Accounting for Business Statements of Calpino Honey limited

Question: Discuss about the Accounting for Business Statements of Calpino Honey limited. Answer: Introduction The financial statement analysis helps to determine and evaluates the performance of the company. The financial ratios show the profitability, liquidity, and efficiency of the company. The financial statements and financial ratios estimation provide significant information to the stakeholders of the company (Alexander, Nobes and Ullathorne, 2016). In this report, the financial statements of Calpino Honey limited will be analyzed. The company believes in quality products that are provided to the customers. The company has made considerable efforts to ensure food safety and quality of the systems. The financial report of the company is prepared at the end of the accounting year which provides significant information to the stakeholders. Main context: Return on assets Return on asset ratio is the indicators how an organization is utilizing its assets to generate returns. The ratio shows the ability of the company of utilizing all its resources and generate profitability. Company Name Item 06/14 06/15 06/16 Capilano Honey Limited ROA (%) 7.68 12.11 10.12 The return on assets of Calpino Honey has increased from 7.68% in the year 2014 to 12.11% in the year 2015, but it has decreased to 10.12% in the year 2016. Thus, it shows that the efficiency of the organization of utilizing its assets has been decreased in the year 2016. The higher value of the ratio means that the company can generate returns from its asset resources (Appannaiah, Reddy and Putty, 2010). The change in the ratio is due to the lack in themanagement of all the processes. Themanagement is responsible to utilize all its resources appropriately. The asset categories that should be analysed by the company are PPE, inventory, and account receivable. The property plant and equipment is important for carrying the activities of an organisation. The stock value is also important as shows the amount goods goes out and comes in (Britton and Waterston, 2013). The inventory level should be maintained. The account receivable is also important as shows the amount of due amount collected by the company. All these assets should be analysed before estimating the return on assets. Apart from this, the sales revenue account should be reviewed as it helps to estimate the profitability and the flow of cash within the organization. The increase in sales revenue means an increase in profitability and cash. The Item 06/14 06/15 06/16 Reported NPAT After Abnormals 4619011 7845047 9483463 CA - Cash 1103559 1424491 8695629 NCA - Inventories 0.00 0.00 0.00 CA - Receivables 14922176 20933909 22850501 The financial statements of the Calpino Honey Limited have been shown above. The company prepares the financial statements as per the accounting standards. Financial information The numbers in the financial statements of the organization reflect the real world events. The financial ratios and numbers are derived from the financial analysis help to understand and evaluate the realities of the world (Helbk, Lindset and McLellan, 2010). The performance of the companies can be easily analyzed with the help of the financial information. Accounting policies The company Calpino Honey Limited has adopted new, amending or reviewed accounting standards and the interpretations that are issued by the Australian Accounting Standards Boards has to be followed by the company in the current financial reporting period. The company has applied AASB 10 which describes the new definition "control (Horngren, 2014). The control exists when the organization is exposed and has the right to utilize its power in an appropriate manner. The organization has the power that enables to their activities that affect significantly the returns of the investee. The company follows the AASB amendments to the Australian Accounting Standards and fair value measurement. The standard provides measurement framework with clear objectives to measure the fair value (Rayman, 2013). The company has followed the AASB accounting standard. Net profit The financial ratio of Calpino Honey limited shows the performance of the organization from the year 2014 to 2016. The net profit after tax after abnormals of the organization has increased from the year 2014 to 2015, and again it has decreased in the year 2016. The profit margin shows a decrease in the profitability of the organization in the year 2016. The profit has decreased because the company has not maintained its business operation. The cost has increased and profit has decreased. Item 06/14 06/15 06/16 Reported NPAT After Abnormals 4619011 7845047 9483463 Asset Turnover 1.73 1.76 1.34 Asset turnover Item 06/14 06/15 06/16 Asset Turnover 1.73 1.76 1.34 The asset turnover ratio shows the ability of the company to utilize its asset resources. The asset turnover ratio has increased in the initial period, and again it has decreased in the final year (Parrino, 2015). The ratio shows that the ability of the company to utilize assets has been decreased. Limitations of the financial statements The financial statements provide Signiant information to the stakeholders, but it has some limitations. The transactions are recorded initially at their cost. It can affect the balance sheet as the values of liabilities and assets may change over time. If the rate of inflation is high than the liabilities and assets in the balance sheet appears low as they are not being adjusted for the inflation. The financial report can provide an incorrect view of the cash flows or financial results of the company by viewing at one reporting period (Powers and Needles, 2012). The financial report does not address the non-financial problems such as the environmental attentiveness of the operation of the company or how well it is working with the community. The information in the financial statement provides results about either financial status or the historical result of the business. The environmental, political and economic factors are not considered during the preparation of the financial state ments. Conclusion The financial analysis determines and evaluates the financial performance of Calpino Honey limited. The financial ratios show that the performance of the organization has increased in the year 2015 and it has decreased in the year 2016. The profit margin and ability to utilize its asset resources has been decreased in the year 2016. Themanagement of the company should take appropriate steps to enhance the performance of the company. References Alexander, D., Nobes, C. and Ullathorne, A. (2016).Financial accounting. Harlow, England: Pearson. Appannaiah, H., Reddy, P. and Putty, R. (2010).Financial accounting. Mumbai [India]: Himalaya Pub. House. Britton, A. and Waterston, C. (2013).Financial accounting. Harlow: Financial Times Prentice Hall. Helbk, M., Lindset, S. and McLellan, B. (2010).Corporate finance. Maidenhead, Berkshire: Open University Press/McGraw-Hill Education. Horngren, C. (2014).Accounting. Toronto: Pearson Canada. Parrino, R. (2015).Corporate Finance. Singapore: John Wiley Sons. Powers, M. and Needles, B. (2012).Financial accounting. [Mason]: South-Western, Cengage Learning. Rayman, R. (2013).Accounting Standards. Hoboken: Taylor and Francis.