THE UNIVERSITY OF THE SOUTH PACIFIC

FACULTY OF BUSINESS AND ECONOMICS

SCHOOL OF ACCOUNTING AND FINANCE

Semester I, 2020
AF101: INTRO. TO ACCOUNTING

MAJOR ASSIGNMENT– COVER SHEET

Due Date: Thursday, 23rd April

Total Marks:
________/60
Note: Any discrepancy or error in marking should be brought to the notice of the
lecturer/tutor immediately on the receipt of the marked manuscript.

PLEASE ENSURE YOU COMPLETE THIS SECTION BEFORE YOU

ATTACH THE COVER SHEET TO YOUR ASSIGNMENT
Mode of Study: FACE-TO-FACE

Students Names*: Shyna Shivnika Chandra (Submission on moodle)

Rikansha Ria Kumar

Students ID Numbers*: S11185703 (Submission on moodle)

S11185754

*If in a group, please list down all students’ names and ID numbers.
Report Title:

Analysis Of 2019Annual Report of FMF Foods Limited.

i
Executive Summary

The objective of this report is to analyze the 2019 annual report of FMF Foods Limited
which includes their financial statements (balance sheet and income statement). This
analysis will help to compare the performance of the company from the previous year
(2018). The applicable ratios and other financial information revealed in the annual
reports of 2019 and 2018 is used to conduct horizontal analysis, vertical analysis and
ratio analysis. This helps to determine the solvency and profitability rate of the company.

ii
Table of Content

1.0 Introduction....................................................................................................................1
2.0 Horizontal Analysis.......................................................................................................2
3.0 Vertical Analysis...........................................................................................................4
4.0 Ratio Analysis................................................................................................................6
4.1 Profitability Ratio of FMF Foods Limited.................................................................6
4.2 Liquidity Ratio of FMF Foods Limited.....................................................................6
4.3 Financial Stability Ratio of FMF Foods Limited......................................................7
4.4 Cash Flow Sufficiency Ratio of FMF Foods Limited...............................................7
4.5 Cash Flow Efficiency Ratio of FMF Foods Limited.................................................8
5.0 Conclusion and Recommendation.................................................................................9
6.0 Bibliography................................................................................................................10

iii
1.0 Introduction

Flour Mill was established 40 years ago by Mr. Hari Punja. Fiji started getting flour that
was milled in Fiji since 1973. The first flour mill of FMF was “Suva Flour Mills of Fiji
Ltd” which imported premium Australian wheat and milled flour for all. They turn out to
beprominent household brand across the pacific. The company was later named as the
“Flour Mills of Fiji Ltd”. They manufacture whole meal flour, semolina, noodle flour and
other products such as pea flour (besan). As they grew the business added new products
such as biscuit manufacturing, snack manufacturing and the list goes on. In 2011 the
company’s name was again changed to “FMF Foods Limited”. Over the years FMF
Foods Limited has become one of the strongest companies in the pacific. They employ
over 1000 of people and are listed in the South Pacific Stock Exchange Market. The
company has been recognized with numerous awards and certificates including the
“Large Exporter of the Year Award (2013)”. (FMF website,2020).

The write up will analyze the 2019 annual report of FMF Foods Limited. The current
year will be 2019 and for previous year 2018 figures will be taken. The balance sheet and
income statement of the company will be analyzed to determine the financial stability of
the company. Horizontal analysis of the income statement, vertical analysis of the
balance sheet and ration analysis for the comparative periods 2019 and 2018 will be
carried out. The objective is to analyze, interpret and advice the investors about the
company’s stability.

1
2.0Horizontal Analysis
“An analysis of the change from year to year in individual statement items is called
horizontal analysis” (Hogget, et al., 2015).

Horizontal Analysis of the Income Statement of FMF Foods Limited for 2018 &2019

2017 2018 % Change

Particulars
($’000) ($’000) 2018 from 2017
Revenue 202534 184939 -8.69%

Other operating -55.09%

3819 1715
income
Changes in
inventories of -192.11%
418 (385)
finished goods and
work in progress
Raw materials and -8.93%
(131795) (120025)
consumables used
7.34%
Staff costs (16372) (17573)
25.77%
Depreciation (6175) (7766)
Reversal of
impairment loss on - (108) -
trade receivables
Other operating -7.36%
(32154) (29788)
expenses
Profit from -45.70%
20275 11009
operations
71.03%
Finance income 107 183
-12.04%
Finance cost (839) (738)
-46.51%
Profit before tax 19543 10454
-25.89%
Income tax expense (2650) (1964)
Profit for the year
-49.74%
from continuing 16893 8490
operations
Other
comprehensive - - -
income
Total -49.74%
16893 8490
comprehensive

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income for the
year
Attribute to:
-52.42%
Owners of the 15680 7460
parent company
Attribute to:
-15.09%
Non- controlling 1213 1030
interests
-49.74%
16893 8490
Basic and diluted
-52.44%
earnings per share 10.45 4.97
(cents)

Particulars 2018 2019 % Change

($’000) ($’000) 2019 from 2018
Revenue
184939 190195 2.84%
Other operating
income 1715 1467 -14.46%

Changes in
inventories of -436.62%
(385) 1296
finished goods and
work in progress
Raw materials and 7.36%
(120025) (128863)
consumables used
Staff costs 1.17%
(17573) (17779)
Depreciation 4.51%
(7766) (8116)
Reversal of
-182.41%
impairment loss on (108) 89
trade receivables
Other operating -2.09%
(29788) (29165)
expenses
Profit from -17.12%
11009 9124
operations
Finance income 13.11%
183 207
Finance cost 14.77%
(738) (847)
Profit before tax -18.84%
10454 8484

3
 Income tax -15.58%
(1964) (1658)
expense
Profit for the year
-19.60%
from continuing 8490 6826
operations
Other
comprehensive - - -
income
Total
comprehensive -19.60%
8490 6826
income for the
year
Attribute to:
-29.05%
Owners of the 7460 5293
parent company
Attribute to:
48.83%
Non- controlling 1030 1533
interests
-19.60%
8490 6826
Basic and diluted
-28.97%
earnings per 4.97 3.53
share (cents)

The horizontal analysis was carried out on Flour Mills of Fiji’s Income Statement for two
consecutive years, 2018 and 2019. Relevant information of the business was extracted,
examined and presented in the Appendix under Figure 1. Within the one-year period, it
was observed that revenue and expenses had an overall percentage decrease which
resulted in a 19.60% profit decrease at the end of the financial period. It is a concern for
the business as its profit is decreasing in the financial year. In 2018 revenue was -8.69%
and in 2019 revenue for the business has increased by 2.84% which is favourable for the
business. All in all, the FMF Foods Limited has had positive percentage in its revenue
changes which would be appealing to any interested stakeholders desiring to invest.

4
3.0 Vertical Analysis

Vertical Analysis of the Balance Sheet of FMF Foods Limited for 2018 &2019

Particulars 2019 % 2018 %

($’000) ($’000)
Current Assets
Cash on hand and at bank 27436 13.28% 21976 12.20%
Inventories 38813 18.79% 36741 20.39%
Trade receivables 27039 13.09% 20101 11.16%
Prepayments and other 11112 5.38% 4208 2.34%
receivables
Other investments 8591 4.16% 9730 5.40%
Current income tax assets 1514 0.73% 2300 1.28%
Total current assets 114505 55.43% 95056 52.75%

Non-current assets
Property, plant and 88772 42.97% 84373 46.83%
equipment
Other investments 2519 1.22% - -
Deferred income tax assets 797 0.39% 758 0.42%
Total non-current assets 92088 44.57% 85131 47.25%
Total assets 206593 100.00% 180187 100.00%
Liabilities
Current liabilities
Bank overdraft 44333 21.46% 19290 10.71%
Trade and other payables 12094 5.85% 10095 5.60%
Current income and tax 84 0.04% 106 0.06%
liabilities
Borrowing 1000 0.48% 3220 1.79%
Amounts owing to related 223 0.11% 445 0.25%
companies
Total current liabilities 57734 27.95% 33156 18.40%

Non-current liabilities
Borrowings 7000 3.39% 8000 4.44%
Deferred income tax 5268 2.55% 5022 2.79%
liabilities
Total non-current 12268 5.94% 13022 7.23%
liabilities
Total liabilities 70002 33.88% 46178 25.63%
Net Assets 136591 66.12% 134009 25.63%

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 Equity
Share capital 6000 2.90% 6000 3.33%
Retained earnings 123911 59.98% 122090 67.76%
Foreign currency (6) 0.00% - -
translation reserve
129905 62.88% 128090 71.09%
Non-controlling interests 6686 3.24% 5919 3.28%
Total equity 136591 66.12% 134009 74.37%
Total Liabilities and
Shareholders’ Equity 206593 100.00% 180187 100.00%

Total current assets in 2018 were 52.75% of the total assets and in 2019 it was 55.43% of
total assets. This shows that total current asset has increased from 2018 to 2019 by
2.68%. It is favourable as current assets are important as they can be used to fund day-to-
day business operations and to pay for the ongoing operating expenses. However, total
non- current assets in 2018 were 47.25% of the total assets and in 2019 it was 44.57% of
total assets. This shows that total non- current asset has decreased from 2018 to 2019 by
2.68%. Therefore, the total asset of the business has increased from 2018 to 2019 and it is
favourable for the business.

Total current liabilities in 2018 were 18.40% of the total liabilities and shareholders’
equity and in 2019 it was 27.95%. This shows that total current liabilities has increased
from 2018 to 2019 by 9.55%. It is unfavourable as the business now owes more.Total
non- current liabilties in 2018 were 7.23% of the total liabilities and shareholders’ equity
and in 2019 it was 5.94%. This shows that total non- current asset has decreased from
2018 to 2019 by 1.29%. Therefore, the total liabilities of the business have increased
from 2018 to 2019 and it is unfavourable for the business.

Net assets in 2018 were 25.63% and in 2019 it was 66.12%. This shows that net assets
increased from 2018 to 2019 by 40.49% which is favourable for the business.

Total equity in 2018 was 74.37% and in 2019 it was 66.12%. This shows that total equity
decreased from 2018 to 2019 by 8.25% which is unfavourable for the business. Overall
the business did better in 2019 compared to 2018 as Total Liabilities and Shareholders’
Equity was more in 2019.

4.0 Ratio Analysis

“A ratio can be calculated using any two or more figures, but for the ratio to be useful, it
must have meaning” (Maynard, 2013). Ratio analysis of FMF Foods Limited was carried
out from the three categories; profitability, liquidity and financial stability.

6
4.1 Profitability Ratio of FMF Foods Limited

Profit Margin
Formula Year Working (000’s) Answer
Profit (after income tax) 2017 16893 8.34%
Revenue 202534
2018 8490 4.59%
184939
2019 6826 3.59%
190195

Year Profit Margin Increase (+) or Decrease (-)

2018 4.59% -3.75%
2019 3.59% -1%

Profitability ratio assesses the company’s financial performance for a definite period of
stretch. It is a vital information for the long-term creditors and shareholders since the
company must operate at satisfactory profit. Profit margin measures net profitability of
each dollar of sales. The profit margin in 2017 was 8.34% however, in 2018 it decreased
by 3.75%. Thus, in 2019 it further decreased by 1% since COGS is high and it is
unfavorable for the company.

4.2 Liquidity Ratio of FMF Foods Limited

Current Ratio
Formula Year Working (000’s) Answer
Current Assets 2017 106712 2.32:1
Current Liability 45898
2018 95056 2.87:1
33156
2019 114505 1.98:1
57734

Year Current Ratio Increase (+) or Decrease (-)

2018 2.87:1 + 0.55:1
2019 1.98:1 - 0.89:1

Liquidity ratio states whether an entity’s current assets will be able to meet the entity’s
obligations as they become due. Current ratio is a measure of short-range liquidity. It
designates the capability of an entity to meet its short-term credits from its current assets.
In 2018 the current ratio of FMF Foods Limited increased to 2.87:1 however, in 2019 the
ratio decreased by 0.81:1 resulting the ratio to be at 1.98:1. The ratio decreased in 2019
because in current liability and it is unfavorable for the entity.

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4.3 Financial Stability Ratio of FMF Foods Limited

Debt Ratio
Formula Year Working (000’s) Answer
Total Liabilities 2017 62017 0.33:1
Total Assets 190789
2018 46178 0.26:1
180187
2019 70002 0.34:1
206593

Year Debt Ratio Increase (+) or Decrease (-)

2018 0.26:1 -0.07:1
2019 0.34:1 +0.08:1

Financial stability ratio means the long-term ability of the entity to meets its debts as it
becomes due. Debt ratio measures the amount assets or funds provided by the external
parties. In 2018 the ratio decreased by 0.07:1 however, in 2019 the debt ratio increased
by 0.08:1. Which means there is increase in investment by the outsiders and it is
unfavorable for the business.

4.4 Cash Flow Sufficiency Ratio of FMF Foods Limited

Debt Coverage
Formula Year Working (000’s) Answer
Non-Current Liabilities 2017 16119 1.28(years)
Cash Flows from 12567
Operating Activities 2018 13022 0.50(years)
25833
2019 12268 11.69 (years)
1049

Year Debt Ratio Increase (+) or Decrease (-)

2018 0.50(years) -0.78(years)
2019 11.69(years) +11.19(years)

Cashflow sufficiency ratio calculates the ratio that assess the entity’s aptitude to produce
satisfactory cash to encounter the entity’s cash flow desires. Debt coverage ratio
measures the repayment period for coverage of long-term debt. In 2018 the ratio
decreased to 0.50 (years) however, in 2019 it took a huge jump to 11.19(years) which is
unfavorable for the business as the cash flow is insufficient to payback.

4.5 Cash Flow Efficiency Ratio of FMF Foods Limited

Cash Flow to Revenue

Formula Year Working (000’s) Answer

8
 Cash Flows from 2017 12567 6.20%
Operating Activities 202534
Revenue 2018 25833 3.97%
184939
2019 1049 0.55%
190195

Year Debt Ratio Increase (+) or Decrease (-)

2018 3.97% -2.23%
2019 0.55% -3.42%

Cash flow efficiency ratios attempt to assess the relationship between items in the
statement of profit or loss and other comprehensive income with cash flows as revealed
in the statement of cash flows, in an attempt to assess the efficiency of an entity in
turning accrual-based profits into actual cash flows. Cash flow to revenue measures the
ability to convert revenue to cash flow. Since the margin ratio calculated earlier is not
similar to the percentage of cash flow to revenue which means the entity is not turning its
accrual-based profits into operating cash flows.

5.0 Conclusion and Recommendation

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To conclude, the report analyzed the financial statements of FMF Foods Limited using
the annual report for the years 2018 and 2019. The analysis is fully reliable since relevant
assumptions and standards were used.
There were few limitations encountered while carrying out the report. Network issued
were faced as Cyclone Harold disturbed the entire network system of Vodafone. The
collection of relevant data was also hindered since there was less reference given in the
annual report.
The report unveils that the revenue for FMF Foods Limited has been fluctuating over the
years however, compared to 2018 it has increased. The performance of the company is
revealed in the report using the horizontal, vertical and ratio analysis methods.

6.0 Bibliography

10
Beattie, C. Claire, C. Hellmann, K. Hoggett, J. Mafield, J., & Medlin, J. (2018).
Accounting (tenth edition). Queensland, Australia: John Wiley & Sons Australia, Ltd

FMF Foods Limited. (2017). FMF Foods Limited Annual Report 2017. Retrieved from
https://announcements.spse.com.fj/ftp/news/021726519.PDF

FMF Foods Limited. (2018). FMF Foods Limited Annual Report 2018. Retrieved from
https://announcements.spse.com.fj/ftp/news/021726903.PDF

FMF Foods Limited. (2019). FMF Foods Limited Annual Report 2019. Retrieved from
https://announcements.spse.com.fj/ftp/news/021727306.PDF

FMF Foods Limited (2020). Copyright FMF Foods Limited 2020. Retrieved April
22,2020 from http://www.fmf.com.fj/

Hogget, J., Edwards, L., Medlin, J., Chalmers, K., Hellmann, A., Beattie, C., & Maxfield,
J. (2015). Accounting (9th ed.). Milton, Queensland, Australia: John Wiley & Sons.

Maynard, J. (2013). Financial Accoun

11