Report on Financial and Managerial Accounting of the commonwealth bank of Australia

Task 1

Business Description of the commonwealth bank of Australia

The finances of the commonwealth bank of Australia are analyzed to determine the financial performance of the organization. The financial ratio analysis has been performed to identify the profitability, liquidity, financial leverage, and efficiency of the corporation. The ratios not only help in financial decision making but also provide a quick overview of the whole organization’s financial position (Chandra, 2011).

Financial Statements of the commonwealth bank of Australia

The financial statements of the organization are provided in the excel sheet.

Ratio Calculations of the commonwealth bank of Australia

Profitability

Liquidity

Efficiency

Financial Leverage

Business Financial performance of the commonwealth bank of Australia

If the financial performance of the organization is analyzed then it can be said the corporation needs to improve its financial performance. The liquidity ratios of the organization indicate that the organization does not have enough cash to pay its short term obligations. The organization’s ROA and ROE ratios are showing that corporate profitability is low and a significant amount of effort will have to be taken to improve the financial performance of the organization (Fridson & Alvarez, 2011).

Business Financial Potential of the commonwealth bank of Australia

The business's current financial performance indicates that the organization needs to improve its financial performance. If the organization wants to sustain in the long run than the business will have to take initiatives for improving the profitability of the business. By increasing its efficiency the organization can improve its profitability up to a lot of extents (Mohana, 2011).

Business Future Funding of the commonwealth bank of Australia

In the future, it can be said that the business will need to borrow more funds if the organization wants to expand its business into different parts of the world. The organization can finance its assets from both debt and equity. It is recommended to the organization to maintain the optimum capital structure (Pandey, 2015).

Business Legal Obligations of the commonwealth bank of Australia

The business is working according to the legal standards set by the authorities. The organization is following the legal requirements of the industry in which it is operating.

Conclusion of the commonwealth bank of Australia

It is concluded that if the financial performance of the organization is analyzed then it can be said the corporation needs to improve its financial performance. The liquidity ratios of the organization indicate that the organization does not have enough cash to pay its short term obligations. The organization’s ROA and ROE ratios are showing that corporate profitability is low and a significant amount of efforts will have to be taken to improve the financial performance of the organization.

Task 2

Cost of Production Budget

 For the ending 30^th September 2017

The production cost at the ending of September 2017 was $679,696. The costs contain raw material cost, direct labor cost, and overhead costs that are incurred in the manufacturing of dining tables and buffets (Warren, et al., 2016).

The raw material cost is evaluated on the basis of the following data:

Cost of Goods Sold (COGS) Budget

Cost of Goods Sold Budget

For the ending 30^th September 2017

The closing and opening inventory of finished goods are evaluated using the following data:

Opening July inventory of finished goods:

Closing Sept inventory of finished goods:

The closing and opening inventory of raw material are evaluated using the following data:

Opening July raw materials inventory:

Expected closing September raw materials inventory:

Task 3

The selling price is determined based on a mark-up of 40% over the Cost of Goods Sold.

Sales budget

From July to September 2017

Cash Budget

From July to September 2017

Cash Budget is prepared on the basis of the following policies:

Task: 4

Budget Objectives

Companies use budgets to develop plans for future business operations and manufacturing of products. The following are the objectives for budgets:

1)      To develop a plan for future production of a product.

2)      To better manage the financial performance of the company

3)      To expand companies' operations in the future.

4)      To measure the performance outcomes of the company.  

Budget Components of the commonwealth bank of Australia

        Budgets are consist of several components including revenue, direct and indirect cost, expenditure, and net profit of the business operation or project for which budget is developed. Moreover, components of a master budget include Direct labor budget, Direct materials budget, Ending finished goods budget, MOH, production budget (containing information about to be produced products), sales budget, and income statement (Fridson & Alvarez, 2011).

Assumptions used in various budgets of the commonwealth bank of Australia

Key assumptions used in the budgets are stated below under the relevant budget name.

v  Cash Budget of the commonwealth bank of Australia

ü  The budgeted sales of the company are $10,000 and $2100 for  June and May respectively.

ü  The cash sales were a total of 80% of overall sales.

ü  Remaining 20% sales are representing the following

·         15% received next month

o   5% received the second month after sales at 2% discount

v  Production Budget of the commonwealth bank of Australia

1)      50% of manufacturing overhead cost for the buffet

2)      50% of manufacturing overhead cost for the dining table. 

v  Operating Expenses Budget of the commonwealth bank of Australia

1)      Variable cost is increased by 20% for the month of August

2)      Variable cost is increased by 25% for the month of September

v  The Master Operating Budget for the whole financial year – July 2017 to June 2018

1)      In each quarter sales are increased.

2)      Raw material cost is increased by 8%

3)      No changes are made in the direct labor cost and discount levels.

4)      MOH will have increase by 20%

v  Income Statement

1)      The cost of goods sold is increased in quarters 2, 3, and 4 by the percentage of 10%, 12%, and 16% respectively (Warren, et al., 2016).

2)      No changes are made in discounts and fixed expenses

3)      The variable cost is increased by 5%.

Communicating the budget to the company

Communicating the budget to the company can give several benefits in monetary and non-monetary terms. The company can communicate about its budget in the following ways:

1)      Organizing weekly meetings for discussion about future plans and current organizational performance

2)      Prompt discussion of recent data with financial details

3)      Setting rules and regulations for each department based on new budgets

4)      Setting SMART goals for each department

Key Milestones and Performance Indicators

Some common milestones and performance indicators can be used by the company. For instance, Breakeven sales, Gross profit margin, Debtors turnover, Debt/ Equity, Return on Investment, Current ratio, Interest coverage, and inventory turnover in a specific time duration. By using these performance indicators and milestones companies can measure their profitability, liquidity condition, and efficiency in resource utilization (Mulford & Comiskey, 2011).

Conclusion of the commonwealth bank of Australia

The whole discussion concludes that the company develop its budget for future business operations and to measure performance outcomes. Several components of budgets include revenue, expense, and cost. Budgets are usually developed on some assumptions concerning with increases and decreases of values. Budgets should be communicated within the organization at meetings.

References of the commonwealth bank of Australia

Chandra, P., 2011. Financial Management. s.l. Tata McGraw-Hill Education.

Fridson, M. S. & Alvarez, F., 2011. Financial Statement Analysis: A Practitioner's Guide. s.l.: John Wiley & Sons.

Mohana, R. P., 2011. Financial Statement Analysis and Reporting. s.l.: PHI Learning Pvt. Ltd.

Mulford, C. W. & Comiskey, E. E., 2011. The Financial Numbers Game: Detecting Creative Accounting Practices. s.l.: John Wiley & Sons.

Pandey, I., 2015. Financial Management. s.l. Vikas Publishing House.

Warren, C., Reeve, J. M. & Duchac, J., 2016. Financial & Managerial Accounting. s.l. Cengage Learning.