i need help in accounting
Accounting: Integrated Reporting
Assignment 2 Questions
Your Course Site provides detail on this assignment.
Please read that information carefully.
You need to answer all questions to complete this assignment.
Weighting: 30% (30 marks)
Word length – refer to details for each question
Please add a cover page that includes your name, student number, and the total number of words for this assignment.
Refer to the Annual Report of the following company Dick Smith Holdings Limited for 2015 (hereafter Dick Smith’s 2015) to answer the following questions.
Part AOn 5 January 2016 it was announced that electronics retailer Dick Smith has gone into receivership, with Ferrier Hodgson appointed to run the firm.
Using the financial statements, Consolidated Statement of Profit or Loss and Other Comprehensive Income (Income Statement), Consolidated Statement of Financial Position (Balance Sheet):
Calculate all ratios indicated below (show working).
5 marks
Discuss two ratios that could provide an indication that Dick Smith would go into receivership on 5 January 2016.
at least 300 words
6 marks
The formulas for some common ratios for liquidity, activity, solvency and profitability are provided below.
Current ratio = Current assets/Current liabilities
Quick ratio = (Cash + Short-term marketable investments + Account receivables)/Current liabilities
Cash ratio = (Cash + Short-term marketable investments)/ Current liabilities
Asset turnover = Revenue/Average total assets
Inventory turnover = Cost of goods sold/Average inventory
Days inventory held = Days in period/Inventory turnover
Receivables turnover = Revenue/Average receivables
Days of sales outstanding = Days in period/Receivables turnover
Debt/Assets = Total debt (liabilities)/Total assets
Debt/Equity = Total debt (liabilities)/Total equity
Interest coverage = EBIT/Interest payments
ROE = Net income/Average equity
ROA = Net income/Average assets
Part B
Now construct a common-size balance sheet (Consolidated Statement of Financial Position) for Dick Smith’s 2015 Balance Sheet and discuss one serious “red flag” (serious warning sign) from your analysis.
150 words
4 marks
Using the Consolidated Statement of Cash Flows (Cash Flow Statement) for Dick Smith’s 2015 financial year, what additional useful information is presented that would support your discussion in Part A (ii).
150 words
3 marks
Minimum 600 words
12 marks
Refer to ASX Corporate Governance Principles & Recommendations 3rd edition at: www.asx.com.au/governance/corporate-governance.htm:
On the release of the 2015 Annual Report as at 30 June 2015, there is no obvious indication to a non-professional investor that Dick Smith’s will go into liquidation within six months. For example, profit is positive.
However, with the benefit of hindsight, the management could be construed to have acted “unethically”.
Required:
On page 4 of the ASX Corporate Governance Principles & Recommendations is an overview of the 8 central principles of the corporate governance guidelines.
Using three of these principles, discuss how Dick Smith’s Board could have enhanced the structure of the board and management and the everyday operations to have possibly prevented this destruction of value.
It is possible that you could argue that liquidation was inevitable given the history of Dick Smith’s since it was sold by Woolworths in 2012.
However, you are to focus your answer on the 2015 financial year.
You will be assisted in answering this question if you look back at the 2017 Annual Report of Australian Agricultural Company (AAC) pages 32 – 36.
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