1: The percentage increase in gross profit
Gross profit margin is the amount of revenue left after meeting all the expenses related to cost of goods sold. Gross profit margin of Bellamy’s Australia Ltd for year 2015 and 2016 was calculated below and increase in percentage of gross profit for year 2016 was given in table below:
|
Bellamy’s Australia Ltd |
||
|
Financial Data |
2015 |
2016 |
|
Data in $’000 |
||
|
Gross profit |
$ 41,207.00 |
$ 111,728.00 |
|
Net Revenue |
$ 125,302.00 |
$ 244,583.00 |
|
Bellamy’s Australia Ltd |
|||
|
Ratio |
2015 |
2016 |
Increase in percentage |
|
Gross Profit percentage |
32.89% |
45.68% |
38.91% |
(Annual report, 2016)
Net profit is defined as profit left behind after subtracting all the expenses that occurred for making sales of goods or services and any expenses related to tax and interest on capital borrowed (Bull, 2007). Net profit margin after tax for year 2015 and 2016 is given below and increase in net profit margin is also shown in below table:
|
Bellamy’s Australia Ltd |
||
|
Financial Data |
2015 |
2016 |
|
Data in $’000 |
||
|
Net profit after tax |
$ 9,073.00 |
$ 38,328.00 |
|
Net Revenue |
$ 125,302.00 |
$ 244,583.00 |
|
Bellamy’s Australia Ltd |
|||
|
Ratio |
2015 |
2016 |
Increase in percentage |
|
Net Profit Percentage |
7.24% |
15.67% |
116.42% |
(Annual report, 2016)
Return on investment is described as profit earned on the capital invested by the owner of the company. It is calculated as EBIT divided by the invested assets (Mumba, 2013). Information in the below table:
|
Bellamy’s Australia Ltd |
||
|
Financial Data |
2015 |
2016 |
|
Data in $’000 |
||
|
Net profit after tax |
$ 9,073.00 |
$ 38,328.00 |
|
Invested Assets |
$ 72,170.00 |
$ 143,501.00 |
|
Bellamy’s Australia Ltd |
|||
|
Ratio |
2015 |
2016 |
Increase in percentage |
|
Return on Investment |
12.57% |
26.71% |
112.46% |
(Annual report, 2016)
Consolidated financial statements means the financial statements of parent company that includes the financial reports of fully owned subsidiary companies. In short it can be said that consolidated financial statements includes financial information on company itself and other companies fully owned by the parent company (Fridson and Alvarez, 2011). Consolidated statement for profit and loss shows the summary of revenue and expenses occurred for the mentioned period generally one financial year. It reflects company’s profitability position during the current year as compare to previous year as consolidated statements always includes financial data for current year as well for previous year.
On looking at the consolidated financial statement for profit and loss for year 2016 it can be said that there was certain increase in net revenue during year 2016 that indicates company has progressed a lot in year 2016 as compare to 2015. Earning per share has changed from 9.8 cents to 39.8 cents that shows major strength of the company in year 2016 (Annual report, 2016).
Consolidated statements of financial position means balance sheet of that contains the financial data of parent company as well as financial data of subsidiary companies owned by the parent company.
Consolidated statements of financial position for Bellamy’s Australia Ltd shows that liquidity and capital structure position is well managed and it is very strong in year 2016 as compare to year 2015 (Annual report, 2016).
Consolidated statements of cash flow means cash flow made for parent company as well as for subsidiary companies (Drake and Fabozzi, 2012). These statements contain the information about the cash generated from activities like operating, financing and investment activities.
Looking at the consolidated statement of cash flow of Bellamy’s Australia Ltd indicates that company has generated cash flow from the operating activities and it can be said that there was increase in cash flow of more than 85% from operating activity (Annual report, 2016).
It is highly recommended that investors must hold or buy the shares as company is in growth face and there are strong chances that company will provide huge returns in future period (Annual report, 2016).
Annual report is simply a primary source by the listed public as well as private companies to acknowledge investors and stakeholders about the history, progress and future plans of the company. An annual report is bound by laws and accounting practices to reveal true information about the financial of the company. However, there are certain pragmatic limitations of information provided in the annual reports such as non-accessibility of annual reports, lack of credibility information and delays in the information (Alattar and al-khater, 2008). Sometimes information provided by the company is only focused on enticing investors by representing biased and favourable information rather then true information. Thus, this study is researching on the reliability over annual report on provided information being outdated or not.
The most reliable source of information of the company are said to be provided by the primary sources like annual reports and magazines of the company that can be directly collected through the companies (Bowman, 2014). Annual reports are attraction and attention point for the stakeholders especially investors of the company due to which they are able to make certain and satisfied decision to invest their money on a company. Annual report provides almost all the information associated with the company such as vision, mission and objectives, corporation information, director’s report, management information of analysis and decision, financial history and insight of product and cognition of corporate governance (Ghazali, 2010). Furthermore, annual reports are a tool for less profit earned company to provide information which favours their company and look all good from sight by the decision makers and financial analyst.
Whereas, companies only provide information pertaining their growth in the market and achievement they have made so far in the most highlighted way. Today, annual reports are being used as a few paper or online presentation to capture the attention of the user and make them believe in their strategies of growth. Even if, it presents entire information true, there is a limitation in the presentation of annual reports that secretly hides important information that can change an investor’s decision about a company (Alzarouni, et al. 2011). Admittedly, with the various studies it has been found that there is a real gap between the information recorded in the annual reports and actual sceneries of the company which is significant information for the analysts. This information which is used in the annual reports can be out dated or arranged for short term and camouflaged the right information.
On the other hand, it has been seen that annual reports are the only source of information about a company plus it is legal document of the information that holds accurate information of a company. Every company presents its maximum financial related information as true in the annual reports. It gives the best journal for the decision makers of the company and future planning (Sarokin and Schulkin, 2016). It is also mostly discussed part of the annual general meeting of a company which implicates that the annual report information is marked by the top level management of the companies. The stakeholders of the company are also believed in the annual report as transparent and most crucial articulated document about the firm’s acknowledgement.
It has been found in a recent study that quality of the Chinese financial reports is very poor form past two decades. Companies with low profit margin and less investments/ diffused ownership with state control generate and use the poor quality of financial information (Wang and Wu, 2011). The main reason for the poor accounting is goal for the survival in the market only as they only show below-the-line items to represent their earnings and obviate the losses of the company. Moreover, china’s capital market is rather avoid these type of financial misleading as they are more concerned with the current years earning and no past concurrent earning are watched closely. It promotes and encourages Chinese firms to operate their business recklessly and more towards financial reporting of poor quality. On the other hand, the financial regulators persistently watch over these firms and discourage their activities among listed companies which are a positive occurrence in UAE as well as China (Alzarouni, et al. 2011).
Likewise, annual reports hold information merely which companies want to share in public. There are some areas and points which a company never shares with its investors or shareholders such as it real performance, strategies they are following to deal with the crisis and management of the organisation and risk involved in the Malaysian market (Ghazali, 2010). Thus, the information in the reports can only fulfils the initial requirements of enquires related to the company. Even sometimes, information is not accessible to the public about the company. The information in the annual reports is rather used for the insight or gets an idea of its future information on investments and strategies.
With the researches it has been illustrated that there are various other sources which should be watched closely and primarily to access the accurate information about the company such as direct visit to the company (Bowman, 2014). Though it has a limitation in itself as nobody can visit every firm always or any time, yet there are some other sources too to cater the reliable information. Journals and magazines published by the government, newspaper, internet authenticated sources can provide up-to date and relevant information about the company (Alzarouni, et al. 2011). In addition to this, company’s cash flow, income statements, balance sheets, notes for accounts and audit reports are the most credible primary resources for significant financial analysis of a company.
Conclusion
From the above information, it can be depicted that the annual reports are the legal documents that verifies the written information as true and legit. It is the most credible and foremost source of information about any company fro regular share investors and respective shareholders of the company. On the contrary, with some of the researches it has been found that for the survival of the company, Chinese firms are continuously using poor quality of financial reporting. It has also been noticed that there is very gap between information communicated through annual reports and needed by the decision makers. Hence, annual reports are especially designed attract the investors of the company and posses outdated or reliable information most of the times.
References
Alattar, J. M., and al-khater, K. 2008. An empirical investigation of users’ views on corporate annual reports in Qatar. International Journal of Commerce and Management, 17(4), pp. 312-325.
Alzarouni, A. et al. 2011. The Usefulness of Corporate Financial Reports: Evidence from the United Arab Emirates. Accounting & Taxation, 3(1), pp. 17-37.
Annual report 2016. Bellamy’s Australia Ltd. [Online]. Available at: https://investors.bellamysorganic.com.au/reports [Assessed on: 18 April, 2017].
Bowman, P. 2014. Handbook of Financial Public Relations. Butterworth-Heinemann.
Bull, R. 2007. Financial Ratios: How to use financial ratios to maximize value and success for your businesses. Elsevier.
Drake, P. P. and Fabozzi, F. J. 2012. Analysis of Financial Statements. John Wiley & Sons.
Fridson, M. S. and Alvarez, F. 2011. Financial Statement Analysis: A Practitioner’s Guide. John Wiley & Sons.
Ghazali, N. A. M. 2010. The Importance and Usefulness of Corporate Annual Reports in Malaysia. Gadjah Mada International Journal of Business, 12(1).
Mumba, C. 2013. Understanding Accounting and Finance: Theory and Practice. USA: Trafford Publishing.
Sarokin, D. and Schulkin, J. 2016. Missed Information: Better Information for Building a Wealthier, More Sustainable Future. MIT Press.
Wang, X., and Wu, M. 2011. The quality of financial reporting in China: An examination from an accounting restatement perspective. China Journal of Accounting Research, 4(4), pp. 167–196.
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