Sample Analytical Essay: Accounting

This sample essay may be useful for all the students studying accounting and economics in general.

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Brief information about the company

Accounting WorkColes Myer Ltd. is Australia’s largest non-government company with the history of more than 100 years old. Its chairman Mr. Richard Allert and Chief Executive Officer and Managing Director Mr. John Fletcher operate around 1800 stores of the company in Australia and New Zealand. The company as one of the country’s largest corporate philanthropists employ over 160,000 staff. Coles, Bi-Lo, Myer, Grace Bros, Megamart, Kmart, Target, Liquorland, Officeworks and Emerging Businesses are the brands which are operated by Coles Myer Ltd. It has over 580,000 shareholders, the majority of whom are non-employee shareholders, “mums and dads”, holding 5,000 or less shares. Coles Myer Ltd is listed on the stock exchanges of Australia, London, New York and New Zealand. Expenses on merchandise and services are around $19 billion which are ordered in over 61,000 suppliers.

PROFITABILITY

The year 2001 demonstrated decrease in profitability of Total group sales from 24,168.0 $M in 2000 to 23,779.6 $M in 2001. Increase in Food & Liquor sales to 14,468.2 $M in 2001 from 14,221.0 $M in 2000 and e.colesmyer to 272.1$M from 195.5$M in 2000 was compensated and reduced with the fall in sales of General Merchandise & Apparel and from 9,751$M in 2000 to 9,039.3 $M in 2001.

Growth of Actual – equivalent weeks fell from 6.2 % in 2000 to 5.5 % in 2001. Net profit is characterized with the decrease in its rate for both years, but in 2001 the result is less than previous. Thus, it fell from 300.7 $M in 2000 ((25.8)%-decrease) to 150.8$M in 2001 ((49.9)%- decrease).

The situation changed for better in 2002 as Net Profit increased to 353.8 $M which is 134,6% towards the previous year.

CASH FLOWS

Operating cash flow before interest and tax reduced in 2000 from 1,082.5 $M to 941.7 $M in 2001 and increased in2002 to 1,280.4 $M. Distributions received, interest and tax led to the rate of operating cash flow again from reduction in 2001 to 672.2 $M from 729.8$M of the previous year to increase of its rate to 1,118.0 in 2002.

Dividends of the company where 285.3$M in 2002, 365.1 $M in 2001 and 254.2$M in 2000.  Thus, a company improved its situation on dividends in 2001 but lost its position in 2002.

As to shareholder value, ordinary share price it increased in 2002 comparing to 2001 but still could not get the rate of 200.  Their value was $6.45, $6.10 and $6.64 accordingly. Market capitalization demonstrated its continuously increasing rate up to 8,403.2$M in 2002.

Net debt/net debt and equity (capital employed) and Net gearing ratio demonstrated their rate on reduction. First on continued to fell from 38.7 % to 27.3 % and to 17.5 % for three years. The second index of financial strength of the company decreased from 64.5 % to 57.8 % and to 55.4 % for the same three years.

BALANCE

Net assets employed before tax balances was 3,994.2$M in 2002, 4,420.2$M in 2001 and 4,588.7$M in 2000. Employed capital reduced from 4,535.6$M, 4,467.4 $M to 4,009.7 for three last years. Net debt was high in 2002 (8,024.4$M), less in 2001 (8,011.1$M) and 7,876.0 in 2000.  Total Capital Expenditure also fell from 707.6 $M to 701.0$M and to 617.1$M.

Conclusion

Summing up, the year 2001 for Coles Myer Ltd. was worse for investing comparing to 2000. Indexes of liquidity, profitability and financial stability demonstrate that 2002 was better to invest in the company than 2001.

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