Question 1 (½ marks) (Multiple choice answer) The concept of triple bottom line reporting refers to the reporting on Corporate Governance, environmental and social performance Environmental, economic and social performance Employee, supplier and customer relations Profits, employees safety and economic performance Question 2 (½ marks) (Multiple choice answer) Corporate Governance is growing in focus for companies in Australia. Using your knowledge select the best definition of corporate governance. Corporate governance refers to; The adherence to the laws set down by the Commonwealth of Australia The direction, control and management of an entity. Issues with the rights and responsibilities of the company’s management and its interactions with customers and external parties The decision making responsibilities of all the employees that are associated with the company. Question 3 (½ marks) (Multiple choice answer) Who is ultimately responsible for the Corporate Governance of the Company? a. The shareholders b. The employees c. The board of Directors d. The Chief operating officer (CEO) Question 4 (½ marks) (Multiple Choice) Sustainability is a focus of many Australian companies. Sustainability can be defined as: - A development that is continual that uses renewable resources and excludes the use of scarce resources - Only using renewable resources in the development of new products - Using resources that meets the needs of the present without hindering future generations use of resources - Using resources that meet the needs of the present without thinking about the ability of future generations to meet their needs Question 5 (1½ marks) (Multiple Answers) Within the Telstra website there is an area on the environment. There are a number of environment programs that Telstra are involved in From this area there is information on ways Telstra is improving its environmental impact. Select from the list below all the areas that Telstra are improving their impact in the environment. - Access for everyone - Supplier code of conduct - Disability - Operational excellence - Adversity and financial hardship - ECVP - Indigenous Australians - Sustainability supply chain - Rural and regional impact TURNING YOUR ATTENTION TO THE ANNUAL REPORT: In the Telstra website there is an area for investors. Access the 2015 Annual report from here, there is no need to print it just down load Question 6a (Multiple Answers) (2½ mark) The annual report contains a number of reports with only some of these being ‘financial reports’. Name all of the financial reports shown for this company in the 2015 annual report. Question 6b (½ marks) The amounts shown in the financial reports are rounded. Identify how the amounts in the financial report for this company are rounded. (Multiple choice answer) a. Nearest dollar b. Nearest thousand c. Nearest million d. Nearest billion Question 6c (1 mark) Briefly explain why you believe the amounts shown in the financial reports are rounded in this way. (Multiple answer) Select 2 from the list below: - ASIC class order 98/100 allows the company to round amounts in this way. - The numbers are easier to read if they are rounded this way. - The report looks neater and the columns are not as wide. - Report is internal so doesn’t need to be detailed. Exact detail is not necessarily required, for management decision making. - Rounding increases the speed at which the report can be prepared. It is not important for everything to balance. - Exact detail is not necessarily required, for investment decision making. Report is external so doesn’t need to be detailed. - Details like dollars and cents aren't used by investment decision makers, they are more concerned with the Auditors report and directors report, to be interested in monetary performance. - External reporting is not for decision making and therefore does not need the detail of internal reports. Question 7 (1 + 1 + 1 + 1 + 1 + 1 + 1 + 1 + 1 = 9 marks) Using the consolidated figures for Telstra Ltd, calculate the following ratios for the years 2014 and 2015. (Multiple fill in the blanks) Ratios are to be shown to two decimal places. Ratios 2015 2014 Profitability Analysis Profit Margin Return on Assets (ROA) Cash flow to sales ratio Asset Efficiency Asset Turnover Capital Structure Debt ratio Market Performance Earnings per share Dividend per share Working capital Debtors Days Liquidity Question 8 (1 + 1 + 1 + 1 = 4 marks) You have been provided with the following information about a hypothetical publically listed company, Commtel Ltd, in the same communications industry as Telstra Ltd: Commtel LTD Ratios 2015 2014 Profitability Analysis Profit Margin 26.01% 25.15% Return on Assets (ROA) 17.81% 18.25% Cash flow to sales ratio 33.58% 32.96% Asset Efficiency Asset Turnover 0.85 times 0.83 times Capital Structure Debt ratio 66.02% 66.98 Market Performance Earnings per share 37.0 36.5 Dividend per share 33.5 32.0 Working capital Debtors Days 22.05 23.6 Liquidity 1.01 1.10 Question 8 continues Using the information above and the calculations in question 7, that is the ratios you are required to make the following comparisons: (a) Looking at the Asset efficiency of both companies, which business has a better Asset turnover? (Multiple Choice) Telstra Ltd Commtel Ltd (b) Looking at the Profitability of both companies, which business has a better Profitability? (Multiple Choice) Telstra Ltd Commtel Ltd (c) Looking at the Capital structure of both companies, which business has a lower debt position? (Multiple Choice) Telstra Ltd Commtel Ltd (d) Looking at the Market performance of both companies, which business is performing better? (Multiple Choice) Telstra Ltd Commtel Ltd Question 9 (1 mark) (Multiple Choice) Using the information above and the calculations in question 7,: Look at the working capital section of your analysis for Telstra. The trend for Debtors days would indicate that; a. Debtors are paying their accounts faster b. Debtors are taking longer to pay their accounts c. Debtors are buying less on credit d. Sales on credit are increasing Question 10 (1 mark) (Multiple Choice) There are ways to encourage payments of invoices by accounts receivables, one is to offer discounts. Discount terms of 2/10 net 30 means a. Pay 10% today and the rest in 30 days b. Pay 2% in 10 days and the rest in 30 c. 2% discount if paid in full within 10 days d. 10% discounts if paid in full within two days Question 11 (1½ marks) (Multiple Choice) There are many benefits and costs to offering credit to customers. Select all the costs of offering credit to customers - Increased sales - Attracting new customers - Attracting impulse purchases - Opportunity costs - Bad debts - Slow payers - Reducing the cost of making a sale - Better profits - Reduced interaction with the customers. Question 12 (½ marks) (Multiple Choice) When an entity does not have enough cash to meet its financial obligations as they fall due the entity is said to be a. Liquid b. Insolvent c. Dissolved d. Wound up Question 13 (1½ mark) (Multiple Answer) There are many costs in business around cash. Select all the costs of not having enough cash in the business. - Opportunity cost - Bad reputation - Loss of business - More expensive borrowings - Embarrassment - Ensuring physical security over the money - Missed timings of cash flows - Closing of store outlets Analyse the profitability of Telstra Ltd and Commtel Ltd by providing: Question 14 (4 marks) Assume you are considering becoming an investor for Telstra Ltd or Commtel Ltd, that is, you will only be investing in one of them. Explain which company you would prefer to put all your money into and why you have chosen this company. You may consider both financial and non-financial information in making this decision. (Multiple answers) Select 4 from the list below. - Profitability is more favourable for Commtel - Profitability is more favourable for Telstra. - Cash flow is improving for Commtel indicating growth - Cash flow is improving for Telstra indicating growth - The debt structure of Commtel is preferable indicating a more stable business - The debt structure of Commtel is preferable indicating a more stable business - The earnings per share for Commtel indicates a better situation for investors - The earnings per share for Telstra indicates a better situation for investors - The dividend per share for Commtel is preferable indicating a better return - The dividend per share for Telstra is preferable indicating a better return - Commtel’s working capital is more secure indicating better liquidity - Telstra’s working capital is better due to favourable debtor days - Asset turnover is improving for Commtel indicating that better use of assets - Asset turnover is improving for Telstra due to an increase in sales - Telstra share price is higher indicating more demand for their shares - Commtel shares are cheaper so therefore I can purchase more