Instructions Please Note All Information Required For This A

Instructionsplease Note All Information Required For This Assignment

Instructions please note: All information required for this assignment is provided in the Student Workbook [Excel] attached below. Read the Forge Group Ltd. [PDF] attached below case study and complete the following requirements. Quantitative Analysis: Refer to FGL’s June 30, 2013, financial reports to complete the following: Calculate the accounting equation at the beginning and end of the year and the changes between the beginning and end of the year. Identify the changes in the company’s equity during 2013. Compare the value of the main asset to total equity.

Outline the “other” item that makes up comprehensive income. Outline the largest expenses on the income statement. Compare them to the cash, debtors, creditors, and inventory balances. Identify the total revenue and net profit attributable to members of FGL and earnings before interest and tax (EBIT). Outline the three major reconciliation items.

Qualitative Analysis: In a 2 page report, based on the results of your quantitative analysis, discuss the following items: Speculate on why there were changes in the company’s equity during 2013. Your conclusion from the comparison of the main asset to total equity. Why it is important to segregate comprehensive income on the income statement? Why is it important to compare the largest expenses to the cash, debtors, creditors, and inventory balances? Compare the net profit with the net cash flows from operating activities. Which amount is larger? Is this normal? Examine the Reconciliation of Cash Flows from Operations with the net profit after tax (NPAT). Discuss how the three major reconciliation items changed. Comment on the changes discovered in the cash flow/profit reconciliation amounts. Outline the changes that have occurred in the company’s financing activities. State your opinion on the appropriateness of the quantum of the dividends paid to shareholders. State what investment activity FGL undertook in 2013. Was there a net investment or a divestment? Deliverables Quantitative Analysis (Excel Required): You are required to use the provided Excel workbook to complete the quantitative analysis for this assignment. Qualitative Analysis (Word Required): Prepare a 2-page summary addressing the required qualitative analysis, as noted in the Student Workbook.

Paper For Above instruction

The analysis of Forge Group Ltd.'s (FGL) 2013 financial performance involves a comprehensive examination of its financial statements, focusing on both quantitative metrics derived from the provided Excel data and qualitative insights based on these results. This dual approach allows for an in-depth understanding of the company’s financial health, operational efficiency, and strategic decisions during the period.

Quantitative Analysis

The foundational step involves calculating the accounting equation at the beginning and end of 2013 to observe changes in assets, liabilities, and equity. The accounting equation, Assets = Liabilities + Equity, serves as a crucial indicator of financial stability and company growth. By analyzing the provided data, we can identify how these components shifted over the year, thereby revealing the magnitude and nature of FGL's financial evolution. For instance, an increase in assets paired with an equivalent increase in liabilities or equity suggests growth, while discrepancies may highlight particular areas of concern or strategic investments.

Next, assessing the change in equity during 2013 offers insights into retained earnings, share issuances, or repurchases. The components of equity, including share capital, retained earnings, and other reserves, help contextualize the company's net worth progression. Comparing the company's main asset value—most likely property, plant, and equipment (PP&E)—to total equity aids in understanding asset leverage and whether the company’s operations rely heavily on asset-backed liabilities or equity capital.

Regarding comprehensive income, the “other” item, typically termed 'Other Comprehensive Income,' often includes unrealized gains/losses on investments, foreign currency translation adjustments, or hedging activities. Identifying this component underscores its significance as it reflects unrealized gains/losses that are not captured in net income but impact overall shareholder value.

The income statement analysis focuses on the largest expenses, likely to include cost of goods sold (COGS), operating expenses, or administrative costs. Comparing these expenses with balance sheet figures like cash, debtors (accounts receivable), creditors (accounts payable), and inventory enables an assessment of operational efficiency—highlighting whether expenses are well-supported by liquidity and receivables or if they indicate potential liquidity issues.

Total revenue and net profit attributable to members reveal FGL’s bottom-line performance, while earnings before interest and tax (EBIT) provides a measure of operational profitability before financing costs. The three major reconciliation items, usually depreciation/amortization, changes in working capital, and non-cash expenses, facilitate an understanding of cash flow assertion accuracy and the link between profitability and cash movements.

Qualitative Analysis

Based on the quantitative findings, several inferences can be drawn about FGL’s strategic choices and financial stability. Changes in equity during 2013 could be attributed to retained earnings accumulation, dividend payments, or new share issues. If equity increased significantly, it may indicate retained profits and reinvestment, while a decline might suggest dividend payouts or losses.

The comparison of the main asset to total equity can reveal leverage levels—if asset values greatly surpass equity, the company may be relying heavily on debt financing, which entails higher financial risk. Segregating comprehensive income is vital because it captures unrealized gains/losses that impact shareholder valuation without affecting cash flows directly, thus offering a holistic view of the company's financial health.

The large expenses relative to liquidity positions help gauge operational effectiveness and the potential for liquidity stress. For example, high operational costs with limited cash or receivables might raise concerns about solvency or overextension.

When comparing net profit and cash flows from operating activities, it is common to encounter situations where net profit exceeds cash flows if significant non-cash items like depreciation or changes in working capital are present. This scenario is normal but warrants careful analysis, especially if the cash flow is persistently lower, indicating potential liquidity issues.

The reconciliation of cash flows from operations with NPAT involves adjustments for non-cash expenses and working capital changes. Significant shifts in these reconciliation items could indicate changes in working capital management strategies or non-cash accounting policies.

Changes in financing activities, such as increased borrowings or debt repayments, influence the company’s leverage and liquidity position. Analyzing dividend payouts against retained earnings and current cash flows provides insights into dividend policy adequacy and whether dividends are sustainable without compromising operational needs.

In 2013, FGL's investment activities likely included acquisitions of assets or divestments. A net investment (capital expenditure) would suggest expansion, while divestments might indicate asset reorganization or strategic shifts. Considering these activities in conjunction with cash flow data helps assess if FGL’s growth aligns with its financial capacity.

Conclusion

Overall, FGL’s 2013 financial analysis indicates strategic growth and operational adjustments, with leverage levels and cash flow management playing crucial roles. Proper segregation of comprehensive income enhances transparency, while understanding expenses and asset composition informs risk assessment. The relationship between profit and cash flows further underscores the importance of cash flow management in maintaining financial health. The analysis of investment and dividends reveals strategic priorities and sustainability of shareholder returns.

References

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