Links to annual report
Telstra Annual Report
2018-Annual-Report-singlepages.pdf
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2019-Annual-Report-singlepages.PDF
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Telstra Sustainability Report
Telstra-Bigger-Picture-2019-Sustainability-Report.pdf
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ACCT2213/2189 Accounting in organisations and Society
Assignment – Melbourne semester 1 2020
Due date: End of Week 10
Stage 1- Analysis of annual reports and calculations.
Stage 2- Recommendation report.
( Both stages ( 1& 2) are to be submitted together as one file word/pdf )
A client wants to invest a substantial amount of money in either Telstra Ltd or a new competitor a listed company Australian communication Ltd which is same Industry as Telstra Ltd. They ask you to appraise each company using key data and provide them with a recommendation. You may consider both financial and non-financial information in making this decision. Write your conclusions in report format.
This has to be done in two stages which are submitted together in one file.
Start your stage one by preparing and analysing the annual report of Australian communication Ltd and Telstra communication Ltd.
Australian communication Ltd has provided financial information for year ending June 2019
| Accounts | 2019 ( $ M) | ||
| Trade payable ( c.l) | 3,900 | ||
| Trade receivable(c.s) | 4,950 | ||
| Prepaid expenses (c.s) | 347 | ||
| Cash and cash equivalents(c.s) | 508 | ||
| Share Capital – (equity) | ??? | ||
| Inventories(c.s) | 342 | ||
| Other income (g.p) | 1500 | ||
| Depreciation expense (ex) | 3,040 | ||
| Investments in other entities(ex) | 11,750 | ||
| Stationary supplies expense | 1,100 | ||
| Interest expense(ex) | 810 | ||
| Insurance expense(ex) | 450 | ||
| Loan from CBA Bank (repayable in full in January 2020) | 2,540 | ||
| Revenue Received in advance (inc) | 1,500 | ||
| Loan CBA Bank (repayable in full in January 2025) | 12,500 | ||
| Other Long-term borrowings (n.c.l) | 8,000 | ||
| Building (n.c.s) | 5,750 | ||
| Maintenance expense (ex) | 450 | ||
| Plant and Equipment (n.c.s) | 16,750 | ||
| Equipment repairs expense (ex) | 575 | ||
| 9Marketing expense(ex) | 1800 | ||
| Income tax expense (ex) | 815 | ||
| Rent expense(ex) | 5420 | ||
| Sales Revenue (inc) | 23,(800 | ||
| Staff wages expense (ex) | 8990 | ||
| Staff wages payable(ex) | 1850 |
- PPE figures includes accumulated depreciation.
Additional information is provided for Australian communications Ltd for 2019.
You are required to prepare the following.
- a) Prepare a classified Income statement for the year ended 30 June 2019. As part of the income statement :-
a) Calculate Earnings before Interest and tax (EBIT) for 2019.
b). Australian communication distributed (11,500,000,000) shares to its shareholders. Calculate Earnings per share for 2019.
c). Calculate dividend payable (per share) for 2019 if company decides to pay 25 % of profit.
Note: round to the nearest dollar if required.
- Prepare a classified Balance sheet as at 30 June 2019.
Australian communication Ltd has provided some of the financial information for year ending June 2018 and 2017 respectively which may help you to answer your next question.
Australian communication financial information from
Balance sheet and Income statement for year 2018 and 2017
Information from Balance sheet For Australian communications for 2018 and 2017 | 2018($M) | 2017 |
| Trade receivables | 5,120 | 5,120 |
| Total current assets (Including trade receivables) | 6,474 | 6,274 |
| Total Non-current assets | 34,100 | 33,850 |
| Total assets | 40,574 | 40,124 |
| Total current liabilities | 9,150 | 9,350 |
| Total Non-current liabilities | 21,100 | 21,000 |
| Total liabilities | 30,250 | 30,350 |
| Net assets | 10,324 | 9,774 |
| Equity | ||
| Share capital | 7,900 | 8,300 |
| Profits | 2,424 | 1,474 |
| Equity available to entity shareholders | 10,324 | 9,774 |
| Total equity | 10,324 | 9,774 |
Information from income statement For Australian communications for 2018 and 2017 | ||
| 2018 | 2017 | |
| Sales Revenue | 25,500 | 26,500 |
| Other income | 3,000 | 1,000 |
| Total Income | 28,500 | 27,500 |
| Earnings before interest and income tax expense (EBIT) | 5,400 | 5,800 |
| Net Profit | 2,424 | 1,474 |
| Earnings per share (cents per share) | 25.5 | 22.7 |
| Dividend per share (cents per share) | 0.09 | 0.10 |
- a). Complete this table for Australian Communications Ltd by using information provided in financial statements above in this document.
| Ratios | 2019 | 2018 |
| Profitability Analysis | ||
| Profit Margin | ||
| Return on Assets (ROA) | ||
| Return on Equity | ||
| Asset Efficiency | ||
| Asset Turnover | ||
| Capital Structure | ||
| Debt ratio | ||
| Market performance | ||
| Earnings per share | ||
| Dividend per share | ||
| Working capital | ||
| Debtors Days | ||
| Liquidity |
And now access https://www.telstra.com.au/aboutus/investors/financial-information/reports link provided in Canvas and pay attention to the information provided in the financial statements as you will find a lot of useful information in them that may help with following questions.
3 b). Locate the financial statements from 2019-Annual-Report-singlepages.PDF and 2018-Annual-Report-singlepages.pdf .Complete this table for Telstra Ltd.
| Ratios | 2019 | 2018* |
| Profitability Analysis | ||
| Profit Margin | ||
| Return on Assets (ROA) | ||
| Return on Equity | ||
| Asset Efficiency | ||
| Asset Turnover | ||
| Capital Structure | ||
| Debt ratio | ||
| Market performance | ||
| Earnings per share | ||
| Dividend per share | ||
| Working capital | ||
| Debtors Days | ||
| Liquidity |
- For 2018 use restated amount from 2019 annual report for calculation.
Stage 2: Now write your recommendation report by using following report format and headings:
Word limit: 1200 words
- Cover page, table of contents, referencing, Executive summary.
- “Corporate Governance is growing focus for companies in Australia” In your answer show your understanding of corporate governance, briefly comment on Corporate governance on Telstra Ltd, identify those responsible for corporate governance and what their role is for corporate governance in Telstra communications? Identify and explain Telstra’s sustainability approach from Telstra sustainability report. (Telstra-Bigger-Picture-2019-Sustainability-Report.pdf ) (Comment on each element of Telstra’s environment sustainable core elements programs which shows their progress of reducing overall impact on environment). Comment on how important you believe environmental and social performance of a company is when potential investor analyse a company?
- Examine the ratios from both tables from Q.3 from stage one (Telstra Ltd and Australian communications Ltd), write a briefly by examining the Profitability, Asset Efficiency, Capital structure, Market performance and working capital ratios of both companies, highlighting your understanding by explaining each group of ratios. Provide your recommendations to a potential investor as to the preferred company for them to invest in (You may include both financial and non-financial criteria of the company). Provide a brief conclusion of your report.
- Now that you have a knowledge of analysing financial statements show your understanding by doing micro credential “Managing Money. (Paste the badge in your assignment, Only URL is not enough). Micro Credential can be located in Canvas modules after week 7 contents.
Note : 1.This Assignment is worth of 40% of total course. This assignment consists of 50 marks worth of questions which is then weighted to 40.
2. ( Both stages ( one and two) are to be submitted together as one file word/pdf with submission coversheet )
Ratio formulas for Telstra assignment semester 1 ,2020
| Profitability Analysis | |
| Profit Margin | (EBIT/Sales Revenue) x 100 = x% |
| Return on Assets (ROA) | (EBIT/Average total assets) x 100 = x% |
| Return on Equity | (Profit available to owners)/Average equity x 100 = x% |
| Asset Analysis | |
| Asset Turnover | Sales revenue/Average total assets = x times |
| Capital Structure | |
| Debt ratio | Total Liabilities / Total assets x 100 = x% |
| Market Performance | |
| Earnings per share | (Profit available to ordinary shareholders)/(Weighted average number of shares) = x cents per share Or Profit/No of shares= x cents per share |
| Dividend paid per share | Dividend Paid/Weighted number of ordinary shares = x cents per share Or dividend paid/No of shares= x cents per share |
| Working capital | |
| Debtors Days | (Average Receivables/Sales revenue) x 365 days |
| Liquidity | Current assets/Current liabilities |
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