Auckland University of Technology

365000 Accounting for Decision Making

Week Seven Workshop Worksheet

The balance sheet
Real-life case study: Balance sheet use
Smart Tiles floors (ST) is a leading family business that specialises in the
manufacturing and wholesale distribution of floor tile products. Over the past
two years Smart Tiles has experienced difficult operating conditions. Tim, the
company accountant, has prepared the income statement and balance sheet
for the prior two years for a management meeting. The owners of Smart Tiles
have asked Tim to evaluate the financial statements and prepare an evaluation
of operating capability to present to senior management.

Auckland University of Technology

365000 Accounting for Decision Making

Current Ratio = Total Current Assets/Total Current Liabilities.

201X = 2,813,687/1,642,469 = 1.71
201Y = 2,106,718/1,436,026 = 1.47
Quick Ratio = (Total Current Assets Inventory)/Total Current
Liabilities.
201X = (2,813,687 1,697,220)/1,642,469 = 0.68
201Y = (2,106,718 1,231,111)/1,436,026 = 0.61
Debt Ratio = Total Liabilities/Total Assets
201X = 3,462,046/3,584,529 = 0.97
201Y = 2,762,960/2,799,502 = 0.99

Auckland University of Technology

365000 Accounting for Decision Making

Required:
Discuss what the implications of the Smart Tiles ratios are for
the business. Discuss each ratio in turn:
1. Current ratio

2. Quick ratio

3. Debt ratio

Auckland University of Technology

365000 Accounting for Decision Making

Report Balance Sheet, Liquidity/Activity &

Leverage
Financial Profile

Actual
2014

Actual
2013

Actual
2012

Actual
2011

Actual
2010

BALANCE SHEET $000

Cash and Deposits
Debtors
Inventory
Other current assets
Total Current Assets
Property, plant & equipment
Investments
Other non-current assets
Total Non-current Assets
Total Assets
Current Liabilities (CL)
Non-current Liabilities
Total Liabilities
Equity
Reserves
Shareholders Equity
Other Equity funds
Total Equity
Total Equity & Liabilities

Statistical Measures

Actual
20141

Actual
2013

Actual
2012

PART I: FINANCIAL
STATEMENTS TRENDS
B. Liquidity / Activity
Inventory Turnover
(if applicable)
Current Ratio
Quick Assets Ratio

C. Leverage (aka Gearing)

Shareholders Equity %
EBIT / Interest paid
(aka Interest Cover)

1 The most recent year will be either 2014 or 2015 depending on your balance date.
7

Actual
2011

Actual
2010

Auckland University of Technology

365000 Accounting for Decision Making

Report structure
Report Title page (not in word count)

You must utilise, read and sign the Title page in the template.
Type Full Name of the Company
Enter your: name, ID and workshop stream number
Read the Statement of Academic Honesty
Then sign the Statement of Academic Honesty and date it, as an
acknowledgement that you confirm all the statements.

Statement of Academic Honesty

This assessment has been written by me and represents my own work.

This work has not been previously submitted.
All sourced information has been appropriately acknowledged and APA
referenced.
I permit this assessment to be copied for academic processes (such as
moderation).
I have retained a copy of this assessment electronically.

Table of Contents (not in word count)

Appropriate numbering system

Descriptive heading
Page number

Introduction (not in word count)

Set the scene

Brief introduction as to the demographics of your recent immigrants.

Part I Economic performance - Interpretation of financial

statement trends

Part I Appendix A completed in workshop weeks six, seven and eight.

Prepare a trend analysis and interpretation of the key accounting ratios
based on the companys latest financial statements & ratios calculated
as well as those available on the available online through AUTs NZX
Company Research database
Comment on the trends in: Profitability; Liquidity / Activity; Leverage;
Cash flow.

Part II Social & Environmental performance Analysis and

decision-making

(Covered in Lecture week 10)

1. Analyse any social and environmental performance that your allocated
company does (or should do).
2. Would you decision differ if you only use economic performance to make
your investment decision? Explain why or why not?

Part III Share market Analysis and Interpretation of share

market trends
(Covered in Lecture week 11)
9

Auckland University of Technology

365000 Accounting for Decision Making

1. Complete Appendix A Share market factors. Calculate one set ratio.

2. Prepare a trend analysis and interpretation of the key share market ratios
based on the companys share market data & ratios available on the
NZX Company Research database.

11

Auckland University of Technology

365000 Accounting for Decision Making

Part IV Buy / Not buy Decision Decision-making

A conclusion as to your buy/not buy decision in terms of your hypothetical

audience of recent immigrants to New Zealand.
This must include a decision as to whether the shares are best suited to
investors looking for Income or Growth.
Justify your buy/not buy decision from Part I, Part II and Part III i.e. no
new material.

References (not in word count)

Appropriately APA reference all your authoritative sources

Appendix A Company metrics (not in word count)

You must utilise Appendix A template to include all your ratios and
financial data.
Calculate the five ratios required i.e.
1.
ROSF: NPaT / Opening Equity %
2.
Efficiency %: EBITDA / Total Revenue %
3.
Operating Cash Flow Margin: Net Operating Cash flow / Sales
4.
Cash Flow Ratio: Net Operating Cash flow / C.L %
5.
Dividend Cover: DPS / EPS %

13

Auckland University of Technology

365000 Accounting for Decision Making

Reference style
What is referencing?

Referencing is the acknowledgement of the source of any material (other

than ones own ideas) used by students in their work.
The source material used could include: other peoples ideas, research,
diagrams and any other evidence use to back up or develop a point being
made.
Failing to acknowledge sources through citation and referencing can lead to
charges of plagiarism.

APA (6th ed.) referencing

References appear in the two places in your Report:

o In the main body of the Report: This is a short, AUTHOR-DATE style
reference e.g. This way of writing is considered best (Smith, 1999).
o In the reference list at the end of the Report. This is a FULL detail
of the reference mentioned (cited) earlier in the short version e.g.
Smith, J. (1999). Academic Writing. London: Collins.
Learning to use citation and referencing correctly is the best protection
against charges of plagiarism.
You have a responsibility to ensure that your work is properly
referenced before it is submitted.

Useful sources & links

AUT Library: http://www.aut.ac.nz/being-a-student/startingout/undergraduates/academic-information/academic-and-studysupport/student-learning/student-learning-centre-learningresources/referencing

APA Interactive from Massey University: creates customised examples of APA
references and in-text citations. http://owll.massey.ac.nz/referencing/apainteractive.php
APA 6th formatting guides at AUT Libraryhttp://http://aut.ac.nz.libguides.com/APA6th
Visit AUTs Student learning centre for further assistance.

APA REFERENCING PRACTICE

Required:
Using the APA Interactive from Massey University
http://owll.massey.ac.nz/referencing/apa-interactive.php APA
reference:
1. Your companys annual report;
2. Newspaper article on your company; and
3. Reserve Bank outlook on economy (you will need to find this on
their website).
15

Auckland University of Technology

365000 Accounting for Decision Making

17

Auckland University of Technology

365000 Accounting for Decision Making

Plagiarism

It is expected that all students will use their own words when
completing the report.
All words quoted or copied from another source MUST be APA
referenced.
All Written reports must be submitted to Turnitin via
AUTonline.
To represent other peoples ideas as your own
This is a serious offence
It may result in disciplinary action e.g.
Lost marks
Failed assignments
Expulsion from the course
Proper referencing of your work shows your intention to avoid
plagiarism.
AUT requires you to use the APA 6th edition style for
referencing

WRITING YOUR REPORT

1. PLAN your answer.
2. GATHER authoritative support.
3. WRITE Parts I, II, III & IV.
4. PRESENTATION should be
appropriate.
5. EDIT to ensure the 2,000 word limit
is met e.g. remove verbose wording,
repetition.

19