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Select Harvests Company is one of the leading vertically integrated nut and health food Company in the Australia. It has core capabilities in different segments include Horticulture, forest Management, dealing out, and Sales and Marketing. These competencies enable the company to get benefit throughout the value chain. Besides this, Select Harvests Corporation is the largest almond farmer, manufacturer, processor and marketer of nut products, strength munchies and breakfast cereal to retail and industrial markets (Select Harvests, 2016).
Further, it exports the almond worldwide. It also builds strong relationships with India and China that are fast growing markets together with maintain markets in Asia, Europe, and the Middle East. It supplies both branded and private label goods and services to retailers, distributors and industrial users. Company deals in different retail brands named Soland, Sunsol, Lucky, and NuVitality. Along with, company supplies some brands to wholesale and industrial markets include Renshaw and Allina Farms. The company also manage a broad range of almond operations like snacking and cooking nuts, health mixes (nuts, seeds, grains) and muesli (Select Harvests, 2016).
This report discusses the financial performance of Select Harvests Company. It also analyzes distinct kinds of financial reports, which is used to understand the financial strength of the firm. These kinds of financial reports include the Balance sheet, income statement, and cash flows statements. Further, this report also evaluates recommendations to enhance the financial position of the corporation.
In accounting, financial statements are the record of different financial activities of the business, or any other entity. It contains all financial information related to a business and reviews the debts, equity, and resources of the company in a particular time of period (Fridson and Alvarez, 2011). Generally, a financial statement of the company includes balance sheet, shareholder’s equity, statement of profit and loss, and statement of cash flow which highlight the financial position of the company
It is a financial statement of the company that contains the information of company’s assets, liabilities and stockholder’s equity over a specific time period (Drake and Fabozzi, 2012). These three segments of the balance sheet are the obligations of the company that include account receivable, inventory, loans payable, and provisions.
The current assets of the company are presented as a liquidity of the company that can be turn into cash in the operating cycle. Current assets include stocks, prepaid expenses, accounts receivables, cash and other liquid resources which are equivalent to cash or quickly convertible into cash. Furthermore, non-current are that resources of the company that are not likely to convert into cash and used for long term economic benefits (Wahlen et al, 2014). Non-current assets are also known as long-term assets that include intangible assets like brand appreciation, goodwill, patents, trademarks, and domains. Investments in other corporations, building, land, equipments, furnishings, and leaseholds improvements also included in non-current assets. These assets depreciate over the time period.
On the other side, liabilities are legal binding obligations of the firm in order to pay funds to another party for ongoing activities of the business. The examples of liabilities of a firm are wages payable, taxes, accrued expenses, and accounts payable. Liabilities are classified as current liabilities and non-current liabilities (Robinson et al, 2015). The liabilities which are expected to be settled in financial year are current liabilities such as accounts owed, temporary liabilities, accumulated liabilities, and other unpaid amount. All other liabilities are known as non-current liabilities or long-term liabilities. Non-current liabilities are expected to pay within more than one account period (Zadek, et al., 2013). Long-term liabilities include bonds owed, durable loans, and debts of long-standing lease.
Moreover, the segment Stockholder’s equity is the element of financial statement which determines the company’s financial position in terms of obtained capital from investors by issuing preference shares (Jack, 2012). In balance sheet, this segment includes different elements like paid-in capital, retained earnings, and contributed capital.
The above table determines that total current assets of Harvests Company are increased in financial year 2014 to 2015 from 10.8% to 52.06%. It point outs that in this financial year Harvests Company has enough capital and additional resources of cash which are convertible in cash within this accounting period. Moreover, in this financial year non-current assets of Harvests Company also increased from 7.49% to 44.33%. These increased non-current assets evaluates that the company has essential and enough assets that are beneficial to provide long-term benefits to the company in compare of previous year. The increased assets of the company determine that the company is more capable to its productivity with great efforts and can get its future goals and objectives.
Moreover, total current liabilities for the company in 2014 to 2015 has increased from -55.74% to 82.10% which presents that the short-term liabilities of the company has increased and the company has not willing to pay its debts within this accounting period as compare of precedent year. The increased current liabilities also indicate that the outstanding obligations of the company increased which may affect the company’s market position and performance. Simultaneously, non-current liabilities of the company are decreased in this financial year from 79.63% to 14.26% which shows that Harvests is capable to meet its long-term debts in compare of preceding financial year.
Additionally, total stockholder’s equity of Harvests Company has risen in 2014 to 2015 from 9.96% to 63.84%. It means that the company had received enough and more amount of capital from its stockholders as compare of previous year. The increased stockholder’s equity also shows that the investors have willing to invest in the company. It also determines that the retained earnings of the company also increased that indicates that Harvests Company become more financial strong for reinvestment and can easily expand its business. The company may use this increased capital to pay its debts.
Therefore, it can be said that the company’s financial position is sound because its current assets and non-current assets are favorable for the company. Long-term liabilities and stock holder’s equity also presents that the company has enough amount of capital for further expansion. But, it is necessary to make effective policy for the accomplishment of current liabilities.
The term shareholder’s equity is residual claim made by the company’s owner after paid all liabilities (Feldman and Libman, 2011). In company’s balance sheet this section includes different elements such as retained earnings, paid-in capital, and common stock. Here, retained earnings are a proportion of net earnings which is not paid to its shareholders and retained for reinvestment in company’s core business. It is also use to pay debts of the company. Moreover, paid-in capital is the company’s capital which is received from investors by issuing common share or preferred shares (Weygandt, et al., 2015). This capital may be less than total capital of the company because the company may not sell all shares to its share holders. The below table demonstrates about stockholder’s equity of Harvests company:
From the above table it is evaluated that common stock on the company has increased from 2.82% to 70.62% in 2014 to 2015. It is favorable for the company because in this period the company received more capital from its investors which determines that the company become more financial strong and the shareholders are interested to invest in company. Investors have believed that the company may give good profit against their investment. Additionally, in 2014 to 2015 retained earnings of the company is increased from 18.95% to 64.45% which illustrates that the company get enough incomes from its assets and can a good reinvest in its core business with strong financial position. In other words, retained earnings of the company depicts that the company got good profit in this financial year and has enough capital to pay short-term debts.
An income statement is one of the type financial statements that represent the financial performance of corporation ended the particular accounting period. Financial performance is evaluated by a summary of business activities like revenues and expenses that incurred by the company from both the working and non-operating activities (Haller and van Staden, 2014). It also depicts the net profit or loss that incurred by company ended the particular accounting period. This statement shows revenues in the beginning and also shows net income and earnings per share (EPS) in the last. There are two main elements involved in the income statement includes the operating and non-operating (Curtis, et al., 2014). The working activities of the P&L statement disclose revenues and expenses which are the direct outcome of the regular business operation.
It is also stated that revenue is generated from selling the goods and services. It is vital for all organization to enlarge its business because sales are persisted from one accounting period to another. On the other side, the cost of goods sold represents the expenses that are an important element to selling the goods (Marshall, et al., 2011). There are different costs are associated with selling the goods in the stock of company named direct labor, material, and overhead cost.
Moreover, total expenses represented another part of the operating activities in the income statement. It is the sum amount of the cost of goods sold and operating costs. Along with this, non-operating expenses are the non-operating activities which show the material cost and expenses related to the revenue item. It is featured by extraordinary item and irregularity of occurrence.
At the same time, non-operating income is another element of company’s income that defines deed which is not related to the core business activities. This income and losses gained by the corporation from the investment, foreign exchange, assets written down value, and other nonoperating revenue and expense. Furthermore, earning per share is the essential component in the income statement that depicts income in dollars which have earned by the corporation in the particular accounting period (Delgado, et al., 2012). It indicated firms per share of its common share. The following statement shows the increase and decrease of performance in Select Harvests Company’s income statement:
As per the above table, it is exemplified that total operating revenue has increased from -2% to -19% in the year of 2014 to 2015. Because, Select Harvests Company is proficient in selling its goods and services as compared to the past period hence, it attains high revenue from its operating activities. Furthermore, the cost of goods sold has increased from -8% to 17% in 2014 to 2015. Because, Select Harvests Company has exercised the cost reduction mechanism in food manufacturing and process of harvest and crop business (Select Harvests, 2015). Moreover, company also eradicated the depletion from food manufacturing process, and crop and harvest processes. Further, the company also prevents the excess production, waiting time, carrying a charge, excess stock, and redundant activity.
Besides this, as per the table, it is illustrated that total expense of company has increased from -16% to -12% in 2014 to 2015 i.e. unfavorable. It indicates that company is unable to cut down its cost in 2015. Along with this, non-operating activities have risen from 20% in 2015 as compared to the previous years. Further, the income that earned by company from non-operating activities has declined 12% in 2014 as compared to an earlier period (Select Harvests, 2014). It shows that company declares a high dividend as compared to the previous year and also gained return from the investment. As a result, income from extraordinary item has increased in the income statement in 2015. As well as, EPS has declined from 6.20 to 1.25 in 2014 to 2015. It depicts that company’s need to enhance its profitability.
The statement of cash flow is an important financial statement which also known as cash flow statement. This financial statement focuses on inflow and out flow of cash of an organization (Nguyen, 2010). Therefore, it demonstrates changes in cash and equivalent to cash rather than working capital of the company. The elements included in cash flow statement are cash flow from operating activities, cash flow from financing activities, and cash flow from financing activities.
The first element cash flow from operating activities constitutes the business activities that generate revenue for the business. The operating activities such as sale of the product, providing services, royalties, fines, commissions, suppliers, and lawsuits are used to carry out cash in the company. The element cash from operating activities is generally compared with company’s net income. If generated cash from operating activities is higher in compare of its net income then the earnings of the company said to be high quality (Fridson and Alvarez, 2011). This element is used to measure the ability of a company to make cash from its core operating with excluding the ability of purchasing assets and capital expenditures for new equipments. It also excludes the amount paid to its stock holders as dividend, received amount by issuing shares and bonds.
The second element cash flow from financing activities are that activities that may alter the borrowings or equity of the company. In a company different activities like sale of stock, issuance of bonds, repurchase of company’s shares and dividend’s payment are included in financing activities (Zaimah, et al., 2015). This element is used to understand the company’s financial position. If the cash flow of a company increases, through bonds, shares, and dividends then the financial position and assets of the company also increases.
Moreover, cash flow from investing activities constitutes those payments that are made to acquire assets for the business as well as cash received from sale of these assets (Rezaee and Riley, 2011). Investing activities includes purchase of assets for long term like equipments and plant. In cash flow statement this element is used to understand the investing resources of the company. Cash flow from investing activities provides the information of company’s profitability in a specified time of period.
From the above table it can be analyzed that in 2015 net cash inflow from operating activities is decreased from 4.69% to 0.32% that shows that the company generated less cash inflow from its operating activities or operating activities of the company is not capable to generate enough cash for the business. Company’s operating activities like distributing, manufacturing, and marketing are not providing the majority of cash flow as a profitable company. Furthermore, net cash inflow from financing activities of the firm increased from -0.78 to 15.16% in year 2015. It indicates that the company became more capable to generate enough amounts from its financial activities in compare of past financial years. The flow of money into company is more than outflow of the money in to company. It represents that the assets of the company is increasing. Additionally, cash flow from investing activities of Harvests Company is also increased from 1.14% to 2.35% in 2014 to 2015 which presents that the company is capable to obtain cash from its investing activities. The company is getting good results from its investments in the market and its assets. Besides this, the net cash flow of the company is increased from -1.44 to 1.99% in 2015 in compare of 2014. The increased net cash flow determines that Harvests Company is profitable for the investors and able to maintain its liquidity position. This statement shows the operating activities, working capital, and financing activities of the company are appropriate to expand its business with higher productivity.
Conclusion
According to the above interpretation, it is summarized that financial position of Select Harvests Corporation is sound because it has sufficient amount of current asset to carry on business operation cycle. Therefore, it is said that Select Harvests Company is proficient in meeting its short-term obligations on time. Further, it has an adequate non-current asset that is effective to expand the business in long run. It is also stated that Select Harvests Company enables to accomplish its noncurrent liabilities on time that increases its creditworthiness in the market.
Along with this, it is concluded that companies retain earnings is increased so, it enables to declare more dividend to its investors. Besides this, it is stated that Select Harvests Company is obtained higher profit due to increase revenue and decline expenses. Furthermore, it is concluded that Select Harvests Corporation enable to create cash inflow from its operating financing, and investing activities. Consequently, its cash position or liquidity strength is good as compared to earlier year.
It is recommended that Select Harvests Corporation should maintain its operating activities which take the time to convert stock into cash. It can be a beneficial strategy that can enable the company to accomplish its short term debts. Furthermore, it is suggested that Select Harvests Corporation should reinvest it’s retained earning into portfolio investment to continue to get profits. This strategy can be valuable for shareholders to get high dividend because this strategy makes able to company to contribute their profit in dividends.
Moreover, Select Harvests Company should use the effective approach such as selling the inventory in cash and also declines the credit period of the collection in order to the growth of the business. Apart from this, it is stated that company revenues are high and expenses are low so, the company should keep their current marketing strategies to obtain the long term advantages. Because, current marketing strategies and production strategies are effective and efficient so, the company will be enabled to maintain their cash flow position in near future.
References
Curtis, A., McVay, S., and Wolfe, M. (2014) ‘An analysis of the implications of discontinued operations for continuing income’, Journal of Accounting and Public Policy, 33(2), pp. 190-201.
Delgado, R. A., Barcena, L. S., and Manzanedo, M. Á. (2012) An Empirical Analysis of the Most Influential Components of an Income Statement. InIndustrial Engineering: Innovative Networks (pp. 79-84). London.: Springer.
Drake, P., and Fabozzi, F. (2012) Analysis of Financial Statements. Sydney: John Wiley & Sons.
Feldman, M. and Libman A. (2011) Crash Course in Accounting and Financial Statement Analysis. Sydney: John Wiley & Sons.
Fridson, M. and Alvarez, F. (2011) Financial Statement Analysis: A Practitioner’s Guide. Sydney: John Wiley & Sons.
Haller, A., and van Staden, C. (2014) ‘The value added statement–an appropriate instrument for Integrated Reporting’, Accounting, Auditing & Accountability Journal, 27(7), pp. 1190-1216.
Marshall, D. H., McManus, W. W., and Viele, D. F. (2011) Accounting. UK: McGraw-Hill Irwin.
Nguyen, K. (2010) Financial Statement Fraud: Motives, Methods, Cases and Detection. Australia: Universal-Publishers.
Rezaee, Z. and Riley, R. (2011) Financial Statement Fraud Defined. Sydney: John Wiley & Sons.
Robinson, T., Henry, E., Pirie, W. and broihahn, M. (2015) International Financial Statement Analysis Workbook. Sydney: John Wiley & Sons.
Select Harvests (2014) Annual report. [Online]. Available at: https://www.selectharvests.com.au/doc/announcements/Select%20Harvests%20Annual%20Report%202014%20Final.pdf (Accessed: 22 September 2016).
Select Harvests (2015) Annual report. [Online]. Available at: https://www.selectharvests.com.au/doc/announcements/Select%20Harvests%202015%20Annual%20Report%20ASX.pdf (Accessed: 22 September 2016).
Select Harvests (2016) Company Profile. [Online]. Available at: https://www.selectharvests.com.au/company-profile (Accessed: 22 September 2016).
Wahlen, J., Baginski, S. and Bradshaw, M. (2014) Financial Reporting, Financial Statement Analysis and Valuation. Melbourne: Cengage Learning.
Weygandt, J. J., Kimmel, P. D., and Kieso, D. E. (2015) Financial and Managerial Accounting. USA: John Wiley and Sons.
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Zadek, S., Evans, R., and Pruzan, P. (2013) Building corporate accountability: Emerging practice in social and ethical accounting and auditing. UK: Routledge.
Zaimah, R., Masud, J., Haron, S. A., Sarmila, M. S., and Awang, A. H. (2015) ‘Financial decision making among the dual-income families in Malaysia’, Mediterranean Journal of Social Sciences, 6(4), P. 70.
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