Executive Summary

The key task of the assignment is to analyse in detail the annual reports of two leading companies
which are from various industry and then perform key analysis on the changes with respect to the
equity capital, Taxing aspects, changes in the cash flow statements and other comprehensive
income. The student will perform a exhaustive analysis on these areas, the company which is
considered for the analysis is Retail food group and Restaurants brands

Table of Contents
Executive Summary...............................................................................................................................1
Detailed description of the chosen companies......................................................................................2
Brief Content of Assignment.................................................................................................................2
Owners equity.......................................................................................................................................2
Cash flow statement analysis................................................................................................................3
Other comprehensive income...............................................................................................................5
Corporate Income tax............................................................................................................................6
Conclusion.............................................................................................................................................8
References.............................................................................................................................................9
Detailed description of the chosen companies
Retail food group (RFG)

The company is one of the leading franchiser which is based in Queensland, Australia, The company
owns various brands which includes Donut Kings, Gloria Coffee, Piza Capers, Big Dad Pies etc. The
company was incorporated in 1989 and converted as the holding company in 2003 which tend to
hold various brands, the business is one of the fastest growing companies in the country with
revenues crossing more than #350 million and net income of more than 75 million.

Restaurant brands (RB company)

The second business which is considered for the analysis is the Restaurant brands which owns and
operates various unit including the Starbuck brand in New Zealand, Pizza hut, KFC etc. The company
was incorporated with the basic view of acquiring the shares of Pizza Hut and other company from
Pepsi, the company operates its stores in Australia and New Zealand with major sales from New
Zealand, the total sales of the company in 2017 were more than $490 million and the net profits of
30 million.

Brief Content of Assignment

Owners equity
Part i)

RFG:

As per the annual report of the company, it is noted that the opening balance of equity were at 376
million, the company has issues an additional shares of nearly 78780000 and the payment of
dividends were accounted to 49888000, the net result shows that the balance of the equity at the
end of 2017 is 465 million.

RB company: As per the annual report of the company, it is noted that the opening balance of equity
were at 75million, the company has issues an additional shares of nearly 119,369,000 and the
payment of dividends were accounted to 22,632,000, the net result shows that the balance of the
equity at the end of 2017 is 192 million (RB, 2017)
Part ii)

RFG

As per the annual statement it is noted that the long term borrowings of the company were 249
million and the equity capital is around 465 million, this shows that the company holds more internal
sources of funds in their capital structure, also noted is that the company issued more equity capital
which is valued to nearly 402 million as of 2017. (RFG, 2017)

RA company: As per the annual statement it is noted that the long term loans of the company were
46 million and the equity capital is around 192 million, this shows that the company holds more
internal sources of funds in their capital structure, also noted is that the company issued more
equity capital which is valued to nearly 143 million as of 2017.

Cash flow statement analysis

Part iii)

RFG
Based on the cash flow statement which is presented in the annual report, it is identified that they
are majorly categorised into cash which is provided by the overall operating activities, cash flows
based on the investing, net cash from the financing lastly a detailed analysis showing the total cash
changes made during the year is discussed. It is noted that the cash provided by overall operating
activities is 63 million, the investing activities accounted to -103 million and financing tend to have
31 million, therefore the net impact on the cash and its equivalents is 9.5 million in 2017, whereas it
was 16.9 million in 2016. This is mainly due to the effect of net decrease in the cash equivalents
during 2017. The major contributing factor is the investments which was made by the business on
the purchase of property, plant and equipment and the payment made to acquire the business.
(RFG, 2017)

RA company: Based on the cash flow statement which is presented in the annual report, it is
identified that they are majorly categorised into cash which is provided by the overall operating
activities, cash flows based on the investing, net cash from the financing lastly a detailed analysis
showing the total cash changes made during the year is discussed. It is noted that the cash provided
by overall operating activities is 47 million, the investing activities accounted to -79 million and
financing tend to have 99 million, therefore the net impact on the cash and its equivalents is 70
million in 2017, whereas it was 1 million in 2016. This is mainly due to the effect of net increase in
the financing activities during 2017, the company has increased the financing capabilities by issuing
share capital which is nearly 93 million in the current year. The other factor is the investments which
was made by the business on the purchase of property, plant and equipment and the payment made
to acquire the business.

Part iv)

RFG

While performing a comparative analysis on the cash flow analysis if the company it is widely noted
that the overall cash flow from the operating activities were 63 million in 2017 whereas it was 64
million in 2016, the major factor is the net sales generated from the business and the increase in the
income tax paid during the year, similarly the analysis of the investing activities shows that the net
investments made in 2017 was 103 million whereas it was 30 million in 2016, the main reason being
investments in purchasing new business and procuring plant and equipment, the net cash from the
financing activities is 31 million in 2017 and it was -32 million, the net increase is due to the proceeds
from borrowings and proceeds from sales of share etc.

RA company: While performing a comparative analysis on the cash flow analysis if the company it is
widely noted that the overall cash flow from the operating activities were 47 million in 2017 whereas
it was 44 million in 2016, the major factor is the net sales generated from the business and the
increase in the income tax paid during the year, similarly the analysis of the investing activities
shows that the net investments made in 2017 was 79 million whereas it was 15 million in 2016, the
main reason being investments in purchasing new business and procuring plant and equipment, the
net cash from the financing activities is 99 million in 2017 and it was -29 million, the net increase is
due to the proceeds from borrowings and proceeds from sales of share etc. (RA, 2017)

Part v)

The overall analysis shows that the cash equivalents of RA company is more with the net cash
proceeds as of 2017 is nearly 70,390,000 whereas the RFG holds only 9,583,000. The RA has the cash
position through the issue of debt capital and equity proceeds so as to increase the financial
position, moreover the company has invested heavily in the acquisition of new business and plant &
equipment. The same aspect is being noted in the RFG, the cash flows from the financing activities
were mainly from the proceeds through the issue of shares and the proceeds from borrowings, the
company has invested heavily in the acquisition of new business which were nearly 67 million during
2017 and the acquisition of property were 30 million.

Other comprehensive income

Part vi)

RFG

From the financial statement of the company it is clearly identified that the other comprehensive
income of the company is nearly 1,429,000 this is mainly related to the exchange rate differences
which is based on the translation of foreign operations undertaken by the business during the
current year, changes made in the cash flow hedges.

RA company: From the financial statement of the company it is clearly identified that the other
comprehensive income of the company is nearly 3,511,000 this is mainly related to the exchange
rate differences which is based on the translation of foreign operations undertaken by the business
during the current year, also the other aspects included were the derivatives hedging and the IT
related to the OCI.

Part vii)

Income, expenses, gains and losses are reported in other comprehensive income if they have not yet
been realized. Something happened when the underlying transaction was completed, for example
with the sale of an investment. For example, if a company invests in securities and bonds, the
difference is reported as a total loss. When you sell the bonds, you will collect funds from the bonds
and transfer the profit or loss from other income to a higher position in the income statement.
obvious. Other items classified as total income: unrealized gains or losses on investments classified
as held for sale. Currency gains or losses. Profits or losses in a pension plan, as well as costs or loans
related to the old-age pension plan. Total income or other income, income tax reduction or related
tax credits, extraordinary expenses or other comprehensive income. The company's financial
statements give a more detailed picture, but in practice this can be very complex in the income
statement. Economic Partnership Agreements improves meaningful financial analysis, especially for
financial companies. Ideally, only the result would be complete because it would include
standardized net income and other revenue, but a competent analyst could actually link the two
statements to their own business model. A detailed description of the full effect and information
required for all items facilitates the analysis at the bottom of the report or in a separate table on the
next page. Many auditors have wondered why CPCs are in the balance sheet, but if we look carefully,
we will have a sufficient position to identify and determine the economic and health aspects of the
underlying company. heart. (Ray, 2011).

Part viii)

RFG

From the annual report it is noted that the OCI was included in the income statement, the profit for
the year before making the adjustments were nearly 61,927,000 in 2017 whereas it was 52,963,000,
the OCI for the year 2017 contributes to 1,474,000, after making the adjustments for this value the
total comprehensive income of the business is 60,453,000 and this is presented as the net profits.

RA company

From the annual report it is noted that the OCI was included in the income statement, the profit for
the year before making the adjustments were nearly 25,955,000 in 2017 whereas it was 24,070,000,
the OCI for the year 2017 contributes to 3,511,000, after making the adjustments for this value the
total comprehensive income of the business is 22,444,000 and this is presented as the net profits.

Part ix)

Financial report should also include other total revenue to understand leadership role in improving
its business and earning profits as NGOs make companies in more than one country more visible. to
help currency management manage exchange rate fluctuations. A strong foreign currency company
operating in Australia, for example, reduces currency and corporate profits, the question of a neutral
currency allows researchers and stakeholders to understand the company's dynamics. growth and
sustainability. management. (Brigham, 2010)

Corporate Income tax

Part x)

RFG

Based on the financial statement of the year 2017, it is noted that the company has paid the tax of
nearly 25,686,000 whereas the last year income tax was 23,620,000

RA company: Based on the financial statement of the year 2017, it is noted that the company has
paid the tax of nearly 11,133,000 whereas the last year income tax was 9,006,000.

Part xi)

The formula to compute the Effective tax rate is considering the overall Income tax expense dividing
the value by the Earnings before tax and then multiply the result by 100 to present in %R terms

RFG

The tax expense of the company as per the 2017 financial statement is 25,686,000 and the overall
earnings before tax is 87,613,000, therefore the rate is computed as

= 25686000/ 87613000x 100

= 29.32%

RA company: The tax expense of the company as per the 2017 financial statement is 11,133,000 and
the overall earnings before tax is 37,088,000, therefore the rate is computed as 30.01
The RA company has a higher effective tax rate as compared with the other company.

Part xii)

RFG

As per the financial statement of 2017,the deferred tax of the assets of the company were nearly
13,657,000 in 2017 whereas the value was 7,394,000 in 2016. This shows that the overall value of
the deferred tax assets has increased considerably in the current year. Similarly the deferred tax
liabilities were 119,433,000 in 2017 whereas it was 115,908,000 in 2016 which further states that
the deferred tax liabilities has increased considerably in the current year.

RA company: As per the financial statement of 2017,the deferred tax of the assets of the company
were nearly 10,325,000 in 2017 whereas the value was 5,994,000 in 2016. This shows that the
overall value of the deferred tax assets has increased considerably in the current year. Similarly the
deferred tax liabilities were 5,153,000 in 2017 whereas it was 5,267,000 in 2016 which further states
that the deferred tax liabilities has decreased considerably in the current year.

The reason for recording is due to the taxes which are paid or carried forward were not stated in the
income statement of the company, the deferred tax is raised in order to reduce the taxable income
and vice versa for the deferred tax liabilities

Part xiii)

RFG

As per the financial statement of 2017,the deferred tax of the assets of the company were nearly
13,657,000 in 2017 whereas the value was 7,394,000 in 2016. This shows that the overall value of
the deferred tax assets has increased considerably in the current year. Similarly the deferred tax
liabilities were 119,433,000 in 2017 whereas it was 115,908,000 in 2016 which further states that
the deferred tax liabilities has increased considerably in the current year.

RB company: As per the financial statement of 2017,the deferred tax of the assets of the company
were nearly 10,325,000 in 2017 whereas the value was 5,994,000 in 2016. This shows that the
overall value of the deferred tax assets has increased considerably in the current year. Similarly the
deferred tax liabilities were 5,153,000 in 2017 whereas it was 5,267,000 in 2016 which further states
that the deferred tax liabilities has decreased considerably in the current year.

Part xv)

The calculation of the tax rate – cash is stated as

total tax expense / EBIT x 100

RFG

The corporate tax as of 2017 is 26,284,000 and the earnings before tax is 87,613,000, therefore the
effective tax rate is

= 30%

RB company: The corporate tax as of 2017 is 13,168,000 and the earnings before tax is 37,088,000,
therefore the effective tax rate is

= 35.5%

Part xvi)

RFG

Reconciliation between the tax expenses and the actual tax stated in the income statement

Particulars Amount
8,76,13,000.0
Profit generated by the business during the year 0
2,62,84,000.0
Income tax as per the 30% 0
Adjustments made  
Expenses which are deductible for tax profit 8,79,000.00
Different rates due to operations in various
jurisdictions -12,000.00
benefits due to tax loss 82,000.00
Non-Assess income -15,47,000.00
  -5,98,000.00
2,56,86,000.0
Tax stated in the income statement 0

RB Company

Reconciliation between the tax expenses and the actual tax stated in the income statement

Particulars Amount
3,70,88,000.0
Profit generated by the business during the year 0
1,31,68,000.0
Income tax 0
Adjustments made  
-
1,03,85,000.0
Domestic tax rates adjustments 0
Non assess income -9,76,000.00
Tax loss 2,83,000.00
Adjustments in tax due to different jurisdictions -55,000.00
 -
1,11,33,000.0
Tax stated in income statement 0
Tax credit 20,35,000.00

Conclusion
From the overall analysis it shows that BHP pays more taxes when compared with Commonwealth
bank , the analysis helps to understand the various concepts like other comprehensive income of the
companies, the income tax payable and the applicable tax rate of the business, owners equity, cash
flow statement analysis etc

References
Brigham, E. F. (2010). Financial Management: Theory & Practice. 5th edition. Cengage Learning.

Brooks, R. M. (2012). Financial Management. 4th edition. Prentice Hall.

Kaplan, R. S., & Young, M. S. (2011). Management Accounting. 3rd edition. Prentice Hall.

Ray, G., & Eric, N. (2011). Managerial Accounting. McGraw-Hill/Irwin.

RB Company (2017). Annual report of Restaurant brands

RFG (2017). Annual report of Retail food group