Accounting Essay Example

Accounting

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Executive Summary

I am pleased to present Treasury Wine Estate Limited financial statement analysis, covering the period of June 2011 to June 2016.

The figures and the statements reflect the company’s position on the need to prioritize the strategies and the shareholders interest on the net worth of the company.

Treasury Wine Estate has continued to drive the positive transformation of our business, and we will continue to do so as we strive to fulfill the ambition to be world most celebrated wine company by ensuring we meet the customer’s needs through achieving their satisfaction and operating at a state where the liquidity ratio of our worth is favorable.

As a world class company we have tried to portray the true and the fair view of our financial state to showcase ourselves that our working capital tells what we believe in and where we are going.

Treasury Wine Estate Limited Overview

The company is an Australian company producing wide varieties of wines having listed in the stock exchange.

The company produces different types of wines which are worldly recognized and enjoys the economies of scale, the wines include coonawarra, penfolds, wolf blass and pepper jack.

The need to disclose financial statement of the company is to portray a true and the fair view of the net worth of the company and the declaration of the dividends so as to be in a position to answer and deal with the emerging trends in the world market.

On the marketing of the products, there are many elements in the consumer packaging including the glass bottles and the paper wrappers to make the consumers more satisfied. In addition to this, the packaging ensures customers loyalty to our products so that if competes in the world economies.

Significance of the Income Statement

Gross Revenue

The revenue of the TWE limited increases from 2011 June when it was at $1,474,900,000 to $ 2,232,600,000 in June 2016. From the data recorded it is evident that during this period from 2011-2016, TWE limited was able to score a percentage increase of 33.9% on the revenue.

The total revenue also increased from $1,476,600,000 in 2011 to $2,347,300,000 in the year 2016.

Percentage increase on the total revenue was ($2,347,300,000-$1,476,600,000)/ $2,347,300,000 and this will give 37.1%.

Revenue is directly affected by the sales of the wines and the cost of producing and selling those wines. From the observation seen in the statement we can say that, TWE had an increasing sales of the wines all over the world.

Operating Expenses

Expenses are the operational costs incurred by a company while undertaking its production duties.

As in the case of TWE limited, the operating expenses increases from 2011 when it was $1,386,500,000 to $1,914,800,000 in 2016. This happens due the fact that as the company increases its target market, in this case world as a market, they are additional extra variable costs that the company incurs in order to produce. TWE limited increases the cost of operation as we try to market and sell our products i.e. wines globally.

Net Revenue

Net revenues in the different years from 2011 to 2016 are less in value compared the total gross revenue this is because the operating expenses are deducted from the gross revenue of the company in that particular year they were incurred.

The most enjoying thing is that throughout the six years the company have not traded at a loss because you can see, we have the positive values in our net incomes after we have deducted the operating expenses in addition to that our goal as a company motivates us to increase sales to satisfy our target market.

The Behaviour in the Balance Sheet

Assets are the economic resources owned by the company which has the future benefits for the company. The total assets of the TWE have increased though 2014 proves deteriorating year when things were not well for us as a company.

In 2011, the current assets were $ 1,298,000,000 while in the last year it stood at $ 1,865,500,000 giving a positive figure in the total assets owned by the company.

2014 may have been a worst year for TWE because in that year we had a net receivables of $7,000,000 in addition there were some sale of the noncurrent assets thus decreasing the Net asset value.

Liabilities

These are the obligations required to be met by the company in order to continue in its operation.

The provisions were evident in the year 2014 to be higher at $131,500,000 with higher current liabilities compared to other years of $ 582,100,000 following 2016 which has $757,900,000.

There were fluctuations in the noncurrent liabilities over the six years with 2012 recording the lowest with $341,000,000 and the leading being 2016 with $984,200,000.

Though when it comes to the total liabilities 2011 has the lowest while the leading was 2016 due to the fact that when the company was expanding its operation it acquired more debt for funding those productions.

Capital is the unit of ownership within a company and in the case of TWE limited the share capital fluctuates all over the six years. This might have been brought about by the withdrawal of shares by the shareholders and the influence of the company management to increase the ratio of debt to equity to finance the company.

Cash Flow Statement

Operating Activities

The receipt from customers increases across the years from 2011 when it was $1,390,900,000 to $2,991,500,000 in 2016, this has been seen due to the increase in sales of wines produced by the TWE limited making the cash from customer to be high.

Investing Activities

During the six years, TWE limited purchased a subsidiary company which was paid at $803,700,000 in addition to that, the company had managed to payback the loans borrowed in the first three years from 2011 to 2013 totaling to $3,900,000.

Financing Activities

Proceeds from issue were only realized in the year 2016 when it was $475,400,000 while other years we didn’t have any issue.

The proceeds from borrowing also were higher in the year 2016 more than any other years.

Leverage Ratios

Debt ratio= total liabilities/total assets

2011: 826900000/3703700000 =0.22

2012: 881500000/3820800000 =0.23

2013: 1120300000/4128200000 =0.27

2014: 1011700000/3860500000 =0.26

2015: 1099100000/4149800000 =0.27

2016: 1742100000/5377200000 =0.32

Debt to equity ratio = total liability/total equity

2011: 826900000/2876800000 =0.29

2012: 881500000/2939300000 =0.30

2013: 1120300000/3007900000 =0.37

2014: 1011700000/2848800000 =0.36

2015: 1099100000/3050700000 =0.36

2016: 1742100000/3635100000 =0.47

PROFITABILITY RATIOS

Return on assets = (net income/assets) x100

2011: (64400000/3703700000) X 100% =1.74%

2012: (129700000/3820800000) X 100% =3.4%

2013: (139900000/4128200000) X 100% =3.4%

2014: (178200000/3860500000) X 100% =4.6%

2015: (84000000/4149800000) X 100% =2.02%

2016: (217600000/5377200000) X 100% =4.1%

Return on sales= (net income/sales) x 100%

2011: (64400000/1474900000) x100% = 4.4%

2012: (129700000/1680600000) x100% = 7.7%

2013: (139900000/1728400000) x100% =8.1%

2014: (178200000/1790200000) x100% =10.0%

2015: (84000000/1848300000) x100% =4.5%

2016: (217600000/2232600000) x100% =9.7%

Items that should have been included to the financial statement of the Treasury wines estates were;

1. Management declaration

2. Auditor’s statement

The above statements are much important in such a way that they give the audience a clear opinion of the fair view of the company.

Conclusion

In as much that our company exists our principle goal is to be transparent and reliable in all our operations to an extent of disclosing everything about our financial positions.

Treasury Wines Estates limited is a company dedicated to producing vast range of products to the consumers worldwide and this can be easily attained when our potentials and capabilities are known and proper strategies put in place to counter affect the weakness and the challenges faced globally.

We remain to be the largest producer and marketer of wide range of wines in Australia and always try to control 30% of the world wine consumptions segment.

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