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BUACC5930 Accounting Concepts and Practices Assignment - Federation University, Australia

Question 1 - Transurban is a company that primarily builds Toll roads in Australia and overseas. Using the 2018 Transurban annual report to compare the financial results of the Company between 2017 and 2018. You should use any financial information provided in the 2018 reports to conclude on the improvements or not in financial position and profitability. What other information would you need to make an assessment of Transurban?

Answer - Transurban Holdings Limited

Profitability Ratios

These are ratios used to evaluate the ability of organizations to generate profits relative to its operating expenses, revenue and shareholders' equity. This indicates how well an organization uses its assets to generate profit and value to its shareholders. Companies with huge profits means that they are performing well by the size of profits generated.8.o% of Transurban Holding ltd revenue is convertible to profitability.

Gross Profit Margin

Reflects how much the business is generating when taking into account the cost of production. A favorable gross profit margin is a clear indication of the efficiency of the operation is carrying out its main business. Poor purchasing policies and stiff competition can lead to low profit margin.

Gross Profit Margin=Gross Profit/Revenue

=289M/3298M

GPM 2018=0.088

GPM 2017=174M/2732M

=0.064

EBITDA Margin

Represents the income of a company before taking into account discretionary expenses.

EBITDA 2017=1526

EBITDA2018=1649

Before taking into account depreciation and net finance cost the income of the company increased by 153M.

Operating profit margin

This ratio measures the efficiency of the operational managers. This ratio helps in measuring efficiency in directly. An increase in operating income means that the company is performing well on its main business. It is important to note that, the operational decisions made by managers such as mode of pricing, cost of labor and raw materials prices are a critical influence in amount of operating income obtain. In other words, operating profit is a measure of management's competence and flexibility in harsh economic times.

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Net Profit Margin

This provides the final position of the profitability of the organization after deducting all the expenses.

Net Profit Margin=Net Profit/Revenuex100%

NPM 2017= 209/2732X100%

= 7.65%

NPM 2018=468/3298X100%

=14.19%

The company was able to controls its costs more effectively and it adopted strong pricing strategies in 2018 compared to 2017.

Return on Asset

This ratio discloses how much profit after tax an organization creates for every asset it holds. Companies with high return on investment require huge investments to buy machinery and equipment in order to generate more profits.

Liquidity ratio is used to determine the ability of an organization to settle its payables in timely manner. This ratio is crucial to lenders and creditors before granting credit. In 2017Transurban ability to settle its bills was high. However, the credit worthiness of the organization improved further.

Age of accounts receivable days is used to measure a company's effectiveness in collecting its receivable. In 2017 the accounts receivables were 34.63 days compared to 2018 which had 73.53s. This means that Transurban collection process was poor, its credit policies were poor and its customers were not creditworthy. In comparison to 2017, the efficiency improved, and quality customers settled their debt in time in the year 2018. The company's efficiency in collecting it's trade receivables was lower in 2017 compare to 2018. In 2018, the efficiency improved an indication of a step in the right direction.

The share prices vary from day to day due to forces of demand and supply. When investors are interested in one stock more than the supply in the market the demand goes high than the market can offer. The puzzle that the general public fails to understand is what makes investor desire a certain stock and dislike the other. The most crucial part is understanding what happenings are positive for the entity and what news is negative. An organization's earnings determine its value.

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Question 2 - Using the 2018 FY18 UN Sustainable Development Goals progress report. Use this information to explain how Transurban is meeting the UN Sustainable Development Goals (SDGs). What is your opinion of these initiatives?

Answer - Sustainable development which had 17 development goals was adopted by the general assembly in 2015. These goals include;

SDG 3: Good Health and Wellbeing: According to their report target 3.1-3.4 of this goal does not directly have indicators against which Transurban holding can gauge their development. They have however set up a wellness program aiming at addressing mental health. This is in line with the goal is target of reducing premature deaths resulting from suicide.

The other target of this goal is to reduce by half the number of global deaths and injuries as a result of road traffic accident. In the year 2018 Transurban roads had three fatalities. The organization has set out initiatives which include road awareness campaigns, improving the design of roads and their optimization which aims at reducing safety risks. Considering that these fatalities occurred in 2018 just 2 years to the timelines which were set when rolling out these goals, is an indication that the company needs to do enough in order to achieve this target.

SDG5 targets at achieving gender equality with emphasis on empowering women and girls. Transurban has developed a policy on equity in the work place; this is in line with the target of having a framework in place aimed at promoting and monitoring equality. Some of the initiates by the organization to achieve gender equality include; availability of parental leave, having internal training on leadership in order to empower women to take up leadership positions, the organization has partnered with Western Sydney University, this institution is offering scholarships to women in engineering. This has enabled have equal opportunities in all leadership levels with the board of management having 30% women and the executive having 45%.

SDG7: Having access to affordable and clean energy. A number of Transurban's assets and facilities are having renewable energy installations. The organization is exploring options of having power purchasing agreements. In terms of improving energy efficiency globally, the company is aiming at reducing the consumption of energy by 10%.

SDG8: Economic Growth and Decent Work. The major projects undertaken by Transurban are contributing to economic growth by creating jobs and reducing the amount of time spent on travelling. The organization aims at improving its efficiency in its consumption by supplementing cementitious materials, and its production by partnering with Beyond Zero Emissions with the aim of reducing carbon emission. On the eradication of forced labor and modern slavery, the company has updated its code of practice which is aimed at complying with modern slavery legislation introduced in Australia. Student work experience and graduate programs have been introduced in the organization aimed at operationalizing a strategy for youth employment.

SDG9: Industry, Innovation and infrastructure. The organization has established an electric working group which is in place to prepare for the increased electric vehicles in its network. SDG11 the organization has enhanced the way of detecting and responding to financial vulnerability in the organization by engaging community-based organizations which are vibrant in this area. The company has improved its processes of engagement for the major projects. Quality monitoring and reporting on road tunnels was undertaken, this was to give the progress of the organization in reducing the environmental impact of cities and quality management of municipal and other wastes.

Responsible Consumption and production. The organization beneficially reused the materials excavated with the aim of reducing waste generation. To promote procurement practices the organization revised its procurement policies. Climate action: The organization is assessing climate risks and adaptation measures identified have been implemented. The aim is to strengthen the resilience and adaptive capacity related hazards and natural disasters.

Partnerships for the goals which is the last goal is aimed at enhancing the global partnership for sustainable development that enhancing the mobilization and sharing of knowledge, expertise, technology and financial resources. The organization partnered with a number of organizations supporting the various goals undertaken by Transurban.

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Question 3 - Problem 9.6 Rochelle Graves Ltd, page 392 Weygant et al., (2013).

Answer -

Date

Transactions


Ref

Debit

Credit








5th July 

Account receivable



       6,200.00




Sales



                           6,200.00

14th July Cash

Cash



          672.00



Bank charge



            28.00




Sales revenue



                              700.00

14thJuly

Bank Charges



      440.00




Account receivable



                              440.00

15thJuly

  Cash



       6,098.63




Interest Income



                                98.63



Notes receivable



                           6,000.00

25th July

 Account receivable



     15,271.23




Interest Income



                              271.23



Notes receivable



                         15,000.00











b) Ledger Posting:

Account receivable:

Date

Particulars(Dr.)

Amount

Date

Particulars(Cr.)

Amount

5th July 

Sales

                                       6,200.00

14th

Bank charge

                              440.00




July



25th July

Note

                                     15,000.00


Balance c/d

                         21,031.23


receivable





25th July

Interest

                                          271.23





revenue







                                     21,471.23



                         21,471.23


Balance b/d

                                     21,031.23




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(c) Statement of Financial Position:

Rochelle Graves Ltd Statement of Financial Position As at 31st July

Particulars

Amount

Amount

Assets:



Current Assets:



Receivable:



Account receivable

21,031.23


Note receivable

9,000.00


interest receivable

237.00


Total current assets


30,268.23

II. Notes receivable

Date

Particulars(Dr.)

Amount

Date

Particulars(Cr.)

Amount


Opening balance

30,000

15th July

Cash

6,000.00




25thJuly

Account

15,000.00





receivable






Balance c/d

9,000.00



30,000



30,000.00


Balance b/d

9000




III. Interest receivable

Date

Particulars(Dr.)

Amount

Date

Particulars(Cr.)

Amount


Opening balance

237.00


Balance c/d

237.00









237.00



237.00


Balance b/d

237.00




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Question 4 - Prepare a Cash Flow Statement for Harrys Harware for the year ended 30 June, 2018 from the above information given (note that you should use the Direct Approach).

Answer - Cash Flow Statement for Harrys Harware for the year ended 30 June, 2018

 

Harrys Harware - Cash Flow Statement.jpg

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