The information which is presented in this assessment is obtained by a process of interview which is conducted with the board of directors of the business. The board of directors of the company are responsible for formulation of policies and different strategies of the business and therefore they are the best persons to get information about the working of the company.
The tax liabilities of the company as shown in the annual report for the year 2017 is shown to be $ 2,384,500 which is shown in the financial statements. The tax liability of Kogan Ltd has increased considerably when the tax liability of the business is considered for the previous year. The tax liability of the company is shown to be $ 622,072 as per the financial statements of 2016. The tax expenses which is shown in the income statements of the company is comprised of both current tax expenses and deferred tax expenses of the business. The tax reduction policies of the business involve effective optimization of taxes as per the policy of the management. The management of the company has already employed competent accountants and tax advisor so as to ensure that all the provisions and legal requirement are followed when the business is assessing the tax which the business needs to bear at the end of the financial year. The GST components of the business which are concerned with operating and investing activities which are either to be paid or received from the ATO is shown in the operating cash flows of the business. The management of the company will also be availing the various deductions which are available to the company if certain conditions are met.
As per the annual report of Kogan ltd, the management of the company focuses on building up effective customer relationship and also improve the quality of the product which is provided by the company. In addition to this, the management is committed towards generation of wealth as per the annual report of the business. The most important role in the accumulation of wealth for the business is that of the management who are involved in the planning process of the business. The wealth accumulation of the business can be clearly identified from the annual report of the business which shows the asset such as property plants and equipment which are under construction as shown in the notes to account section of the annual report. As per the annual report of the company for the year 2017, the annual report specifies that the effective performance of the business during the year. Kogan company is engaged in a variety of business and therefore has an effective portfolio of the services which is provided by the company (Kogancorporate.com. 2018).
The assets which the company possess in the annual report of the business as per the year 2017. The assets of the business are shown in the profit and loss statements as prepared by the business. The business has purchased assets during the year as shown in the notes to accounts of the company. The business also had purchased assets from Dick Smith in the year 2017. The business has shown significant amount of profit as shown in the annual report of the company for the year 2017 which has increased tremendously in comparison to previous year’s estimate which shows that the management of the business is focused towards generation of wealth for the shareholders of the company.
The legal requirement of the business focuses on the compliance of all the legal regulation which is applicable to the company as introduced by the government. In addition to this, the annual reports of the business show that during the ordinary course of business, the company has faced law suits which are other than for tax rules compliance. The code of conduct of the business and management policies of the business are all governed by the legal requirement of the business.
The financial regulations of the business are as per the standards of accounting which are established by AASB which are applicable on the business. The other common accounting policies and conventions which are followed by other businesses belonging to the same industry is also applicable to the company.
As per the cash flow statement which is prepared for Kogan ltd, the business has made investment in intangibles. In addition to this, the management of the company is expecting investments in the business. The strategies of the business is to maximize the investments of the business. The management expects to increase the investments of the company in the coming year 2018.
In order to operate in the market, the business needs to register with the authorities. The registration of the business needs to be handled by the legal team of the business and the business also needs to comply with all rules and regulations of the corporation act.
The business is engaged in a variety of business, therefore the need for insurance for the overall business is important. The insurance needs of the business are quite evident as the business has various diversified business and certain retail and other service units might be subjected to risks for which the business needs insurance cover.
In order to achieve the long-term goals and business objectives of the business, the management of Kogan ltd need to comply with the legal requirements of tax. Due to the diversified business of the company, various taxes are applicable on the company which the business needs to consider in order to proceed with the business and overall operation of the company.
Strategies will be adopted by the business in order to ensure that all other strategies of the business are effectively implemented which will be formulated by the top-level management. The management has already as per the annual report of 2017 established different committee which will be looking after different roles of the business. In addition to this, the management can implement performance report on a monthly basis so as to review the performance of the business as per the goals and objectives of the business.
In order to ensure that the financial position of the business is stable and the policies which are formulated by the business are appropriate, continuous review of the financial position is needed. The market and the business environment are dynamic in nature and changes continuously therefore it is essential that the financial position of the business is review regularly.
The annual report of the company shows the business model of the company which is to ensure that the best quality of online services is available to the customers. The management of Kogan ensures that the business uses the best technologies and online technologies for retail services. The business model of the company focuses on cutting out the benefits of the middle men and ensure that the clients get the best deals for the products.
The financial position of the business is shown in the annual report of the company which is engaged in retail business. The management of the company has brought about changes in the technological aspect of the business and thereby also improved the operational structure of the business. The profits of the business have significantly increased from the results of 2016. The profit which is earned during the year is shown to be $ 3,739,865. The business should plan aggressive strategies to further increase the revenues of the business.
The accuracy of the financial information by consulting with the auditors of the business and also by reviewing the auditor report which is provided in annual report of the business during the year 2017. The auditors of the company are KPMG and the auditor report shows that the financial statements are prepared according to corporation act 2001 and is also showing true and fair view. The accuracy of the financial information can be confirmed by reviewing the treatments of the various items which are shown in the annual report of the business and ensure that the same comply with the relevant standards to which the treatments are associated with.
As per the profit and loss statement which is shown in the annual report of the company for the year 2017 shows that the profitability of the business has significantly improved from the performance of previous year. The profit of the business has increased from $ 809,149 in 2016 to about $ $ 3,739,865 in 2017. This shows tremendous performance of the business and also depicts operational efficiency of the business. The computation of debt equity ratio of the business is shown below:
The debt equity ratio shows that the proportion of debt in the capital structure mix is much more than the equity mix in the capital structure of the business. The business as per the annual report of the company for the year 2017 shows that the business does not utilizes any borrowings in the capital mix of the business. Therefore, the business mostly relies on the equity capital as the main source of finance for the activities of the business.
The major risks or problems which are faced by the management of Kogan ltd are clearly indicated in the annual report of the company. The retail environment and economic condition in the country is not stable and things can be difficult for the business. In addition to this, Kogan company faces intense competition in the market as clearly indicated in the annual report of the company as per 2017 report.
The cash balance of the business has decreased significantly from the previous year which shows the liquidity position of the business has improved significantly as shown. The reasons for such an increase in the cash flow of the business can be attributed to the following reasons:
As per the annual report of the business, the profitability of the business which is shown in the income statement of the business has increased as shown in the annual reports of the company. The rise in the profitability of the business is due to the improved operational performance of the company and better sales generation for the business. The profit of the business has increased to $ 3,739,865 which was just $ 809,149 in 2016.
The financial stability of the company is also appropriate as the company is engaged in retail business which has various diversification. The efficiency of the business is also considered to be good when measured with the operational capacity of the business.
As per the question, the business is able to consolidate the profits of the business effectively and there has been a significant increase in the profits of the business. The income statement of the business shows considerable rise in the profits of the business.
The annual reports of the business clearly indicate that the management of Kogan ltd uses more of equity capital and does not rely on the debt capital of the business. The capital structure which is used by Kogan ltd for the year 2017 shows that the capital is made up of only equity capital funds and does not incorporate debt capital funds. This suggest that the business should use more of Debt capital to attain a favorable capital structure for the business and for any funding required for any future operations.
In order to clearly explain the performance of the Kogan ltd, significant ratios are calculated. The ratios which are calculated are financial indicators as to how the business is performing and such ratios include profitability ratios, liquidity ratios and stability ratios. The calculations for the same is shown in the table format below:
The net profit margin of the company as calculated shows that the same has increased in comparison to previous year’s results. The profits of the business have increased from previous year estimate due to the rise in revenue which is received from investments. The overall profits from operations has decreased as per the estimates of previous year. The return on assets and return on equity has also increased which are positive indicators of the business as the return which is received from the use of the assets and the returns which the business generates for the shareholders. The earnings per share of the business has reduced as shown in the annual report of the company which signifies that there is fall in dividends of the business.
The current ratio of the business shows that the liquidity of the business has significantly improved in comparison to previous year’s estimates. This shows an improvement in the liquidity position of the company. The debtor and inventory collection period which shows the efficiency of the business in analysis of the operational capabilities of the business. Both the results show favorable outcome for the company as both have reduced. This shows the operational strength of the business in collection of funds and effective use of inventories. The debt ratio of Kogan ltd is zero as the borrowings of the business for the year 2017 is shown.
The management of Kogan ltd is engaged in provided and formulating the best policies for the purpose of effective corporate governance of the business. The corporate governance statement which is shown in the annual report of the company as per 2017 shows that the business follows the Corporate Governance Principles as set out by ASX council.
The role of the board of directors of the business are responsible for the overall management of the company and also for supervising whether the policies which are implemented by the company are followed or not. The strategies of the business are formulated in such a way such that the expectations of the shareholders are always given priority and the overall activities of the business are conducted in such a way that all the requirements of ASX’s principles are followed. In addition to this, the board has established all significant committee which play a vital role in the overall management of the business. The management of Kogan ltd complies with the standards of accounting as prescribed by AASB and also follow the tax regulations established by ATO as is evident from the annual reports of the company.
The company is engaged in the business of retail industry and the business faces risks of fluctuations in markets. The major risks which the business faces are related to the intense competition which the business faces from the competitors in retail industry. There is always the risk of fluctuations in the prices in the market and there is a high chance of losses in such a situation.
The business is engaged in the sale of variety of products which are for the retail business and the same are sold in online transactions. In addition to this, the business faces intense competition from the other retail giants like Amazon.
The risk management strategies which are followed by the business are shown below in details:
The business as per the annual report considers equity capital which is used by the business in the capital structure of the business. However, the management can use more of debt-based capital in order to obtain a favorable mix in the capital structure of the business. The business can use retained earnings as well as a potential source. In addition to this, the company can undertake investments in foreign bonds.
The different taxes which are applicable on a business in Australia are stated below:
As per the tax rulings which are provided by ATO, most of the expenses which are incurred by the businesses during the course of the business are allowed as deductions for the business. Some of these deductions that a business can claim as deduction are given below:
As per the provisions which are provided by Australian Tax Office (ATO), the general rule is that if any company spends money for the purpose of earning revenues for the business then the business can claim the deduction immediately or even overtime. In order to claim an expense as deduction the following needs to be established:
As per the provisions which is provided by ATO, if an employee stays away from home for business travel for one or more than one night than proper documentations of the expenses need to be made in order to claim the deduction. In case the stay is for more than 6 nights, a proper diary is to be made which contains all expenses related to the business. In certain cases, fringe benefit taxes apply when employer incurs expenses for private tour of the employee.
If a business chooses to follow simplified depreciation rules than the business needs to consider and follow the following:
If the business does not follow the simplified depreciation rule than it must follow the general depreciation rules. This rule set the amount which can be claimed as deduction based on the useful life of the asset. The depreciation is calculated following prime cost method or diminishing value method.
The simplified rule applies to a small business which has a turnover less than $10 million from 1st July 2016 or $ 2 million for any previous years. The deduction will be allowed at 15% or the first year and at 30% for the second year.
Prepaid expenses which are incurred by small business are immediately deductible under 12 months rule if the following are satisfied:
In case the 2 months rule is not meet, then the business cannot claim deduction for the expenses which was incurred in a similar fashion. Small business can also use simplified tax system (STS) accounting method as well.
In order to access such a concession most of the business uses 12 months rule as it simplifies the entire process and is mostly used in businesses.
The time limit which is set for amending the tax assessments for individuals and small business is two years and for other categories of tax payers it is four years from the day when the notice of assessment is received from ATO.
The four scenarios where CGT concessions are allowed as per the provisions of ATO are:
As per the provisions which are provided by ATO, a business can vary its PAYG installments. However, if the business ends up payment too low which is lesser than 85% of the amount which was actually needed to be paid than the business will be charged general interest for such a default.
The concessions which are available for goods and service tax are given below:
The areas which can bring about issues in the overall tax computations in a business are treatment of depreciation funds which can be done under simplified system and general system. Then there is a case where stamp duty is to be paid for superannuation fund and also there is a situation with dividend access shares.
The techniques which are used for financial forecasting are given below:
The financial risks which are faced by business are given below in point form:
The measure which can be taken for managing the common risks which the business faces are given below:
The legal rights of a client are given below in details:
The formats which are used business for depicting the financial information of the business are Financial Statements, Budgets, AGM presentations and Half yearly performance reports.
Australian Privacy Principles: As per this principle all Australian and Norfolk Island Government Agencies, all private sector as well as public sector and NPO which has a turnover of $ 3 million must handle, use and manage personal information. The principles are covered under Privacy Act 1988.
Stamp Duty Act: Stamp Duty is a tax which is on documents which are imposed by state governments and the nature of the tax varies from one state to another state. Transactions like, leases and mortgage, hire purchase agreements, transfer of property requires stamp duty taxes.
Taxation Acts: The taxation acts are introduced by the tax regulating authority in Australia which is the ATO and is also responsible for amendments and introductions of new taxation acts. An example can be given of the GST act introduced by the ATO.
Trades Practice Act: This act was introduced for the purpose of ensure that effective competitive pressure exist in the market place. In addition to this, the act was responsible for preventing monopolistic practices which can affect the competition of the business.
Profit and Loss Statement: The profit and loss statement show the expenses which the business has incurred during the year and also the income which the business has earned during the year. In addition to this, the profit and loss statement depicts the financial performance of the business in terms of either profit or losses as per the performance.
Balance Sheet: The balance sheet depicts the financial position of the business at the end of a particular period. The balance sheet shows the total assets which are possessed by the business and also the total liabilities which the business accrues during the year. The assets and liabilities sides of the balance sheet matches to show accuracy and precision in preparation of financial statements.
Statement of Changes in Equity: This statement shows the changes which takes place in the equity related items of the business. This statement effectively shows the fluctuations in comparison with the estimates from previous year.
The cash flow statement forms part of the financial statements of the business and the statement is prepared for the purpose of showing the cash position of the business at the end of a period. Cash flow statement shows cash from operations, cash from investing activities and cash from financing activities. The cash flow statement shows the various changes that takes place in the cash position and also shows the liquidity of the business.
The role of Budgeting in a business is very important nowadays. Budgets provides the business a means to plan for the future operations and effectively forecast the resources which are required by the business. In addition to this, budgets provide a means to the business to control the activities of the business and ensure that performance of the business is on the right tracks as per the plan and goals of the business.
Financial products refer to the instruments which are used by business such as bond, securities and other sort of investments. Two important sources of financial information are stock market and banking institutions which offer securities as well.
Treasury is a department which is normally found in financial organizations and even in some businesses. The main purpose of treasury is to maintain the inflow and outflow of cash of the business. In addition to this, they are responsible for sanctioning any amount of cash for the use of business or as a loan in case of banking institute. In addition to this, treasury also maintains liquid assets and investments.
Reference
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Davies, Adrian. Best practice in corporate governance: Building reputation and sustainable success. Routledge, 2016.
Gitman, Lawrence J., Roger Juchau, and Jack Flanagan. Principles of managerial finance. Pearson Higher Education AU, 2015.
Heikal, Mohd, Muammar Khaddafi, and Ainatul Ummah. “Influence analysis of return on assets (ROA), return on equity (ROE), net profit margin (NPM), debt to equity ratio (DER), and current ratio (CR), against corporate profit growth in automotive in Indonesia Stock Exchange.” International Journal of Academic Research in Business and Social Sciences 4, no. 12 (2014): 101.
Hills, John. Wealth in the UK: distribution, accumulation, and policy. Oxford University Press, 2013.
Kogancorporate.com. (2018). [online] Available at: https://www.kogancorporate.com/document/73c43b2fa1cd4706851051ddaaced964/KOG0004%20AR17_PFO_web.pdf [Accessed 29 Jun. 2018].
McKernan, Signe-Mary, Caroline Ratcliffe, C. Eugene Steuerle, and Sisi Zhang. Less than equal: Racial disparities in wealth accumulation. Washington, DC: Urban Institute, 2013.
Reid, Walter, and David Roderic Myddelton. The meaning of company accounts. Routledge, 2017.
Robb, Alicia M., and David T. Robinson. “The capital structure decisions of new firms.” The Review of Financial Studies 27, no. 1 (2014): 153-179.
Tricker, RI Bob, and Robert Ian Tricker. Corporate governance: Principles, policies, and practices. Oxford University Press, USA, 2015.
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