Financial Statements Of Kathmandu Holdings †MyAssignmenthelp.com

Questions: 1. Provide a brief of the company (Name, year of establishment, history, background, the product/service they deal in) and also what year is under review? Try selecting the latest year? 2. Looking at the contents page and flicking through the report, which sections dominate the report? 3. Who are the directors? List three or four main directors along with a brief summary of directors report? 4. Who are the auditors? What is the auditors opinion? Provide a brief summary of auditors report? 5. Have sales increased or decreased (compare the year you have selected with that of the previous/preceding one)? Comment on the reasons for the change in the sales. 6. What is the net cash inflow (outflow) from operating activities? (See the companys cash flow statement). How has the companys net cash inflow changed from the previous year in terms of money and in terms of percentage? 7. What was the retained profit for the year? Has the company any borrowings, i.e. loans, debentures, etc.? 8. Based on the income statement, Balance sheet cash flow statement, calculate the following ratios and comment on the financial health of the company? Answers: 1. Brief introduction of Kathmandu Holdings Limited Kathmandu Holding Limited is the professional outdoor wholesaler. It was established in 1987.The company is hooked in designing, marketing, wholesaling of clothes and material for travel and adventure. The companys sector consists of the countrys like New Zealand, Australia, and the United Kingdom. It offers a range of garments like fleece jacket, waterproof jacket, shirt pants and footwear and socks. It also provides equipment consist of bags, sleeping bag, tents, camping accessories and travel accessories. The company works approximately 110 stores in Australia, over 46 stores in New Zealand and approximately 4 in the United Kingdom. The companys subdivision includes Kathmandu (U.K) Limited, Kathmandu Ply Limited, Kathmandu Limited, and Milford Group Holding Limited (www.kathmanduholdings.com, 2017). 2. Identifying the key aspect of the annual report Annual report of any company includes all the relevant and compulsory information for the users (both internal and external) of the report. The annual report specifically includes, directors report, interim report, media announcement, strategic performance report, etc. However, the interim report is the most dominating section of the annual report, followed by the directors report and media announcement (Zadek et al. 2013). Similarly, interim report is the most dominating section of the annual report of Kathmandu Holdings Limited. Financial statement and Auditor's report are the most significant part of it, since it brings material and required information for the users of the report. Here it has been found that the PWC has audited the financial statement of the company, stating that the company has followed the guidelines of AASB and the statement is showing true and fair view (de Villiers et al. 2014). The report has made individually to the companys shareholder. The audit work has been tackled so that it might shape to the companys shareholders the matter which are required to state to the shareholders for the review report and for no other desire. To the fullest extension allowed by the law, the company do not accept or guess the duty anyone other than the shareholder. 3. Identifying the key directors and analyzing the directors report The director is the prime of the organization, they are either appointed or elected, who mostly has the power and duties link to administration and management (Cassim, 2016). The three-significant director of this company are David Kirk, Xavier Simonet and John Harvey. The directors report analysis that majority of Kathmandus year ended sale are obtained from three major sales promotions each year appearing in the part of the months of March and April (Autumn), June and July (Winter) and December and January (Christmas). Among these three developments the Largest sales is Winter sale and the remaining two sales occur in the second half of the financial year. As the outcome, in the second half of every financial year the largest proportion of the Kathmandu sales and EBITDA is obtained. However, the fee structure of the directors is represented below in a diagram. Figure 1: Directors remuneration (source: www.kathmanduholdings.com, 2017) 4. Defining auditors, their opinion and discussing the summary of auditor's report Auditor is someone who is responsible for calculating the validity and security of a company's or managements financial statements (Tang et al. 2017). The only financial statement which was occurred by the Group that are estimated at the fair value are over the counter derivatives. These derivatives have all been resolve to be in the level two of the fair value position. As all the powerful inputs are needed to find out the fair value of these derivatives. Pwc has audited the financial statements of the company and found that the report has been prepared in relationship with group interest andaccounting guidelines. Thus, theAccounting firm, Pwc has given unqualified report. The report is individually made to the companys shareholder as a body (Christ et al. 2015). The audit work has been so that it might state to the companys shareholder, the matter which are required to state to the shareholder for the review report. The company do not accept or assume responsibility to anyone other than shareholder. 5. Comparative analysis of sales for the year 2017 and 2016 and explaining the reason behind the changes Based on the audited financial statements of Kathmandu Holdings Limited, it can be seen that the total sales for the year ended 31 January is almost similar to the previous year. Total segment sales in the Australia domain is around $ 279,704. The company specifically recognizes the sales whenever the payment is made (Ordanini, Parasuraman Rubera, 2014). However, the credit sales contribute 80% of the total sales. In addition, the group sales also contribute 80% of the total credit sales. It can easily be understood from the sales graph shown below, that how the company efficiently performed in the previous five years to increase sales. This, is the reason why Kathmandu Holdings have never faced losses in the past five years. Figure 2: Segment sales in the domain of New Zealand (source: www.kathmanduholdings.com, 2017) With respect to the above context, the sales revenue in the UK domain has faced struggle in increasing its sales, because the region has very strict belief in accepting the products offered by the company. However, the segment sales are well described in the context of three different countries. An operating is a part of an element that participates in business exercises which wins income and brings about costs and where the central leader audits the working outcomes all the time and settles on choices on asset allotment (Hambrick and Quigley, 2014). The Group is composed into three working portions, portraying the three land areas the Group works in. 6. Discussion on net cash flows of the company The operating cash flow for the year 2017 decreased significantly to $ 10,033, also the cash used in investing. Compare to 2016 and 2017 the net cash flow from operating activities has decreased from 24,187 to 10,033 because in 2017 they paid more to the supplier and the employee, they paid more income tax, also paid interest more as compare to 2016. Receipt from customers remained unchanged, payments to suppliers and employees slightly rose, but income tax and interest paid in the current year is slightly less. This made the operating cash flow less than 2016. However, the net cash used in investing activities has increased in 2017 compare to from (12,875) to (6,792), this is because they purchased less fixed assets, but they purchased more intangible assets. Moreover, proceeds from loans and advances considerably rose to $ 41,921. Similarly, the net cash (outflow) from financing activities has increased in 2017 as compared to 2016, because the company paid less dividend in the curr ent year, also provided less loan as compare to 2016. This is because the cash and cash equivalent is less as compare to 2016 (Ball et al. 2016). However, the computation of net cash inflows from operating activities is shown below. Figure 3: Changes in net profit after taxation with cash inflow (source: www.kathmanduholdings.com, 2017) 7. Discussing the debt and equity structure of the company Kathmandu Holdings total debt is amounted to $ 103,838, which consist of fixed interest-bearing liabilities of $ 51,595 and derivative financial instruments of $ 3,199 for the year 2017. On the other hand, total debt for the year 2016 was $ 48,591 which was less than the current. Thus, it can be said that the company is raising funds to finance their business operation. However, the total equity for both the year remained almost same, which includes unchanged total equity shares (Bradley and Roberts, 2015). Moreover, retained earnings slightly increased, but reserves and surpluses significantly rose in the current year. Therefore, it can be said that Kathmandu Holdings has efficiently managed its equity shares and performed up to the expectations of the shareholders. Since, the dividend paid by the company is considerably higher than that of previous year. However, the consolidated statement of changes in equity with respect to the debt and equity structure is given below. Figure 4: Changes in equity (Source: www.kathmanduholdings.com, 2017) 8. Computation of the financial ratios for identifying the financial health of the company KATHMANDU HOLDINGS LIMITED Profitability ratios Particulars 2017 $ 2016 $ Rate of return on net sales Operating profit / net sales 14830/196316 15139/195977 0.075541474 0.077248861 7.50% 7.70% Rate of return on equity Net profit / total equity 10045/303328 9410/305782 0.033115967 0.030773558 0.03 0.03 Earnings per share given in the annual report 4.9 cents 4.6 cents Liquidity ratios Particulars 2017 $ 2016 $ Working capital Current assets-current liabilities 107202 - 51930 123204 - 48591 55272 74613 $ 55272 $ 74613 Current ratio Current assets/current liabilities 107202 / 51930 123204 / 48591 2.064355864 2.535531271 2.0:1 2.5:1 Accounts receivable turnover Net credit sales/Avg. receivables ((196316/ (5399+7313)/2)) ((195977/ (7313+5031)/2)) 7.721680302 7.938148088 7.72 times 8 times Leverage ratios Particulars 2017 $ 2016 $ Debt ratio Total liabilities/total assets 103838 / 407166 119919 / 425701 0.255026206 0.281697717 25.50% 28.00% Debt to equity ratio Total liabilities/total equity 103838 / 303328 119919 / 305782 0.342329096 0.392171547 34.23% 39.21% Assets turnover ratios Particulars 2017 $ 2016 $ Assets turnover ratios Net sales / average total assets ((196316/ (407166 + 425701)/2)) ((195977/ (425701 + 413253)/2)) 0.117855552 0.116798418 0.12 0.12 Table 1: Financial ratios (Source: Self-created) Based on the computation of different financial ratios of Kathmandu Holdings Limited, for the year ended 31 January 2017, relevant information regarding the financial health of the company have been found, which are commented below. Companys return on sales and return on equity both remain almost same, but the return on sales slightly declined by 0.2% in 2017. Thus, it can be concluded that company is moderately doing well, but it need to put more focus on its unnecessary expenses (Delen et al. 2013). However, the current ratio has shown satisfactory result in 2017, which meet the industry standard of 2:1, but the working capital and accounts receivable turnover declined in 2017 to $ 55272 and 7.72 times respectively. Thus, it can be said that the company is still struggling in paying off its debt obligations. However, the liquidity of current assets gives a sense of relief. On the counter part, the organizations debt-equity mix is quite high, indicating that the entity is largely relying on the debt capital for financing their operation (Kou et al. 2014). However, the assets turnover ratio remained unchanged, indicating that the company is quite stable in generating sufficient revenue with its assets. 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