Sunday, December 8, 2019
Accounting & Financial Management Health Brand Company
Question: Discuss about the Accounting Financial Management for Health Brand Company. Answer: Introduction As it is rightly said, Health is wealth; Blackmores is a leading natural health brand company operating in Australia New Zealand from over 80 years. Their rich experience in vitamins, herbs, nutrients and minerals encourages them to produce and deliver natural approaches to health and well being. As they are highly passionate about the natural well being, it encourages consumers to take control of their personal health and well being. An entirely new arena of naturopathic medicine was developed and slowly and steadily a number of stores were established. Maurice also pioneered the establishment of the first naturopathic college and professional associations. A lot of training programmes were organized which shaped the growth of naturopathic practitioners in the country (Blackmores Limited, 2015). The establishment of the company happened under the mentorship of Maurice Blackmore and his ideas regarding health were too high at point of time. The headquarters of the company is based i n Sydney and have strength of more than 800 employees. Blackmores was listed in the year 1985. For more than eight decades of successful development in the continent of Australia. It needs to be noted that this process of entry and expansion in the Asian market is an apt strategy that will generate strong results. With the due passage of time it has enhanced its position and changed strategies with the shift in the mindset of the consumer (Blackmores Limited, 2015). Firms financials could be used to support the decisions of a range of stakeholder groups. The Annual Report contains a section which is Five Year History. This section tabulates the key figures of the Balance Sheet and Income Statement right from Sales to EPS and gives a birds eye view of the progress the company has made over years. The good performance of the company is established by the financial statements and also the future prospects are enlightened. The figures on the Balance Sheet indicate whether the share capital and Reserves have strengthened, whether the loans, liabilities and assets have increased or decreased helping stakeholders make decisions about the company performance. The Profit Loss Account helps in analyzing the incomes and expenses (Blackmores Limited, 2015). The Cash Flow Statement helps in understanding the utilization of cash for operating, investing and financing activities and also the availability of surplus cash for the company. From the numbers given in the financial statements, different types of analysis can be carried out like vertical analysis, horizontal analysis, ratio analysis, Du-Pont analysis, profitability, risk and growth analysis, SWOT analysis, PEST analysis, so on and so forth. The quality of business can be understood by the security and efficiency with which crisis have been managed by the company (Peterson Plenborg, 2012). The Reserves of the Company indicates how secure the equity shareholders are and the efficiency is established by the profitability, liquidity, leverage and such other financial parameters. Thus investment decisions, financing decisions, partnership or joint venture decisions, mergers and acquisitions are all taken based on these analysis. In short, it can be said that the financial statement is like a snapshot from where the prospective investor can look into the soundness of the company. It enables the investors to ascertain the position with ease and hence a decision or a comparison can be done with ease and flexibility (Fridson Alvarez, 2002). Overall various information is portrayed as per the regulation and other disclosures are also available that helps to know about the true value. It is a known fact that Ratio Analysis helps in understanding the trends in the financial figures; it would still be pertinent to note that all the figures used for analysis are historical figures (Parrino et. al, 2012). There is no certainty that the same results will get repeated in the future. It can only be used as a starting point to get a fair degree of expectation about future results. Due to this ability, it might not be wrong to say that an investor sees the financial statements that the management and auditor are willing to show them. Though all the figures might not be manipulated due to the strict compliance with laws and regulations, but still there could be cases where the profits are growing but the company is actually falling and vice versa (Hitchner, 2013). Thus there are a few limitations of the financial statements and an investor is expected to be aware of the same. Identification of the key assets, liabilities, equity, incomes and expenses that impact the positions and performance On an analysis of the Balance Sheet it can be understood that the current assets and current liabilities have seen a significant increase and hence can be termed as key assets. The key assets include property, plant and equipment, investment property, goodwill, intangible assets, etc. Moreover, the current assets include cash and bank balance, receivables, inventories, etc. Secondly, the key liabilities include trade payables, provisions, interest bearing liabilities, etc. Cash and bank balances are the actual figures as on the balance sheet date as this is the most liquid asset and has a very short maturity of less than three months (Brigham Daves, 2012). Receivables are measured at the current recoverable amounts less any provision for bad and doubtful debts. Inventories are measured and stated at the lower of cost or net realizable value. The proportion of fixed and variable overheads for moving of inventories is charged to the same using the most appropriate method. Trade and other payables include the sundry creditors and also Net GST Payable to the taxation authorities. Under Current Tax Liabilities, Income Tax expenses represent the amount of taxes currently payable and the movements in deferred tax. Both current tax and deferred tax form a part of the profit and loss account except where they have been directly recognized in equity or business combinations. Provisions are recognized when there is a current obligation that has arisen from a past event and there is a likely certainty of the liability becoming materialized in the near future. Reserves includes the Equity settled employee benefits reserve which is due to the grant of options to Executives and employees, Cash Flow hedging reserve recognizing the effective gains or losses from the cash flow hedges and foreign currency translation reserve which arises due to the translation of the exchange differences on monetary items (Gibson, 2008). Revenues are measured at the fair value of the consideration received or to be received and are reduced by the amount of estimated customer returns (Brigham Ehrhardt, 2011). Thus a few points on the accounting policies followed by the management for the recognition of significant assets and liabilities have been discussed. Trends and comparisons with benchmark indicators An increasing or growing trend is observed from the year 2015 in all the ratios. The results for the year 2016 will show if the same momentum is being continued or not. The trend has been positive because the group sales enhanced by 36% as compared to the previous year. Moreover, the net profit after tax clocked at $46.6 million that is 83% more than the previous year. The decline in debt by 87% is a strong indicator that the company is using equity and reducing the burden of debt. On comparison with the peers like Asaleo Care, BWX, Vitco Holdings on areas of revenue, profitability, EPS, P/E, Dividend yield, it can be said that Blackmores has outperformed its peers in most of the areas. The comparison of the earnings, P/E and P/B Ratios with the market and sector benchmarks, also indicate that Blackmores has fared better than the industry benchmark (Graham Smart, 2012). Blackmore has undergone a vast change in the mind of consumer mindset from the orthodox pharmaceutical drugs to the recovery method that is traditional in nature that is expected to revive health without any issue of side effects. It targeted the Asian market and hence witnesses a strong potential of $US40 in this segment. The growth rate is targeted at 10% every year and is bent on crossing the Australian revenue in a short span of time. Conclusion From the above report, it can be commented that Blackmores has done a commendable job in terms of health and has increased awareness. Since, it was the first mover it has enjoyed the advantage and has stressed on a new course of activity. The penetration into the Asian market has been praiseworthy and the innovations have cemented its position firmly. Further from the above analysis it can be commented that there is no potent risk for the company and the growth will be at a strong pace. It is a company of strong fundamentals and should be on the investment list as it is bound to generate higher yields. It has stressed on the process of digital marketing that has won million of users in a short span of time. Thus the company is guided and managed under values of superior business performance, delivering quality and growth and enhancing the industry leadership position. References Blackmores Limited. (2015). Blackmores Limited annual report 2015, Retrieved August 20, 2016, https://flipflashpages.uniflip.com/2/41140/355972/pub/html5.html Brigham, E. Daves, P. (2012). Intermediate Financial Management. USA: Cengage Learning. Brigham, E.F. Ehrhardt, M.C. (2011). Financial Management: Theory and Practice (13th ed.). USA: Cengage Learning. Fridson, M.S. Alvarez, F. (2002). Financial Statement Analysis: A Practitioner's Guide. USA: John Wiley Sons. Gibson, C.H. (2008). Financial Reporting and Analysis (11th ed.). USA: Cengage Learning. Graham, J. Smart, S. (2011). Introduction to Corporate Finance: What Companies Do (3rd ed.). USA: Cengage Learning. Hitchner, J.R. (2013). Financial Valuation: Applications and Models. USA: John Wiley Sons. Parrino, R., Kidwell, D. and Bates, T. (2012). Fundamentals of corporate finance. Hoboken, NJ: Wiley Petersen, C., Plenborg, T. (2012).Financial statement analysis. Harlow, England: Financial Times/Prentice Hall. Peterson Drake, P., Fabozzi, F. (2012).Analysis of financial statements. Hoboken, N.J.: Wiley.