Financial Statements - Sullivan Barrett Pty Ltd - Case Study Example

Case Study: Sullivan Barrett Pty Ltd Name: Institution’s name: Date: IV. Annual Report for Sullivan Barrett Pty Ltd Director’s report The Director duly presents the report for the company’s financial statements for the year ended 30th June 2010. Principal Activity The main activity of Sullivan Company in the year of review is warehousing. The company, apart from its core objective, undertakes sales of goods and services. Meeting of directors The Annual general meeting for the company is usually held on 1st of July every year. Prior to tabling of this financial report, the company’s last meeting was held on 1st July 2009. Charitable and Political contribution The charitable donations realized by the company amounted to $3000 in the current financial year (2009 was $3250) The report has been prepared in accordance to Corporation Act (2001) and the Companies Act 2006 Part 15 which relates to small companies. On behalf of the Board: Mrs. P. Singalong –Secretary 18th August 2010 The adjusted financial statements for Sullivan Barrett Company are given as follows; Sullivan Barrett Pty Ltd 455 Mogil Rd Indooroopilly, QLD, 4068 Balance Sheet As at 30th June 2010 Assets $ $ $ Current assets Cash at bank 58824 Petty Cash 200 Trade Debtors 37278 GST Receivable 18855 Income Tax Receivables 9700 Inventory (Net) 222373 Prepaid Rent 17600 Total Current assets 364830 Non-Current Assets Leasehold Improvements (Net) 135190 Plant, Property and Equipment (Net) 55186 Leased Motor Vehicles (Net) 42920 Computer software (Net) 3456 Total Non-current Assets 236752 Total Assets 601582 Liabilities Current Liabilities Trade Creditors 8720 Deferred tax 24898 GST Payable 23837 PAYG Withholding 11226 PAYG Installment 2200 Loan- Luke Moran 59340 Loan- Leigh Sullivan 13990 Loan- Trish Barrett 13990 Total Current Liabilities 148101 Non-Current Liabilities Loan- Luke Moran 224857 Loan- Leigh Sullivan 58274 Loan- Trish Barrett 58274 Total Non-Current Liabilities 389955 Total Liabilities 538056 Net Assets 63526 Shareholder’s Equity Issued Capital 100 Current Year Profit 63426 Total Shareholder’s Equity 63526 Sullivan Barrett Pty Ltd 455 Mogil Rd Indooroopilly, QLD, 4068 Adjusted Profit & Loss statement $ $ Total Revenue 1109331 Cost of Goods sold 571227 Gross profit 538104 Total Expenses 443530 Additional expense Depreciation charge 14898 (468428) Operating Profit 69676 Income Tax Expense 0 Dividends Paid- T Barrett 2500 Dividends Paid- L Moran 1250 Dividends Paid- l Sullivan 2500 Total Other Expenses 6250 Net Profit 63426 Notes to Financial Statements reporting The financial statements have been prepared in accordance to the Corporation Act and AASB 101 regulations for special financial statements reporting. Other professional accounting techniques have also been incorporated in the financial statements a) Basis of accounting The historical cost basis have been used in the preparation of the financial statements except in the case of investment securities in which it is taken at the net realizable value b) Contribution Income The Company’s employers contributed towards the fund at the relevant agreed rate c) Property, Plant and Equipment The valuation of plant, property and equipment is taken at its cost. The depreciation charge was based on reducing balance method and was based on the individual asset’s lifetime. No residual value was allocated to the assets after their lifetime expired. d) Revenue was recognized when the amount was considered probable in attributing to economic benefit of the company and when it can be measured reliably. e) The company’s law suit of $25000 is not included in the financial statement as the event occurred on 19th July 2010 and the financial statement was prepared for the financial period up to 30th June 2010. The liability has not been confirmed whether it is probable or not but the amount charged is material according to IFRS. f) The financial statements have not been audited by the audit firm practitioners; therefore, no professional accounting has given his/her opinion on the fairness of the financial statements. Director’s declaration In Regard to the Director’s opinion of Sullivan Barrett Pty Ltd: a) The financial statements and accompanying notes provided comply with Corporation Act 2001, (except the exemption given by Australian securities & Investment Commission in note 24(c) as: i) The financial statements give a true and fair view of the Company’s financial position and the consolidated entity prior to the year ending 30th June 2010 and its performance thereon, as depicted by the results of the company; and ii) It complies with AASB regulations 2001; and b) The company can effectively pay its obligations when they are due and payable. In this regard reasonable grounds are provided to support this statement. This declaration has been duly in regard to Corporations Act 2001 section 295A for the financial year ending 30th June 2010 Signed at Indooroopilly this 18th day of August 2010 in accordance with director’s resolutions Sign Mr. L. Sullivan Director Sign M/s. Maryanne Director Accountants Compilation Report To the Board of Trustees Sullivan Barrett Pty Ltd We have analyzed and compiled the financial statements of Sullivan Barrett Pty Ltd as of 30th June 2010, in accordance with the Accounting Standards and Review Services. The financial statements have been prepared in regard to cash basis accounting, which comprehensive other than GAAPs basis. The financial statements are the representation of the company’s performance and we have not performed any audit to the underlying financial statements of Sullivan Barrett Pty Ltd. We, therefore, do not express our opinion in regard to the assets and liabilities of the company. The management of the company has decided to omit all the disclosures accompanying the financial statements prepared in cash basis accounting. In the case where the disclosures are included in the accompanying financial statements, the conclusion of the user of the financial statements can be influenced in regard to the Company’s liabilities and assets. Conclusively, the financial statements are not designed to be used to make conclusive decisions by the users. Certified Public Accountants August 18, 2010 V. Professional fee TAX INVOICE Mr. Shantell ABN: 14 901 044 418 248 Bateson rd Canberra. Date: August 18, 2010 To: Sullivan Barrett Pty Ltd 455 Mogil Rd Indooroopilly, QLD, 4068 Reference: Financial Statements Analysis Activity Hours Price per hr GST Total External Financial Statement 10 100 10 1100 MDA preparation 6 100 10 660 Total amount payable 1760 Total amount including GST of: 160 Total amount excluding GST 1600 VI. Management Discussion Analysis (MDA) The discussion and analysis carried out on the financial statements of Sullivan Barrett Pty Ltd Are aimed at ensuring that the reader or user of the financial statements is well acquainted with the undertakings of the company and as such a narrative overview is provided for the company in the period ended August 18, 2010. The information provided here should be in conjunction with the transmittal letter and the company’s financial statements provided thereon. Financial Highlights The issued share capital in which the company floated to the public only ensured that $100 was raised from such an arrangement. Major focus shifted towards the profit outlay that ensured the company’s operations succeeded. The funding of $63000 came from the reported profits in the financial period. The company realized high profits in its initial year of operation which was beyond the expected value that the management had speculated. These high profits were attributed to the team’s corporation in the realization of its strategic goals. Income and Expenses The sales revenue for the financial year was reported at $1109000. The amount was received mostly from Toy sales which registered sales revenue of $583000, $249000 from Gaming sales, $184000 from book sales and the rest from Services Income. The management focus on sales of Toy was imminent from the results the company reported in the financial year 2010. The total expenses were mitigated to a relatively lower amount $468000 which enable the company to realize a massive profit outlay of close to $64000 which was high amount for a company to report in its initially period of operations. Financial ratio analysis a) Gross profit margin GP Margin = {Gross profit/sales} * 100 = {538104/1017362} * 100 = 52.89% The Gross profit margin sown was attributed to the revenue received form the Toy, Book and gaming sales. The company, being its initial financial period, has reported a significant high profit margin. b) Net Profit Margin = {Net Profit/sales} * 100 = {63426/1017362} * 100 = 6.23% c) Return on Total assets = Net Income/Total assets = {63426/601582} * 100 =10.5% This shows how the management of Sullivan Barrett Pty Ltd maximizes the use of its assets in the generation of income. In this case the company uses only 10.5% of its total assets in generation of net profit. d) Current Ratio = Current assets/Current liabilities = 364830/148101 = 2.5 The ratio shows that Sullivan Barrett Pty Ltd can easily meet its short term obligations. e) Debtors collection period = {Average debtors/credit sales} * 365 days = {37278/ (0.275*1109331)} * 365 = 45 days f) Inventory turnover period = {Cost of Goods Sold/Average Inventory} * 365 = {571227/ (394303/2)} * 365 = 730 days g) Shareholders loans to total assets ratio = (shareholders loan/total assets) * 100 = {63526/601582} * 100 = 10.56% h) Times Interest earned ratio = EBIT / Interest charges = 69676/6250 = 11.1 References Maguire, M. (2007). Financial Statement Analysis. London: Pearson Education. Read More