HI5020: Management accounting - Growing the lucky country together - Funtastic limited - BHP limited - Santos limited - Assessment Answer

Subject Code: HI5020 Internal Code: 1AIBEG

Management accounting - Growing the lucky country together - Assessment Answer

Assignment Task: To examine the impact on individual industries, we calculated the change in standard deviation in revenue (the dispersion) between firms. First, we assessed the revenue spread of the industry and then examined the performance of primarily digital firms, comparing them to firms that are not. At an industry level, disruption is measured by revenue spread over the past two years. The change in revenue is a noisy measure of disruption but is preferred to profits since profits are more easily influenced by other short term factors. It confirms the differences between industries. However, it is important to note that this is not a perfect measure; revenue is affected by many non-digital factors and individual company circumstances. Further, the experiences of firms in short fuse smaller bang and long fuse big bang industries appear similar in the short term, i.e. smaller impacts now. Further, in the manufacturing industry (long fuse, small bang industry), the industry has actually had a decline in revenue dispersion, most likely resulting from a variety of changes in economic circumstances. Answer given to the question no-1  After assessing the annual report, it is found that the cash flow from the business operation of the BHP is higher than the net income for the all the completed three years. However, the net income has been computed by using the accrual accounting basis and on the other hand, cash flow statement is prepared by complying with the cash matching concept. Answer is given to the question no-2 Funtastic limited: The cash flow statement of the company reveals that it has high cash outflow but due to the changes in the business condition and its business effectiveness it is still able to raise more funds from the shareholders.   BHP limited: It is analysed that the financial strength of a company is related to generating the high cash inflow in its business. Company is paying high amount of dividend to its shareholders to satisfy their needs. Company has been attracting investors to invest their capital in business. It has also increased more capital by issue of debts (Tappura, et al., 2015). Santos limited: It has increased its cash flow to cover its capital expenditure and dividend payment to shareholders. Answer is given to the question no-3 It is analysed that in order to borrow more funds, the company needs to keep its security in the market mortgage. However, profitability is required to cover the interest payment on a periodical basis. The organization need to generate enough cash to pay off the debts.  The surplus cash after paying the interest is an optimal lending choice for the business. However, compression has been made in part-F and it is clear that BHP Company has the highest surplus in its business. The borrowing cost of the company is high but it is having good profitability. It is found that if the decision of the lending is made then firstly profitability and cost of debt should be considered. In the case of Santos, it could look for lending. Nonetheless, BHP is stepping forward due to its high surplus (Tran, 2017). In the case of the Fantastic Company, it is having negative cash outflow nor has it a profitable business. It is not considered to be in a good position to consider for lending (Vohs, Vohs, and Baumeister, 2016).

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