd. They ask you to appraise each
company using key data and provide them with a recommendation. You may consider both financial and non-
financial information in making this decision. Write your conclusions in report format.
This has to be done in two stages which are submitted together in one file.

Start your stage one by preparing and analysing the annual report of Australian communication Ltd and Telstra
communication Ltd.
Australian communication Ltd has provided financial information for year ending June 2019
Accounts 2019 ( $ M)

Trade payable 3,900

Trade receivable 4,950

Prepaid expenses 347

Cash and cash equivalents 508

Share Capital - ???

Inventories 342

Other income 1500

Depreciation expense 3,040

Investments in other entities 11,750

Stationary supplies expense 1,100

Interest expense 810

Insurance expense 450

Loan from CBA Bank (repayable in full in January 2020) 2,540

Accounting Assignment Semester 1,2020 NB_ AO&S2189/2213_ 2010_V1.0

Page 1
Revenue Received in advance 1,500

Loan CBA Bank (repayable in full in January 2025) 12,500

Other Long-term borrowings 8,000

Building 5,750

Maintenance expense 450

Plant and Equipment 16,750

Equipment repairs expense 575

Marketing expense 1800

Income tax expense 815

Rent expense 5420

Sales Revenue 23,800

Staff wages expense 8990

Staff wages payable

1850

 PPE figures includes accumulated depreciation.

Additional information is provided for Australian communications Ltd for 2019.

You are required to prepare the following.

1) a) Prepare a classified Income statement for the year ended 30 June 2019. As part of the income
statement :-
a) Calculate Earnings before Interest and tax (EBIT) for 2019.
b). Australian communication distributed (11,500,000,000) shares to its shareholders. Calculate Earnings
per share for 2019.
c). Calculate dividend payable (per share) for 2019 if company decides to pay 25 % of profit.
Note: round to the nearest dollar if required.

2) Prepare a classified Balance sheet as at 30 June 2019.

Australian communication Ltd has provided some of the financial information for year ending June 2018 and
2017 respectively which may help you to answer your next question.
Accounting Assignment Semester 1,2020 NB_ AO&S2189/2213_ 2010_V1.0
Page 2
 Australian communication financial information from

Balance sheet and Income statement for year 2018 and 2017

2018($M) 2017
Information from Balance sheet
For Australian communications for
2018 and 2017

Trade receivables 5,120 5,120

Total current assets (Including trade 6,474 6,274
receivables)
Total Non-current assets 34,100 33,850
Total assets 40,574 40,124

Total current liabilities 9,150 9,350

Total Non-current liabilities 21,100 21,000
Total liabilities 30,250 30,350
Net assets 10,324 9,774

Equity
Share capital 7,900 8,300
Profits 2,424 1,474
Equity available to entity 10,324 9,774
shareholders
Total equity 10,324 9,774

Information from income statement

For Australian communications for
2018 and 2017

2018 2017
Sales Revenue 25,500 26,500
Other income 3,000 1,000
Total Income 28,500 27,500

Earnings before interest and income 5,400 5,800

tax expense (EBIT)
Net Profit 2,424 1,474
Earnings per share (cents per share) 25.5 22.7
Dividend per share (cents per share) 0.09 0.10

3 a). Complete this table for Australian Communications Ltd by using information provided in financial
statements above in this document.
Accounting Assignment Semester 1,2020 NB_ AO&S2189/2213_ 2010_V1.0
Page 3
 Ratios 2019 2018

Profitability Analysis
Profit Margin
Return on Assets (ROA)
Return on Equity
Asset Efficiency
Asset Turnover
Capital Structure
Debt ratio
Market performance
Earnings per share
Dividend per share
Working capital
Debtors Days
Liquidity

And now access https://www.telstra.com.au/aboutus/investors/financial-information/reports link provided in

Canvas and pay attention to the information provided in the financial statements as you will find a lot of useful
information in them that may help with following questions.

3 b). Locate the financial statements from 2019-Annual-Report-singlepages.PDF and 2018-Annual-Report-

singlepages.pdf .Complete this table for Telstra Ltd.

Ratios 2019 2018*

Profitability Analysis
Profit Margin
Return on Assets (ROA)
Return on Equity
Asset Efficiency
Asset Turnover
Capital Structure
Debt ratio
Market performance
Earnings per share
Dividend per share
Accounting Assignment Semester 1,2020 NB_ AO&S2189/2213_ 2010_V1.0
Page 4
 Working capital
Debtors Days
Liquidity
 For 2018 use restated amount from 2019 annual report for calculation.

Stage 2: Now write your recommendation report by using following report format and headings:

Word limit: 1200 words

1. Cover page, table of contents, referencing, Executive summary.

2. “Corporate Governance is growing focus for companies in Australia” In your answer show your
understanding of corporate governance, briefly comment on Corporate governance on Telstra Ltd,
identify those responsible for corporate governance and what their role is for corporate governance in
Telstra communications? Identify and explain Telstra’s sustainability approach from Telstra
sustainability report. (Telstra-Bigger-Picture-2019-Sustainability-Report.pdf ) (Comment on each
element of Telstra’s environment sustainable core elements programs which shows their progress of
reducing overall impact on environment). Comment on how important you believe environmental and
social performance of a company is when potential investor analyse a company?

3. Examine the ratios from both tables from Q.3 from stage one (Telstra Ltd and Australian
communications Ltd), write a briefly by examining the Profitability, Asset Efficiency, Capital structure,
Market performance and working capital ratios of both companies, highlighting your understanding
by explaining each group of ratios. Provide your recommendations to a potential investor as to the
Accounting Assignment Semester 1,2020 NB_ AO&S2189/2213_ 2010_V1.0
Page 5
 preferred company for them to invest in (You may include both financial and non-financial criteria of
the company). Provide a brief conclusion of your report.

4. Now that you have a knowledge of analysing financial statements show your understanding by doing
micro credential “Managing Money. (Paste the badge in your assignment, Only URL is not enough).
Micro Credential can be located in Canvas modules after week 7 contents.

Note : 1.This Assignment is worth of 40% of total course. This assignment consists of 50 marks worth of
questions which is then weighted to 40.

2. ( Both stages ( one and two) are to be submitted together as one file word/pdf with submission
coversheet )

Accounting Assignment Semester 1,2020 NB_ AO&S2189/2213_ 2010_V1.0

Page 6
 Ratio formulas for Telstra assignment semester 1 ,2020

Profitability Analysis

Profit Margin (EBIT/Sales Revenue) x 100 = x%

Return on Assets (ROA) (EBIT/Average total assets) x 100 = x%

Return on Equity (Profit available to owners)/Average equity x 100 = x%

Asset Analysis

Asset Turnover Sales revenue/Average total assets = x times

Capital Structure

Debt ratio Total Liabilities / Total assets x 100 = x%

Market Performance
(Profit available to ordinary shareholders)/(Weighted average
Earnings per share number of shares) = x cents per share
Or Profit/No of shares= x cents per share
Dividend Paid/Weighted number of ordinary shares = x cents per
Dividend paid per share share
Or dividend paid/No of shares= x cents per share
Working capital

Debtors Days (Average Receivables/Sales revenue) x 365 days

Liquidity Current assets/Current liabilities

Accounting Assignment Semester 1,2020 NB_ AO&S2189/2213_ 2010_V1.0

Page 7