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Table of ContentsPART A.....................................................................................................................................1(1) Objectives of financial statements...............................................................1(2) Conceptual Framework 2010.........................................................................1(3) Dupont analysis...................................................................................................1(4) Changes in working capital.............................................................................1(5) Earning quality.....................................................................................................2

PART B.....................................................................................................................................2(6) Ratio calculations................................................................................................2(7) Interpretations.....................................................................................................2(8) Recommendation................................................................................................2(9) Cash flow and profit...........................................................................................2

REFERENCE............................................................................................................................3APPENDIX............................................................................................................................... 1

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PART A(1) Objectives of financial statements

Equity investors have the objectives to know the business futureearning capacity, growth potential and security of their holdings. All theinvestors are very much interested to get higher amount of returns.Therefore, they make risk and return analysis associated with theirinvested funds. Lenders such as bond investors have the objectives toknow the short term as well as long term solvency of the business(Bushman and Smith, 2001). They determine the security of their funds.Further, they require timely the interest and principal payments. Theirexpectations about return are highly depend upon the amount, timing andthe uncertainty of the business future cash flows. Thus, they assess thebusiness ability to get higher the amount of profitability and its stability.They determine the Government and other agencies are interested toknow the business activities to ensure efficient allocation of resources soas to improve their tax incomes.

(2) Conceptual Framework 2010(a) Full disclosure principle says that all the required information for

investors, lenders and other users should be disclosed in the financialstatements. Going concern principle assumes that company will operatefor a longer time period (Scott, 2014). Further, Business entity principlesays that all the business is separate from the entity. Therefore, financialstatement shows only the business transaction not the owner's personaltransaction.

(b) Relevance characteristic says that all the relevant informationshould be disclosed because misstatements can influence the userdecisions negatively. Another characteristic is comparability, says that all

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the financial information must be comparable to the other accountingperiods (Edwards, 2013). Therefore, users can identify the comparativechanges and trends of the business performance and the financial position.

(3) Dupont analysis(a) It is a measurement of return on equity through identifying the

operational efficiency, assets uses efficiency and financial leverage(Chang, Chichernea and HassabElnaby, 2014).

ROE = Profit margin*Total assets turnover*assets to equityCalculation is enclosed in appendix

(b) Interpretation: The profit margin, assets turnover and financialleverage ratios of the company are 0.0625, 0.711 and 1.73 respectively.Therefore, the return on equity is 7.69%. Thus, it can be recommendedthat company has to maintain its assets in an efficient manner. Further, ithas to improve its profitability percentage so as to increase its businessperformance. This in turn helps to enhance return on equity.

(4) Changes in working capital(a) CalculationsEnclosed in Appendix(b) Interpretations




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From the above statement, it can be concluded that company isincreasing its current assets and decreasing its current liability so as toimprove the working capital (Financial Ratio Analysis, 2015). This in turnhelps organization to increase the ability to pay its short term obligations.Moreover, it helps business to improve the growth in future period.(5) Earning quality

Investors determine the earning capacity of the organization.Decreasing trend of earnings result in reducing the business growth.Decreased business profits, earning per share, price to earnings growthratio, negative cash flow, inadequate liquidity and decreased solvencyposition indicate decreased earning capacity of the business (Reimers,2013).PART B(6) Ratio calculationsEnclosed in Appendix(7) Interpretations

Fraser & Neave gross profit tends to increase while the netoperational results get declined to 6.25% because of high operating cost.However, net cash flow of the company is negative amounted to -9.Moreover, liquidity of the company gets declined (DRURY, 2013). Further,business has no solvency position to pay its long term liabilities becauseof negative net cash flow. Thus, business is not able to pay its financeobligations out of cash inflow. Further, the earning per share getsdeclined to 7.69% that indicates lower shareholder returns.

(8) RecommendationMr. Shinawatra has to improve its sales and profitability so as to

avail positive cash flow. Further, operating cost should be declined for

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getting higher amount of profits. It helps to improve the businessperformance (Zimmerman and Yahya-Zadeh, 2011). On contrary, businesshas to increase its solvency position so as to financially strengthen itsposition. This in turn helps company to attract new investors.

(9) Cash flow and profitOperating profits and cash flows are different because profitability

statements involve both the cash and non cash expenditures such asdepreciation. Further, transactions are recorded on accrual basis not oncash basis (Lee, 2014). Therefore, it may be possible that cash flows canbe negative in case of profit availability.




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REFERENCEBooks and JournalsBushman, R. M. and Smith, A. J., 2001. Financial accounting information

and corporate governance. Journal of accounting and Economics.32(1). pp.237-333.

Chang, K.J., Chichernea, D.C. and HassabElnaby, H.R., 2014. On theDuPont analysis in the health care industry. Journal of Accounting andPublic Policy. 33(1). pp.83-103.

DRURY, C. M., 2013. Management and cost accounting. Springer.Edwards, J. R., 2013. A History of Financial Accounting (RLE Accounting)

(Vol. 29). Routledge.Lee, T. A., 2014. Cash Flow Reporting (RLE Accounting): A Recent History

of an Accounting Practice. Routledge.Reimers, J. L., 2013. Financial Accounting: Pearson New International

Edition: A Business Process Approach. Pearson Higher Ed.Scott, W. R., 2014. Financial accounting theory. Pearson Education Canada.Zimmerman, J. L. and Yahya-Zadeh, M., 2011. Accounting for decision

making and control. Issues in Accounting Education. 26(1). pp.258-259.

OnlineFinancial Ratio Analysis, 2015. [Online]. Available through:

<http://www.slideshare.net/algelyee/financial-ratio-analysis-final-report>. [Accessed on 22 December 2015].

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APPENDIXCalculation of Return on Equity:

Profit margin Profit /sales 0.0625Total assets turnover

ratio Sales/Assets0.71111111

11

Financial leverage Assets/Equity1.73076923

08

ROEProfit margin*Assetsturnover*leverage 7.69

Changes in Working capital:Extract from the statement of cash flows for the year ended 30

September, 2015Operating profit 468

Increase in current assets and decrease incurrent liability 2015 2014Receivables 1325 1250 75Inventory 869 786 83Payables 1035 1360 325

Net cash flow from operating activities 951

Ratio Calculations:

Ratios FormulaCompany data

2013 2014 2015Return oncapital

employed PBIT/Equity and NCL 16.00% 15.00% 20.66




Gross profitpercentage Gross profit/Revenue * 100 30.00% 35.00% 37.5Net margin Net margin /revenue*100 19.00% 18.00% 6.25

Net cash inflowcoverage NCL/Revenue 15.00% 14.00% -5.625

Quick ratioCash and

receivable/payables 1.5 1.1 1Solvency ratio Net cash inflow/equity 25.00% 29.00% -6.92Profit basedinterest cover Net profit/Finance cost 3.2 2.7 2Cash basedinterest cover

Net cash inflow/Financecost 3 2.4 -1.8

Receivablecollectionperiod Receivable/Revenue*365 32 44 57.03

Earnings pershare Net profit/Equity 18 13 7.69

Calculation of ratios for the year 2015

Ratios Formula (In $000) 2015Return on capitalemployed PBIT/Equity and NCL

25/(130-9)*100

20.6611570248

Gross profit percentageGross profit/Revenue *100 60/160*100 37.5

Net marginNet margin/renvenue*100 10/160*100 6.25




Net cash inflowcoverage NCL/Revenue (9)/160*100 -5.625

Quick ratioCash andreceivable/payables 30/30 1

Solvency ratio Net cash inflow/equity (9)/130*100

-6.923076

9231Profit based interestcover Net profit/Finance cost 10/5 2Cash based interestcover

Net cashinflow/Finance cost (9)/5 -1.8

Receivable collectionperiod

Receivable/Revenue*365 25/160*365 57.03125

Earning per share Net profit/Equity 10/130*1007.692307

6923




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