Delving into Financial Statements

“To predict the future we must refer to the past”.  This makes a lot of sense as we all use this logic without even knowing it in most decisions we make everyday – not just in business.  To judge how much time we will need to fight the traffic in the morning to get to work….how long has it taken in the past.   Similarly, we look for past trends in business and make decisions moving forward using this information as an ‘educated guess’.  Nothing in the future is written in stone but this is a good starting point.

For me chapter 4 has been the most challenging as I feel it has the most information crammed into one topic.  My understanding of the fundamental message being portrayed is breaking up each of the financial statements into operational and financial to pinpoint the drivers of a business which in turn identifies how it is adding (or destroying) value.

See the rationalisations behind my thoughts on this chapter:

Chapter 4: Analysing Financial Statements

Megan

Draft Restated Financial Statements

Evening all

Ok, I am behind the 8 ball again......intense new job, family, school holidays = LIFE!

I am in a rush to catch up as I haven't even opened a book for the last two weeks, so please be kind as this is a raw first draft. All feed back is welcome and I would love to have a look to see where you are at, so drop me a link and I will check out your fin stmts.

Link to Draft - Balance Sheet
Link to Draft - Stmt of Changes in Equity

Megan

Amcom's Assets, Liabilities & Equity

Assets

1. Goodwill  -  $34,472,000
   
   Goodwill is a non-current asset.  This account has increased from $23,126,000 in 2011 to $34,472,000 in 2012 which indicates Amcom has purchase another entity in that year.  In a dollars sense goodwill basically is the difference between purchase price and assets but in a reality sense it is the intangible value of that company - why you would pay more than what the assets etc are worth - maybe a company's reputation reputation, industry placement etc??
   
2. Trade and other receivables  -  $15,983,000
   
   This is a current asset as is it is predicted to be received in the short term future usually 30 days.  Amcom has pretty much the same trades and receivables as the prior year which indicates stable activity. They written off $272,000 which is a small amount in the big picture (2%). The remaining amount has been reviewed and decided by management to be fully collectible.
   
3. Plant, property & equipment  -  $123,209,000
   
   This non current asset has increased in the last year by over $14,360,000 opposed to only $6,000,000 for 2011.  The biggest increase in assets was in the area of network infrastructure which is associated with the Cloud & Cisco partnership.

Liabilities

1. Derivative Financial Liability
   Current - $47,000,000
   Non Current - $70,000,000
   
   These are obligations the firms has with an agreement of a interest rate swap being the BBSW rate (Bank Billed Swap rate) +1.5%.  This is basically to lock in a fixed amount and control variation to amounts paid due to fluctuating interest rates.
   
2. Deferred Revenue  -  $13,934,000
   
   The is a great example of Accrual Accounting.  The deferred revenue noted above is revenue which has been received but not yet earned.  A possible example of this may be a customer has paid for 12 months of IT assistance of which only 6 months has been provided.  Therefore 6 months essentially has not yet 'earned' and is therefore an obligation (ie liability) for Amcon to provide this service.
   
3. Borrowings
   
   Current - $639,000:  This is a short term loan which is forecast to be paid back within a year, not a substantial amount.
   Non Current - $36,516,000:  $4,480,000 is for the upgrade to network infrastructure for the Cisco partnership. The other substantial portion of this liability, $31,500,000 is drawings on bank borrowings due to expire on 31/12/16.

Equity

1. Retained profits  -  $13,493,000
   Essentially a bucket of funds retained as equity and not distributed to shareholders as dividends.
   
2. Contributed equity - $107,873,000
   This is quite self explanatory being capital invested by equity shareholders.
   
3. Reserves - $720,000
   This is a tool used to recognised the shares transferred to employees/executives as part of their remuneration.

Megan

Changes to my Blog

I have made a small change to my blog page and each topic is now on a separate page but unfortunately I inadvertently deleted any comments!!

(See the links above - just makes the blog a little easier to navigate).

So my apologies to those who have taken the time to leave me feedback - I do appreciate your comments.

Martin - your feedback was a big surprise and VERY well received - would love for your to add it again, lol!

Thanks all!

Megan

Introduction to Amcom

After reading through the 2013 Financial Report for Amcom Telecommunications Ltd, my immediate first impression is that this is a strong, innovative and rapidly growing company within the telecommunications and IT industry specialising in:

• Data Networks
• Hosted and Cloud Services
  (I am ignorant – I thought this was just an Apple product eg iCloud with that little cloud icon??!!)
• IT Services

The company has again started the new financial year in a strong position with great results for the FYE:

• Profits up 23% to $20.8m
• Cash flow improved by 10% to $14.8
• Return on shareholder’s funds improved to 18%
• Full year dividends paid to shareholders increased by 10% to 5.5c per share (fully franked)

Amcom has a large customers base in the Government and Mining sectors.  From my experience from working in both, having a robust IT infrastructure is imperative to its operations - makes sense to capitalise on this need and use these industries as a benchmark in terms of what products and services Amcom can provide to its customers.

My thoughts are this looks like a business which invests a lot of time, money and resources into research and development to entrench themselves as a market leader in this industry.

Megan

Welcome to my blog....

Wow, I did it! I used to think I was very computer savvy however after trying to set up this blog......not so sure.

I must admit, this approach to active learning and engaging with other students is extremely new to me however I am very open to the experience and welcome the guidance and tips of others (please :-)). I in turn will provide as much valuable input into your blogs and contributions as I can, hopefully we can all get through this on a positive note – and with high grade!

I am a full-time working mother of 2 daughters.  My working background has predominately been in the government sector (health) and I have recently made the move to mining.  So out went the high heels and in with the T-boots!

So again, everyone welcome to my blog and I look forward to learning from you all.

Megan