Brierty limited
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The company provides civil and mining contracting services in Australia. It operates through three segments: Civil, Mining, and Land Development. The Civil segment undertakes various civil construction projects. The Mining segment offers mining services. The Land development segment develops residential lands. In 2015, the company saw an increase in current and non-current assets but also an increase in current and non-current liabilities, resulting in a decrease in equity. Revenue and earnings were impacted by delays and tight margins. The financial statements show a need to improve cash flow from operations and financing activities.
Brierty limited
- 1. Company: Brierty Limited: Brierty Limited provides civil and mining contracting,and land development services in Australia. The company operates through three segments:Civil, Mining, and Land Development. The Civil segment undertakes various civil construction projects,including highways and roads, railway formations, airport runways, site works, concrete and pavement works, earthworks, drainage and service installation, sewer reticulation, and road works and sub divisional infrastructure for the creation of housing lots. The Mining segment offers mining services, such as surface mining, including site preparation services,which comprise stripping overburden, site works for building infrastructure, road works, tailings dams, residue disposalareas, airstrips, drilling and blasting,ore haulage rehandling, train loading, tailings and water storage facilities, and vegetation clearing. The Land development segment develops residential lands. It provides civil construction and mining services solutions to government and private industry. Brierty Limited was founded in 1981 and is headquartered in South Perth, Australia. Source: http://www.brierty.com.au/about-us/our-history.html Part 1: Executive Summary: Overviewof SubjectMatter: The processof evaluationof the financial informationcontainedinthe financial statementsinordertounderstandandmake decisionsregardingthe operationsof the firmis called‘Financial StatementAnalysis’.Itisthe processof identifyingthe financial strengthsand weaknessesof the firmbyestablishingrelationshipsbetweenthe itemsof the balance sheetandthe statementof profitandloss. THE PUROSE OFFINANCIALSTATEMENTS The preparationof profitandlossstatementandbalance sheetisa veryvaluable exerciseforan organization.The purposesof these financialstatementsare asoutlinedbelow: • To informownersaboutthe financial positionof the organization. • To informmanagersthe achievements/shortfallsinthe performance of the business. • To secure finance andmaintainfinance. • To monitorperformance of the businessperiodically. • To fulfill statutoryobligations. • To assesstax liability.
- 2. Source:http://seminarprojects.org/t-finacial-statement-analysis SCOPEOF STUDY: The study mainlyattemptstoanalyze the financialperformance of the companyselectedforthe study. The financial authoritiescanuse thisforevaluatingtheirperformance infuture,whichwillhelpto analyze financial statementsandhelptoapplythe resourcesof the companyproperlyforthe developmentof the companyandits employeestobringoverall growth.The presentstudyattemptto developatrendanalysismodel forSalesandWorkingCapital andProfitandLossAccounts. RESEARCH METHODOLGY Methodsof data collection;- Secondarydata the secondarydatais derivedfrom the annual reports,Businessline andfinance newspaperswebsites. Methodsof analysis: The mostcommonlyusedtechniquesof financialanalysisare asfollows: Comparative Statements CommonSize Statements TrendAnalysis RatioAnalysis Cash FlowAnalysis COMPARATIVESTATEMENT ANALYSIS: Comparative statementisthose statements,whichhave designed inaway,soas to provide time perspectivetothe considerationof the variouselementsof financial position embodiedinsuchstatements.Insuchstatementsfiguresfortwoormore periodsare placed side byside to facilitate comparison.The twostatementsare proposedforcomparison.Theyare comparative income statementandcomparative Balance Sheet. METHODS OF LEAST SQUARES(TREND VALUES) By the methodof lease square,astraightline trendcan be fittedtothe giventime seriesof data. It isa mathematical,aswell as,analytical method.Withitshelp,economicandbusiness time seriesdatacan be fittedandthishelpsinforecastingandpredicting.The trendline iscalled the line of bestfit.The sum of deviationsof the actual valuesof Y and the trendvalue (Yc) is0 and sumof square of deviationsof the actual value andthe trendvalue isthe least.(Y-Yc) = 0 and (Y- Yc) = least.Sothismethodiscalledthe leastsquaresmethodorthe line of bestfit. RATIOANALYSIS: RatioAnalysisiswidelyusedtool of financialanalysis.Itisdefinedasthe systematicuse of ratio to interpretthe financial statementssothatthe strengthandweaknessof a firmas well asits
- 3. historical performance andcurrentfinancialconditioncanbe determined.The termratiorefers to the numerical orquantitative relationshipbetweentwoitems/Variable.Thisrelationcanbe expressedas. a. Percentages b. Fractions c. Proportionof numbers. Typesof financial Ratios: Liquidityratios Leveragesratios Activityratios Profitabilityratios LiquidityRatio: LiquidityRatiomeasuresthe firm’sabilitytomeetcurrentobligations,andare calculatedbyestablishingrelationshipsbetweencurrentassetsandcurrentliabilities. Leverage ratio: Leverage ratiosmeasure the proportionof outsider’scapital infinancingthe firm’s assets,andare calculatedbyestablishingrelationshipsbetweenborrowedcapital andequity capital. ActivityRatio: Activityratioreflectsthe firm’sefficiencyin utilizingitsassetsingeneratingsalesandis calculatedbyestablishingrelationshipsbetweensalesandassets. ProfitabilityRatio: Profitabilityratiosmeasurethe overallperformance of the firmbydeterringthe effectivenessof the firmingeneratingprofit,andare calculatedbyestablishingrelationships betweenprofitfiguresonthe one hard,andsalesandassetson the other. Source:http://www.ncert.nic.in/ncerts/l/leac204.pdf Findings: Revenue and earnings impacted by delayed project starts and tight margins given the current operating environment. WTS2 establishmentinvestmentresultedin increased capital expenditure and associated debt as expected. Targeted increased cash generation and associated debt reduction in FY16 as major projects transition from setup phase to delivery or completion.
- 4. Recommendations: The current ratioof the companyis below the standardratiointhe 2 yearsunderstudy,Hence it shouldbe improvedatleasttothe standard. The company shouldtake some measuresforimprovingmore profits;sale shouldbe enhanced fromintoendthrough innovativemarketingtechniques. The company shouldfocustoincrease itscashflow fromoperating,financing&investing activities.
- 5. Part 2 ConsolidatedStatementofFinancial Positionas at 30 June 2015 Source:http://www.brierty.com.au/investors-and-media/invester-information/financial-snapshot.html Currentassetsare balance sheetaccountsthatrepresent the value of all assetsthatcan be converted intocash withinone year.Currentassetsinclude cashandcashequivalents,accountsreceivable, inventory,marketable securities, prepaidexpensesandotherassetsthatcan be readilyconvertedto cash.
- 6. Non-currentassets are those thatwill nothave theirfull value realizedwithin12monthsof the balance sheetdate.Examplesof noncurrentassetsinclude investmentsinanothercompany, intangible assetssuchas goodwill, brandrecognition andintellectual property,andproperty,plantandequipment. Currentliabilitiesare debtsandobligationsof the companythatare due withinayear. Bonds,mortgages andloansthat are payable overaterm, more thanone year wouldbe fixed liabilities orlong-termliabilities. FINDINGS: Increase in Current Assets: $ 77,400,439- $72,080,044/ $72,080,044*100 = 7.38% Increase in non- current assets: $90,412,428- $55,574,094/ $55,574,094* 100 = 62.68% Increase in Current Liabilities: $82,098,983- $48,884,243/ - $48,884,243* 100 = 67.94% Increase in non- current liabilities: $28,957,540- $19,638,312/ $19,638,312* 100 = 47.45% Decrease in equity: $56,756,344 – $59,131,583/ $59,131,583* 100 = -4.01% Decrease in equity can be a reason of worry for the management. Even both the current and non-current values have gone up in year 2015 as compared to previous year.
- 7. Part 3: Consolidated Statement of Comprehensive Income for year ended 30 June 2015: Source:http://www.brierty.com.au/investors-and-media/invester-information/financial-snapshot.html FINDINGS: The Profitand Lossstatement(P&L) isgenerallypreparedannuallyandformspartof the accounting documentsalimitedcompanyandsole traderneedtoproduce tosatisfythe tax authorities.Itshows revenuesandcostsandhow muchprofithas beenmade bythe businessoverthe periodithasbeen preparedfor.
- 8. The profitand lossstatementconsistsof these majorcomponents:- · Gross sales - the total resourcesgeneratedbythe firm'sproductsandservices · Netsales - the revenuesreceivedbythe firmaftersubtractingreturnsanddiscounts(suchastrade, quantity,cash) · Cost of goodssold - the cost of merchandise soldbythe manufacturerorretailer. · Gross margin(profit) - the difference betweensalesandthe costof goodssold:consistsof operating expensesplusnetprofits · Operatingexpenses - the costsof runninga business,includingmarketing · Netprofitbefore taxes - the profitearnedafterall costshave beendeducted. The above snapshot showsa pro formatradingand profitand lossaccount.
- 9. Part 4 Statementof cash flows: The cash flowstatement showshowmuchcashcomesin and goesoutof the companyover the quarteror the year.At firstglance,thatsoundsa lotlike the income statementinthatitrecords financial performance overaspecifiedperiod.Butthere isa bigdifference betweenthe two. Source:http://www.investopedia.com/university/fundamentalanalysis/fundanalysis8.asp Source:http://www.brierty.com.au/investors-and-media/invester-information/financial-snapshot.html Terminologies: Cash Flowfrom Operations Thisis the keysource of a company'scash generation.Itisthe cash that the companyproduces internallyasopposedtofundscomingfromoutside investingandfinancingactivities.Inthissectionof the cash flowstatement,netincome (income statement) is adjustedfornon-cashchargesandthe
- 10. increasesanddecreasestoworkingcapital items - operatingassetsandliabilitiesinthe balance sheet's currentposition. Cash FlowfromInvesting For the most part,investingtransactionsgenerate cashoutflows, suchascapital expendituresfor plant, propertyandequipment,businessacquisitionsandthe purchase of investmentsecurities.Inflowscome fromthe sale of assets,businessesandinvestmentsecurities.Forinvestors,the mostimportantitemin thiscategoryis capital expenditures(more onthislater).It'sgenerallyassumedthatthisuse of cash isa prime necessityforensuringthe propermaintenance of,andadditionsto,acompany'sphysical assets to supportitsefficientoperationandcompetitiveness. Cash FlowfromFinancing Debtand equitytransactionsdominatethiscategory.Companiescontinuouslyborrow andrepaydebt. The issuance of stock ismuch lessfrequent.Here again,forinvestors,particularlyincome investors,the mostimportantitemiscash dividendspaid.It'scash,not profits,thatisusedto paydividendsto shareholders. OperatingCashFlow/NetSales Thisratio,whichis expressedasa percentage of acompany'snet operatingcashflow toits net sales,or revenue (fromthe income statement),tellsushow manydollarsof cashwe get foreverydollarof sales. Source:http://www.investopedia.com/articles/stocks/07/easycashflow.asp FINDINGS: NetCash inflowfromoperating activities: -$ 1,787,474– $28,466,646 = -$30,254,120 (Decrease) The company needstofocuson theiroperationsas the cashinflow hasdippedinone year. Netcash outflowfrom investingactivities: -$1,995,728- (-$879,777) = -$1,115,951 (Decrease) The company’sinvestmentactivitieshasgone downwhichisnotall a healthysign. The managementhas to lookintothismatter. Netcash inflowfrom financingactivities: -$20,635,650 – (-$13,893,595) =- $6,742,055 (Decrease) Thisdecrease showsthatthe companyis unable togetfundsfromthe market.
- 11. Part 5 Stockholders' equity: Equity Equityrepresentswhatshareholdersown,soitisoftencalledshareholder'sequity.Asdescribedabove, equityisequal tototal assetsminustotal liabilities. Equity = Total Assets – Total Liabilities The two importantequityitems are paid-incapital andretainedearnings.Paid-incapital isthe amount of moneyshareholderspaidfortheirshareswhenthe stockwas firstoffered tothe public.Itbasically representshowmuchmoneythe firmreceivedwhenitsolditsshares.Inotherwords,retainedearnings are a tallyof the moneythe companyhaschosento reinvestinthe businessratherthanpayto shareholders.Investorsshouldlookcloselyathow a companyputs retainedcapital touse andhowa companygeneratesareturnon it. Source:Accounting – AuthorB.S.Raman Componentsof Shareholder'sEquity Alsoknownas"equity"and"networth",the shareholders'equityreferstothe shareholders'ownership interestinacompany. Usuallyincludedare: Preferredstock - Thisisthe investmentbypreferredstockholders,whichhave priorityover commonshareholdersandreceiveadividendthathaspriorityoveranydistributionmade to commonshareholders.Thisisusuallyrecordedatparvalue. Additional paid-upcapital (contributedcapital) - This iscapital receivedfrominvestorsfor stock; itis equal tocapital stockpluspaid-incapital.Itisalsocalled"contributedcapital". Common stock - Thisisthe investmentbystockholders,anditisvaluedatpar or statedvalue. Retainedearnings - Thisis the total net income (orloss) less the amountdistributedtothe shareholdersinthe formof a dividendsince the company'sinitiation. Other items- Thisis an all-inclusive accountthatmayinclude valuationallowance and cumulative translationallowance (CTA),amongothers.Valuationallowance pertainsto noncurrentinvestmentsresultingfromselectiverecognitionof marketvalue changes.
- 12. Cumulative translationallowanceisusedtoreportthe effectsof translatingforeigncurrency transactions,andaccounts forforeignaffiliates. Source:Accounting– AuthorB.S.Raman Source: http://www.brierty.com.au/investors-and-media/invester-information/financial-snapshot.html This statementconsists offour major categories: Capital Stock --- Thiscategoryreflectsthe equityfinancingdecision,differentclassesof equitystocks, and can alsoinclude more esotericitemssuchasESOP’s(see below) AccumulatedOtherComprehensiveIncome (AOCI) --- Describedabove intermsof transactions(other than AccountingIncome transactions) thatimpactstockholders’equitywithoutstockholders’being involvedinthe transaction. RetainedEarnings ---- ResultsfromAccountingIncome andDividend payments TreasuryStock --- inthe US a companycan trade itsownstock. Source:https://www.stock-analysis-on.net/NASDAQ/Company/Alphabet-Inc/Financial- Statement/Liabilities-and-Stockholders-Equity
- 13. FINDINGS: By analyzingthe statement,we canconclude that,share capital hasdipped in2015 as comparedto 2014: $56,756,344 - $59,131,583 = -$2,375,238 Thisis a massive decrease whichstatesthatcompanyhas not beensuccessful inmultiplyingitsgoodwill.