Cannot Believe the end is here…

Wow! What a sensational roller coaster ride this unit was.  When I started this unit, I was scared, anxious and under extreme emotional stress…  People thought I was crazy for signing up to uni but I wanted to do something for me and my gosh I am beyond grateful for choosing this unit as my very first.

Since starting this unit my dad has undergone a stem cell transplant to try beat leaukemia, we have lost 3 Grandparents (2 from cancer and one to old age) and to say our life has been full on is an understatement.  Mat and I both work full time so time is precious.

This unit while drove me crazy at times (damn you Chapter 4) has provided me with the most amazing feelings, understandings and gratitude.  I feel proud of myself (and my peers) for pushing each other to strive for the best results possible and I feel a sense of calm over my everyday life even through the turmoil.  This unit has opened up so many mind blowing experiences and has woken up the parts in my brain that went to sleep many years ago due to going through the same monotonous motions in my ungrateful job.  I feel alive again and so eager to keep using the skills and information I learnt through this unit and keep pushing to make my workplace a better place to be.

I cannot thank Martin and his team of lecturers/tutors enough for making me feel like I have a purpose in my work life again. As for my fellow uni peers, you are all one step closer to being accounting super heroes in my eyes!  

Now to eagerly await my final marks 😬😥

Just a few photos of my children and their Grandad who is still fighting his battle.  Taking the first step to uni is all thanks to my mum and dad who always told me I could achieve anything I put my mind too.

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Economic Drivers and my thoughts

Hi There,

So, I love graphs! As I am still getting a handle on the meaning of each of the economic drivers I thought, why not pop it in a graph to see if it shows me anything interesting visually rather than in numbers. I’m glad that I did. While I believe that I have touched on them above I thought it best to confirm that I think the economic drivers for Britvic are the return on equity and asset turnover. It appears that Britvic are very good at generating profit from their shareholders equity and have done this consistently for the four years. What I can’t help but wonder is; do they do this because this is their only option? This graph also confirmed for me what I knew from the start in the fact that Britvic have a high asset turnover which means that they deploying their products quickly and in high volumes. While I believe this is due to the nature of their business (retail) it definitely helps Britvic look good in an investors eyes because they are constantly turning over their products and generating revenue. However it appears that they are still not generating enough revenue to start paying back their debts hmm….

Looking at this graph the key economic drivers for Britvic are definitely the return on equity (use of investors money) and asset turnover (generating sales revenue).

Economic Drivers

How is your company fairing?  I’d love to compare!

Thoughts on Ratios

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I found completing the ratio task was really enjoyable.  Some questions that I have since completing the task will be outlined in my draft assignment however keen for a chat about them if you can assist.

  1. After restating and ratios, did anyone elses opinions of their company change? For me (having no accounting knowledge) I assumed that because my company was gaining profits each year they were wealthy… after ratios I am shocked to discover that my company is 82.70% in debt…. This ratio process identified to me that even though the company is making a profit it does not mean that it is paying out its debts.
  2. I am getting an insane figure in Debt/Equity Ratio… I don’t actually know why this is occurring but will definitely investigate it.
  3. My Earnings per Share (EPS) show up as zero however my annual report says others. Many of my shares are actually for staff so I was wondering if this would have an impact?
  4. My Dividends per Share (DPS) are also zero which once again concerns me and I am starting to think that I missed the start of the lecture where Maria referred to which figure to use from the Issued Share capital section.
  5. I was getting an interesting figure in Price Earnings Ratio so I used a * instead of / and this figure seemed more realistic, however is this correct?

    At the end of the day I have learnt many things about my company especially in regards to the asset turnover and economic profit which was fascinating to watch as it evolved.  But I think the thing that still shocks me the most is that my company is over 80% in debt and not using or gaining their own money.

How is your company fairing?

Assignment 2 – Steps 7-9 – Draft

Hi Everyone,

I will place my spreadsheet here so it is easier to find but please find an in depth rundown on my findings of my company’s information through the ratio process below as per the instructions in Step 8.

Assignment Stage 2, step 7-10- Sarah Zillmann  ***UPDATED 28.05.17***

Britvic-PLC-Company-Spreadsheet-Final-by-Sarah-Zillmann 03.05.17 ***UPDATED 28.05.17***

I actually enjoyed completing this task a lot more than originally anticipated. I’m not sure if it was due to the previous work in restating or if I have grown more confident to trust myself when completing the task. A big learning curve for me last time was to complete the task while watching Maria’s lecture and while she is super-duper speedy in completing the task I just kept rewinding and re watching until I got it. Another positive to this was that I had Kerryn Zimmerman online with me while I was completing it and each time I hit a sticky spot we would discuss different options on whether our figures looked right or not and whether we had got the information from the right places or not. All in all it was a pleasantly surprising experience.

Ratio Analysis

Profitability Ratios
I had to break this down, so for those reading I apologise in advance for my lengthy explanations, you will probably sense me learning as I am typing. My understanding of profit ratios is that they give us the opportunity to look at Britvic’s financials to and compare the expenses and relevant costs over the year to assess if the business is heading in the right direction to gain profit. Looking at Britvic’s Net Profit Margin I was really concerned because it is very very low compared to Kerryn Zimmerman’s and Danielle Bradley’s. Bother of their companies have over -48% whereas my company is 8% and under. One thing I did observe however was that my company has doubled its net profit margin since 2013 so looking at this we are on the right track. If I understand correctly though I would say that my company is not very good at generating earnings after tax.

When I investigated the return on assets my company has tried to stabilise however hasn’t been consistent. Compared to Danielle Bradley’s company Britvic is gaining more return on assets and is a lot more stable whereas Kerryn’s company has big fluctuations, I wonder why this is? I can’t help but think that Britvic hasn’t increased their assets over the past 4 years whereas it looks like Danielle’s company has gained large assets especially in 2014. My understanding of return on assets is that the more assets the company has then the more return they will make from them, looking at the other two companies I would say that my company does not take many risks when it comes to gaining or selling assets. I can’t help but wonder if this is because they are manufacturing company and they already have what they need asset wise to produce large amounts of their products… hmm the search continues.

Efficiency or Asset Management) Ratios
Reviewing the efficiency or asset management ratios concerned me a little bit. I’m still trying to grasp the concept on what they do and after reading a few different documents I can only work out that this ratio shows me that Britvic is not very efficient in asset turnover, this suggests that my company is not using its assets very well and/or having production problems. In fact as each year that has occurred they have gone from bad to worse. However when I compared them to Danielle and Kerryn’s companies I can’t help but notice that Britvic has a higher asset turnover and my inventory is not stored for very long at all. I once again think this is because the company produces the product and there is no need for them to store it as they move the products onto the distributers quickly. I wonder if moving the items onto the distributors also impacts the asset turnover?

Liquidity Ratios
After reading up on what liquidity ratios are I started to panic for my company. As they have (1.21) in 2016 and this is the lowest one so Britvic has progressively gotten worse in respect of being in a positive position to pay out their current debt payments. As this is a negative figure I can only assume that my company relies on finance from others mean likes the bank or financial institutions. My feelings of distress for my company were only reinforced when I looked at Danielle’s and Kerryn’s companies as they were all in the positive and had the ability to pay their debts out. How can my company appear to have such good profit when it appears that they don’t use their own money…?

Financial Structure Ratios
When I read that Debt/Equity ratio will show me how much debt a company is using to finance its assets I was in absolute shock! Britvic is -482% in 2016. So I think that is telling me that my company uses A LOT of finance from financial institutions compared to shareholder funds. I’m not convinced I have this part correct but I followed everything Maria said in the lectures and as it has already been identified that my company does not have a lot of equity I feel this explains why this ratio is so high and impacts the equity ratio. When I compared this to Danielle and Kerryn’s ratio’s I was very disheartened as this confirmed my thoughts.

Market Ratios
It was fascinating to read about what market ratios are and what the purpose is. After completing the ratio task I was disappointed to see that my company’s shares are only receiving 0.04 after net profit however it did help me understand that this would be impacted by the company’s profit.  One thing I didn’t really understand is that the earnings per share for 2016 is 0.04 however the price earnings ratio is 0.27. Does this mean from an investor’s point of view that this would be a relatively cheap share to purchase with the potential of getting a small return on? When I looked at Danielle and Kerryn’s ratios I once again thought that these share prices are greatly affected by the fact that Britvic is using financial institutions money and not their own because they have very little equity. This was once again confirmed when I looked at the debt ratio because this ratio identified that Britvic is 82.81% in debt… uh-oh…. I guess a positive profit doesn’t mean everything. It’s not all bad though because originally in 2013 it was 96.15% so they are obviously trying to reduce their debt, but how?

Economic Profit
Ratio Based on Reformulated Financial Statements
I’ll be honest here, this section surprised me. Everything so far has given me the impression that my company has been using their borrowings from financial institutes to continue business. However when I got the ratio based on reformulated financial statements and understanding that Return on Equity (ROE) is based on identifying how much profit can be made from the shareholders investments and I was impressed to see that in the past my company has made wise decisions especially in 2014 when it was 90.85%. It was however disheartening to see that this has dramatically decreased since then to 42.81% while it is still an okay return it does make me wonder what internal changes have occurred to make this decrease.

While reviewing the return on net operating assets and looking at Kerryn’s and Danielle’s company spreadsheets again it was positive to see that Britvic was trekking towards the right direction in respect of operating income. I can’t help but think that while this company is in great debt they are good at selling their products. But then when I looked more closely I realised that once again compared to 26.58% in2015 our operating income has once again dipped. It was around this time that Britvic had a failed product and were trying to implement the media campaign to drive Fruit Shoot’s image back into the drink world as a better product for children.

When I investigated the net borrowing cost (NBC) I thought that this would highlight further concerns for me as it is using the borrowed money less cash on hand, as you know my company appears to borrow a lot of money so I expected this to be a negative. After completing the ratios though I was relieve to read that my company is tracking okay. Not great but okay. While they have once again decreased the NBC from 7.91% in 2015 to 5.93% in 2016 it was nice to see that they were relatively stable in 2014 and 2013. I once again can’t help but feel this has been affected by the decrease in ROE and RNOA.

Needless to say the profit margin (PM) showed that my company does make a small profit. It identified that the PM has doubled since 2013 and while it had a slight peak in 2015 it levelled out to 8.67% in 2016. I had a discussion with fellow peers in regards to how this process has changed my opinion in respect of initial impression and what I have discovered and this particular one showed me that even though a company is making a profit it doesn’t have to be huge for business to continue.

After learning in the restating task that Asset Turnover is used to ascertain the ability of my company to generate sales from its assets it was again interesting to learn that my company is decreasing is ATO…(seriously what is going on!) in 2013 they were turning over 2.95 compared to 2.06 in 2016, I can only assume here that the impacts of consumer opinion and the sugar tax is making an impact on the reduction in sales. When I compared this to Danielle’s and Kerryn’s companies it was good to see that in respect of sales Britvic is still tracking okay. This of course is because it is a manufacturer of mass products where as their companies are not however if I just look at the figures it provided a glimmer of hope.

This ratio exercise has definitely given me a lot of insight into my company and that while a company in the financial statements can provide a misconception on how the company is really progressing. I really enjoyed this process!

I would like to highlight that I used 10% for the WACC, while I could locate the correct figures in my annual report I chose to follow Maria’s lead in the lecture and stuck with 10%. While I am still trying to fully comprehend this information overload I strongly believe that ROE is the main driving force for Britvic to continue making profit. As the economic profit is a positive figure I can’t help but notice that the use of shareholders equity and sales are the key indicators for Britvic still making a profit even though they have a lot of debt.  The economic profit is all over the place for Britvic however it has shown significant growth from 2013 to 2016. Once again I can’t help but highlight the peak in 2015 which I feel is due to several marketing campaigns and Britvic strategy to join the forces of reducing sugar in their drinks to avoid the sugar tax that was implemented. When I compared Britvic to Danielle and Kerryn’s companies economic profit it was interesting to see that while both of their companies are doing well they had negative economic profits. I think my company is so different to Danielle’s economic profit due to the fact that her company was significantly impacted by natural disasters and they used their insurance payout to reduce their liability of debt . As for Kerryn’s company, we are still in discussions with how different our companies are. One thing I would suggest why our companies are so different is because Kerryn’s company produces a specific specialised item where my company mass produces various types of small products. While it would take my company a lot more to sell to reach similar profit, Kerryn’s company is a one of a kind object that only certain peoples would want to purchase therefore I feel would have less sales.

I really enjoyed this entire process. I learnt from my restating incident (and meltdowns) that I needed to have a more strategic approach this time round and it was so much more pleasant!

If at first you don’t succeed, try, try, try again! – Ratio Checklist Assistance

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Hi Everyone,

I am in a strange mood this morning and I think I have decided that it is the calm before the storm.  I have mixed feelings about my commentary and I feel as though I can hear the click ticking away in the background (actually I can, my clock is way too loud) in regards to the draft deadline for my work (Friday, 26th May 2017 @ 5:00pm).  I most likely won’t reach this deadline but I am sure going to try!

To make life a little easier for myself I have broken down all of the questions Martin asks us in the study guide to make sure that I don’t miss anything.  I think it easing my mind on where to start with my commentary.  Hopefully it can help one of you too 🙂

Have a super fantastic day and I cannot wait to start seeing the facebook page go off with requests for feedback!

Checklist – please note this was just for me to make sense, there could be heaps more to include!

Ratio Analysis
What do the ratios tell me about my firm?
What do the ratios not tell me about my firm?
How do I understand them?
How do my ratio’s compare to other firms ratios?  I have printed out 3 other students worksheets and going to compare
What do the ratio’s tell me about my company’s performance?
What new questions do I have in regards to the ratios?
Economic Profit
Note that I used 10% but could locate them in the annual report
Check Chapter 4.4 and write what are the key drivers telling me? Write about each of the following points
– Return on Net Operating Assets (RNOA)
– Cost of Capital
– Net Operating Assets (NOA)
– Profit Margin (PM)
– Asset Turnover (ATO)

Which one is driving the Economic profit over the past 4 years?
Is my firm’s economic profit positive or negative?
Is it a large number? What is causing this?
Is it a small number? What is causing this?
Has it changed over the 4 years?
Why was it changing?
Discuss with other students on what is driving my firms economic profit.
Discuss similarities or differences between the economic profit of the different firms. Why is this?
What is causing them to be similar?
What is causing them to be different?
Describe my insights I have gained by breaking it into bits
What insights have I not gained?

Capital Investment Decision
Develop a Capital Investment decision
Provide two options and include discounting cash flows for between 5 to 10 years
Use required cost of capital @ 10%
Calculate paypack period for both options
Calculate net present value (NPV) for both options
Calculate internal rate of return (IRR) for both options
Advise which option it should invest capital in
Use excel tab to calculate NPC and IRR
Discuss thoughts on processes in coming to my recommendation.
Briefly discuss the strengths and weaknesses of analysis

Step 7 and 8… the end is near

light-illusion

So reading through the instructions for Step 7 I felt surprisingly calm…that doesn’t seem right haha.  As I typed up my Step 7 draft, which I have included for you for feedback if you’re keen (pretty please). I decided to make a quick checklist to make sure I have included all of the requirements for this step as Maria did say on the lecture that the little bits count too.

  1. Identify 3 products or services
  2. Estimate/Guess selling price
  3. Estimate/Guess variable cost
  4. Comment on Contribution Margins you calculated
  5. Discuss why the contribution margins are different or similar for your three products/services
  6. Identify constraints resources and market
  7. Comment on why the constraints might be relevant when deciding what products your company should produce and sell

I realise this is only 4 marks but I am keen to know if I am on the right track with my explanations.

Britvic-PLC-Company-Spreadsheet-Final-by-Sarah-Zillmann 03.05.17
***Updated 25.05.17***

Assignment 2, Step 5

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Hi There,

I realise that I am leaving this until the last minute but life has yet again thrown me a curveball and this week was crazy.

I LOVED this Chapter!  I don’t know if it was because it was another chapter that I could easily relate to or if I am just warming up in this uni lifestyle, either way I hope I have managed to achieve the desired result with my summary and KCQ’s of Chapter 7.

Please feel free to provide feedback if you have time and if you think I have missed something,  It would be most appreciated!

Cheers,
Sarah

Assignment Stage 2, step 5- Sarah Zillmann

 

Assignment 2, Step 3 thoughts & feelings

Holy Moly… I’m sorry if you are reading this prior to finishing your restating task but this entire task had me frustrated and close to tears on several occasions!  There were no “oh I get it moments” and there were no excited or exhilarated moments. It was all frustration!  I did describe my processing of this task in a previous blog  https://sarahzillmann.wordpress.com/2017/04/17/false-hope-restating-nightmare/ however as the instructions specifically says “post on your blog your comments and responses to restating your firm’s financial statements” I thought I better provide a BRIEF (haha have you read my previous work LOL) summary of what I can only describe as a nightmare.

This is the first time I think I have said throughout this entire unit that I don’t think I learnt anything from this process.  I do not feel enlightened or excited, I don’t think I will ever use this process in my working career ever (I know you should never say never) and in all honesty I felt like a lone ranger through this process.  While I used the Facebook page several times (probably to the point of being annoying) for feedback and information which was fantastic, all I really needed was to sit down and have a chat with a lecturer about my struggles.  I felt envious of those who could attend the lectures in person because I felt they would get more clarity by asking face to face questions and be working through it with the lecturer.  Don’t get me wrong Martin and Maria’s recordings where fantastic but for me personally it just pissed me off even more because I could never get a straight answer from any of the tutors or lecturers through email and FB.

It took me ages to get started because I did not understand ANYTHING in the financial statements.  It may as well have been written in another language and I had to read what felt like the entire annual report (over 160 pages) to even get a start and while I know the lecturers were working their magic in making me explore and work hard by doing this my god it pissed me off.  I was told regularly and on more than one occasion that this was a simple task and basically just copying and pasting.  I couldn’t help but have a massive vent (crying session) to my husband about the fact that I have absolutely no knowledge of this accounting world so being told it was a simple basic task really upset me and then made me angry.  What did I learn about my about my firm through this process?  I have NO idea!   The thought of providing feedback to others on a subject that I don’t understand makes me sick to my stomach.  The last thing I want to do is confuse others with my confusion.  One thing I do see as silver lining is the friendships/support group that I have found myself by using the online communications element of this unit.  For those reading this, you know who you are and I will never stop thanking you for the support and assistance you provided me throughout this ordeal.

I blame this step for my struggles with Step 2, I was so overwhelmed I could not focus on it and lost my confidence in writing.  This entire step made me lose sleep, overdose on chocolate and get so frustrated that I wanted to hand in a blank spreadsheet.  While I know and understand that I took the challenge on myself in regards to studying via distance I can’t help but express that I did not feel very supported by the lecturers/tutors during this particular step which I feel is a massive downfall for a distant student.  Maybe I wasn’t asking direct questions?  Maybe I didn’t try hard enough?  Maybe I’m just not cut out for this accounting thing, I don’t know, all I really know is that I am extremely relieved to know that this step is almost done and out of my life.

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