Accounting For Business Decisions For Investigating: Analysis Of Australian Dairy Farms Group

Executive Summary and Introduction

Discuss about the Accounting for Business Decisions for Helpful Investigating.

The company’s financial statements provide a very important basis for deriving economic information. It serves an essential data which is helpful in investigating the financial performance of a company. This report will be encompassing the concepts related to the financial statement and management decision making of the company listed in the Australian Stock Exchange. The main purpose behind the preparation of this project report is to analyze the financial position and performance of Australian Dairy Farms Group. This analysis will be supportive in numerous ways to the investors as it will identify whether investing in the company will be successful or not. This will also provide a deep insight about the company’s strategies and decision making within the industry. Initially, a brief description about Australian Dairy Farms Group has been discussed in the report. Further, in order examine the financial position of Australian Dairy Farms Group; a comprehensive analysis of company’s balance sheet has been done which includes Income Statement, Balance Sheet and Statement of Cash Flow for two years i.e. FY 2014 and FY 2015. The current economic position of the company has been analyzed within food, beverage and tobacco industry. The company has prepared its financial books as per the Corporations Act, 2001, prescribed by the Australian Accounting Standards Board. However, the company observed a downturn in the consecutive FY 2014 and 2015 but progressively it is aiming to improve its performance and also building such schemes which are attractive towards more consumers and investors. In this project report, all the major financial records and items affecting the financial position of the company are briefly discussed which in turn will eventually help to find out the financial viability of the company.

Australian Dairy Farms Group is an Australian based company. The company was originally founded as the Australian Dairy farmers Federation (ADFF) in the year 1942. Successively in 1993, Australian Dairy farmers Federation were integrated as a guarantee limited company and hence, its name changed to the Australian Dairy Farmers Group (Australian Dairy Farmers, 2016). The company operates within a dairy farming industry as a producer of fresh milk. Basically, the company functions in the areas of Victoria including Brucknell farms, Brucknell No 3 farm and Ignatios farm (Investsmart, 2016). It was established with a motive to enhance the sustainability and profitability of the farmers in the country. Currently, with the successful implementation of policies, the company is holding six dairy farms along with more than 3000 dairy livestock and water licenses together with plant and equipments so as to operate the farm (Australian Stock Exchange (ASX), 2016). The company has successfully converted itself into one of the leading producers of milk producers. The company has established a strong communal influence to the Government, society and industry on the nationwide issues distressing farmers and their prosperity (ASX, 2016). The constitution of Australian Dairy Farms Group is consisting of a National Council, five Policy Advisory Groups, six members of State Dairy Farmer Organization and Board. However, the company is committed to the highest standards regarding the safety of public health (Australian Dairy Farms Group (ADFL), 2016).

About the Company

Three financial statements including the balance sheet, the income statement and the cash flow statement are important to be analyzed because decision regarding the investment and accounting business management of the company can be analyzed with the help of these financial statements. The financial statements of Australian Dairy Farms Groups have been analyzed for the FY 2014 and FY 2015 in order to examine its stability within the dairy industry (Australian Dairy Farms Group, 2015).

The company’s financial statement has been analyzed and the percentage increase or decrease in its financial items from the balance sheet statement of Australian Dairy Farms Groups has been recorded.  

The current assets of a company indicate the total value of the assets which can be expected to be easily converted in the form of cash within a year. It is a vital asset for the operation of the company because these assets can be utilized to finance day to day function of the business activities. The purchase of the current assets varies from company to company, depending on the nature of activity within an organization. However, the current assets of the Australian Dairy Farms Group are comprised of cash, inventories (feedstock, silage and hay), debtors and other receivables.

Particulars	2014	2015	Change in the Value	Percentage increase or decrease
Current Assets	794,596	15,810,079	15015483	1889.700301

The current assets of Australian Dairy Farms Group have increased rapidly from FY 2014. A positive change has been recorded in the FY 2015 which was amounted to AUD $ 15,180,079. This boost has been resulted due to increase in its cash and inventories (Wall Street Journal (WSJ), 2016).  

The non-current assets indicate an investment made by a company for a long period of time and thus, its realization cannot be done within a year. These assets are also known as the long term assets. Australian Dairy Farms Groups includes plant, property, equipment and biological assets as non-current assets (Investsmart, 2016).

Particulars	2014	2015	Change in the Value	Percentage increase or decrease
Non-Current Assets	0	16,876,463	16876463	0

In the FY 2014, Australian Dairy Farms Groups does not hold any non-current assets however, in FY 2015, the company invested AUD $ 16,876,463 to acquire these non-current assets in order to enhance its investment opportunities and future operations.  

Current liabilities show the company’s obligation payable within a year. Australian Dairy Farms Groups’ current liabilities are consists of short term borrowings, provisions and trade payables.

Particulars	2014	2015	Change in the Value	Percentage increase or decrease
Current liabilities	311,147	1,191,922	880775	283.0735954

The company’s current liabilities has been raised by AUD $ 880775 i.e. 283.07% increase from the last FY 2014. Therefore, current liabilities of the company have not grown as the assets of the company have increased (Investing, 2016).

Main Body

Non-current liabilities indicate the financial obligation of a company for more than one accounting year. The non-current liabilities of the company are comprised of long term borrowings.

Particulars	2014	2015	Change in the Value	Percentage increase or decrease
Non-Current Liabilities	0	6,407,942	6407942	0

In the FY 2014, current liabilities of the company were nil but, in FY 2015, the company secured AUD $ 6407942 as its non-current liabilities. Therefore, the non-current liabilities of the company have appeared in the FY 2015.

Stockholder’s equity represented in the balance sheet determines the amount of received capital from the investors in substitute of the stock or shares held with them.  

Particulars	2014	2015	Change in the Value	Percentage increase or decrease
Stockholder’s Equity	483,449	25,086,678	24603229	5089.105366

The stockholder’s equity has tremendously increased over the last FY 2014 with the percentage of 5089.1. In 2014, it was recorded as AUD $ 483,449 and increased to AUD $ 25,086,678 in the FY 2015 (Wall Street Journal, 2016).

Comparative Financial Condition of the Company:

The financial condition of the company is strong within an industry as it records increase in its total assets, liabilities and shareholder’s equity during the FY 2015. The assets of the company are comparatively more than its liabilities in both the financial year, which in turn shows high liquidity position of the company in the market. Whereas, company’s long term assets and liabilities has rapidly increased from the last FY 2014 and thus, a stable position of the company has been recorded.  Australian Dairy Farms Group has enhanced its business operations in the overall trading of food and beverage products (Investing, 2016).

The stockholder’s equity of Australian Dairy Farms Group is increasing from the last FY 2014. It records a positive change of USD $ 24,603,229 in FY 2015 which leads to the value of AUD $ 25,086,678. The capital composition of the company consists of debt and equity with high equity ratio. It reports 5089.10% increase in the stockholder’s equity from the last financial year 2014. The equity shares of the company include issued capital, retained earnings and reserves. However, with less proportion of debt, company is in the better position in the market within industry. 

Particulars	2014	2015	Change in the Value	Percentage increase or decrease
Issued Capital	7,866,059	14,830,305	6,964,246	88.53538983
Reserves	197,767	5,056	-192711	-97.44345619
Retained Earnings	-7,580,377	-8,396,350	-815973	10.76427993
Equity attributable to stockholders	483,449	6,439,011	5,955,562	1231.890437
Trust unit holders	0	18,647,667	18,647,667	0
Total Equity	483,449	25,086,678	24,603,229	5089.105366

The statement of profit and loss of the company is used to analyze the profitability and revenue of the firm during a particular period of time. This statement differs from company to company depending on its area of activity.

The total revenue of the company has increased to AUD $ 2,725,348 in 2015 with a positive increase of AUD $ 2,722,713 from the last FY 2014. This huge increase has been recorded due to arise in the sale of milk and livestock. The rent received by the company has also contributed to the increase in its revenue. However, a net loss of AUD $ 2,051,668 has been observed with the increase in its revenue in the year 2015 (Financial Times, 2016).

Particulars	2014	2015	Change in the Value	Percentage increase or decrease
Total Revenue	2,635	2,725,348	2,722,713	103328.7666

Statement of Financial Position

The cost of goods sold of the company is AUD $ 2,015,122 in the FY 2015 which indicates the sale of dairy related products. In the FY 2014, cost of dairy related products sold was nil which in turn shows increase in the cost of goods sold.

Particulars	2014	2015	Change in the Value	Percentage increase or decrease
Cost of Goods Sold	0	2015122	2015122	0

The total expenses of the company was AUD $ 426,524 in 2014 and increased by AUD $ 2459954, which leads to the positive value of the total expenses to AUD $ 2,886,478 in 2015. The company continues to maintain the same financial position in the market. However, 576.74% increase in the total expenses of the company has been observed (WSJ, 2016).

Particulars	2014	2015	Change in the Value	Percentage increase or decrease
Total Expenses (Before income Taxes)	426524	2886478	2459954	576.7445677

In the FY 2014, the company is having a loss of $ 426524. Subsequently, a positive change of AUD $ 933183 i.e. 218.78% increase has been recorded in the next year 2015. This has resulted into increase in the company’s net operating loss. The employment benefit expenses and finance cost of the company in 2015 was higher than its non- operating income which leads to increase in its non- operating losses (Investing, 2016).  

Particulars	2014	2015	Change in the Value	Percentage increase or decrease
Non-Operating Loss	426524	1,359,707	933183	218.7879228

In 2015, the earnings per common share of the company were recorded as 3.02. It has been observed the great change from the last year where the earnings per common share of the company was 0.7. This change leads to 331.42% increase in the company’s Earnings per common share (WSJ, 2016).

Particulars	2014	2015	Change in the Value	Percentage increase or decrease
Earnings per common share	0.7	3.02	2.32	331.4285714

Comparative Financial Operation of the Company:

The income position of the company is not efficient in its operation as         a continuous loss has been recorded in both the financial year 2014 and 2015. However, the company has significantly expanded its revenue with a positive change of AUD $ 2,722,713 in 2015. Australian Dairy Farms Groups has attained a milestone in its operation through increasing and stabilizing its sales during the year. It has raised its business market by growing its sale in milk and livestock. The total expenses of the company have also increased from the last FY 2015 with the increase in its income. In addition, the company’s earnings per share have also increased as compared to FY 2014 (ADFL, 2016).

The cash flow statement of the company states the generated cash and utilized during the accounting period. It involves the cash generated from the following activities i.e. cash flow from operating activities, investing activities and financing activities (Motlagh, 2013).

The company reports the net cash outflow from its operating activities. In 2014, the company is having a cash inflow from interest received and outflow of AUD $ 150282 in the form of finance cost and payment to employees and suppliers. In the FY 2015, company records an income of AUD $ 2382970 generated from interest received and amount received from the customers. But outflow of the company was higher than its inflow i.e. AUD $ 3151799. This has resulted into cash outflow from the operating activities of the company (ASX, 2015).

Particulars	2014	2015	Change in the Value	Percentage increase or decrease
Net cash outflow from operating activities	147,647	768,829	621,182	420.7210441

The cash inflow from the financing activities in 2014 was recorded as AUD $ 26,652 and has been increased by AUD $ 27969855 which comes to AUD $ 27,996,507 in the FY 2015. A 104944.67% boost in the value of net cash inflow of the company has observed in these two years. In the FY 2015, the company has generated income from the issued securities, unsecured loans and  facility provided by Commonwealth bank of Australia Limited, which results in the rapid increase of the cash generated from the financing activities (Investing, 2016).

Particulars	2014	2015	Change in the Value	Percentage increase or decrease
Net cash inflow from financing activities	26,652	27,996,507	27969855	104944.6758

The cash outflow of AUD $ 12,392,985 has been recorded in the FY 2015. However, the company’s cash flow from investing activities was nil in the previous year i.e. 2014. In 2015, the company has invested its cash through purchase of fixed and biological assets which results into cash outflow. However, it has generated an income of AUD $ 629826 from the sale of long term assets and acquisition of trust. 

Particulars	2014	2015	Change in the Value	Percentage increase or decrease
Net cash  outflow from investing activities	0	12,392,985	12392985	0

The company reports a net decrease in its cash equivalents in the FY 2014 i.e. AUD $ 120,995 during the year and net increase of cash i.e. AUD $ 14,834,693 in the FY 2015. There is 12360.58% increase in the net cash during this year and it records AUD $ 14,871,060 as cash at the end of the FY 2015.

Particulars	2014	2015	Change in the Value	Percentage increase or decrease
Net increase (decrease) in cash during the year	-120,995	14,834,693	14955688	12360.5835

Cash Position of the Company:

The cash position of the company indicates cash availability in the books of a company. It indicates the financial and liquidity strength of the company in the industry. The cash position of the company is stable with an available balance of AUD $ 14,871,060 in the FY 2015. Cash is continuously increasing in the recent years. However, in 2015 the company has made an investment in fixed assets which helps in generating funds for the future operations of the company. In terms of cash, position of the company is positive during 2015 with the outflow of cash in its operating and investing activity and inflow in the financing activity (Investing, 2016).

Part 3: Conclusion

Australian Dairy Farms Group is a company based in Australia operates under the Food, Beverage and Tobacco industry. Since its establishment, the company has proved it presence as a successful dairy producing company. The company aims to gradually increase the number of dairy farms in the primary region of Victoria and thus become one of the major milk suppliers in Australia over a period of time. Moreover, the company is continuously focusing on the quality of the products offered to the customers and committed towards the progress of the society as a whole. In the recent years, the company has recorded a significant improvement in its performance through increase in its sale in the FY 2015 as compared to FY 2014. The cash position of the company is also stable in the economy with a positive change in its cash flow during 2015. In order to expand its business, Australian Dairy Farms Group has invested its capital in the long term assets during the year. Therefore, investment made by the investors will support the product development of the company. Hence, with the stable and improved financial performance, Australian Dairy Farm Group is adding value to the development of the industry and country as well.

On the basis of the company’s financial position within the industry, here are some recommendations suggested for the improvement in the performance of the company in the near future.

The company should concentrate on the research and development program of the dairy products as it will help them in improving the existing process and thus, would help in developing new products under food, beverage and tobacco industry. The growth and success of the company can only be ensured through its quality of products offered to the customers and hence, the program of research and development is essential for the development of the company (The Australian, 2016).

The company should also focus on producing alternative dairy products in the market as it will help them in increasing their revenue and thereby profitability of the company will also likely to be increased. This will greatly contribute to the success of the company. It should also capture other area in the international market (The Australian, 2016).

The company should achieve its objectives keeping in mind the benefit and welfare of the society and the environment as it helps to create brand value among its competitors within the industry.

The company has several investment opportunities in the business. Through unique business strategy, Australian Dairy Farms Group should address its negative trend of generating profit in the market (Financial Time, 2016).

The company should allocate its resources in such a way that it maximizes return and thereby minimizes risk in the business operations. The cash available with the company is high which indicates its liquidity in the market, but sometimes large amount of cash is not beneficial for the company as it attracts less investment and thus remains idle for the company without maximizing return (Lemsec, 2015).

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