Finance Assignment Sample on Understanding Financial Statements

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Question

Write a report on the ANALYSIS OF THE ANNUAL REPORT OF HENWELL PLC

A professional report is expected to include a number of key aspects including

  1. To, From, Date and Subject: a report should always make clear who is the recipient and who is the author (though in this case of the author you will need to put a false name rather than your own for anonymity purposes). A report should be dated and have a subject title.
  2. Introduction: this section should set out the purpose of the report and what will be covered subsequently.
  3. Executive summary: it is often the LAST section of the report to be written because it consolidates all the information set out in the report. It is usually at the front of the report and sets out the most important points raised.

Solution

Executive Summary

Through this paper a humble effort has been made to analyze the financial position of Hen well Plc. The paper focuses on the areas of development and also the areas where the organization has done well. Through the analysis it can be made out that the organization has not performed well in 2013 as compared to 2012. A complete analysis of the financial statements has been done in the sections that follow.

To                                                                                                                   Date    :

The Chief Executive Officer

Henwell Plc,

UK

 

From :  XYZ

 

Sub : Financial Report Of 2012/2013

Introduction

The main porpoise of the Annual Report as submitted by the Chairman of the company can be explained in the following paragraphs

i).  To inform the shareholders, creditors, investors, & other stakeholders, the result of operation during the concerned financial year and also the position of assets and liabilities as on the last date of the said financial year.

ii). To highlight the key areas of success in business operation. In this way, confidence of all concerned can be established.

iii). To make the report, both text and data, available for scrutiny by an independent auditor, as mandatory under Companies Act.

iv). To assure the shareholders, that their money has been properly utilized by the company and no wastage has taken place (Pillai, 2005).

v). To assure all concerned that in-spite of the bad phase of the world economy in general, and political turmoil in the Middle-East, the company has been able to expand by making further investments in the way of acquiring another established food chain in US. It is also highlighted in the report that sales have increased in-spite of global slow-down and resultant increase in cost. The report also aims to signal out that the persons at the helm of affairs are doing their jobs pretty well and there is no worry in the near future so long as operation of the firm is concerned.

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Auditing and Corporate Governance

 Auditing

One important objective of Annual Report is to make available the result of operation and financial position for the year and on the last date of the year respectively, for scrutiny by independent Auditor. In the UK, the functions of an independent Auditor attained a position of importance in the 19th century with the introduction of statutory requirements regarding the audit of companies. The Companies Act of 1862, in its suggested set of regulations, contained a provision relating to the audit of joined stock companies. Audit of the accounts of limited companies became mandatory by the Amendment Act of 1900. With the growing importance of accounting and auditing, a number of societies of professional accountants came into existence during 1870-1880. The Institute of Chartered Accountants in England and Wales is bestowed with the job of auditing. The main job of an Auditor in the context of Statutory Auditing, is to see whether the financial statements prepared by the company show the true and fair view of the operation as well as values of assets and liabilities (Goltz, 2010).

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Corporate Governance

The term Corporate Governance is very significant. Here governance refers to overseeing functions of n organization where there are many stake holders; most important among those are shareholders, who invest their money in the firm. This nature of such organization makes governance of affair a very specialized task demanding expert hands (Pomoni, 2010).

Trend Analysis

The following trends emerge;

  • Moderate increase in sale (only 1.43%), where as cost of sales has increased by 3.79%
  • Increase in overhead expenses has been very high- 35.40%. This needs special attention.
  • Profit has fallen alarmingly. In the year ending 2012-2013, it has registered a fall of 1778 million pound or 56.19%. This has happened due to drastic rise in overhead expenses which is 35.40% (Urken, 2005).

Both G.P. & N.P. margin of sales have declined.
It is cleared from above that the company did not performed well in 2013 as compared to 2012. The main reason of such poor show is the presence of huge overhead expense in ………..

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