Based on these ratios outline the apparent trends and changes in these ratios, the key risk areas
Fantastic news! We've Found the answer you've been seeking!
Question:
Based on these ratios outline the apparent trends and changes in these ratios, the key risk areas for the audit and the matters that will have to be addressed in the audit plan. Give examples of relevant assertions and at least one audit procedure for each assertion.
What are the trends? Are these positive or negative from a financial management perspective? Are any movements consistent with the over-statement of profit and assets, or the under-statement of expense and liabilities? Summarise the main risks. What audit objectives (e.g., occurrence/existence) are relevant? What audit procedures are useful?
Ratio's to be considered | |||
Profitability Ratios | 2020 | 2021 | 2022 |
Net Profit Margin =(Net profit after tax/Sales) | 9.8% | 12.3% | 8.2% |
Return on Assets= (Net profit after tax/Total assets) | 6.5% | 9.1% | 6.4% |
Efficiency (or Asset Management) Ratios | |||
Total Asset Turnover Ratio=(Sales/Total assets) | 65.9% | 74.0% | 77.9% |
Current Asset Turnover Ratio=(Sales/Total Current assets) | 167.9% | 173.7% | 198.3% |
Liquidity Ratios | |||
Current Ratio (Working Capital Ratio) =(Total Current assets/TotalCurrent liabilities) | 235.3% | 212.2% | 273.2% |
Quick Ratio 1=(Total Current assets - inventory - prepayments)/Current liabilities | 152.0% | 101.1% | 128.6% |
Quick Ratio 2=(Current assets - inventory - prepayments - receivables)/Current liabilities | 151.0% | 100.8% | 128.1% |
Financial Structure Ratios | |||
Debt/Equity Ratio=Debt/Equity | 74.5% | 75.0% | 61.0% |
Equity Ratio=Equity/Total assets | 57.3% | 57.2% | 62.1% |
Vertical Analysis | |||
ANSELL LIMITED | |||
Balance Sheet Data Entry in US$m | |||
YEAR ENDED 30 JUNE | |||
Account Details | 2020 | 2021 | 2022 |
Current Assets | |||
Cash and cash equivalents | 16.7% | 8.8% | 8.2% |
Trade and other receivables | 7.4% | 10.0% | 8.0% |
Derivative financial instruments | 0.2% | 0.1% | 0.7% |
Inventories | 13.9% | 22.3% | 20.8% |
Other current assets | 1.0% | 1.4% | 1.5% |
Total Current assets | 39.2% | 42.6% | 39.3% |
Non - current assets | |||
Trade and other receivables | 0.2% | 0.1% | 0.1% |
Derivative financial instruments | 0.1% | 0.0% | 0.1% |
Investments | 0.5% | 0.8% | 0.7% |
Property,plant and equipments | 10.3% | 10.8% | 11.9% |
Right-of-use assets | 2.3% | 2.2% | 2.3% |
Intangible Assets | 43.5% | 39.3% | 41.9% |
Deffered tax assets | 2.8% | 3.0% | 2.6% |
Retirement benefit assets | 0.1% | 0.1% | 0.1% |
Other non-current assets | 1.1% | 1.0% | 1.1% |
Total non-current assets | 60.8% | 57.4% | 60.7% |
Total assets | 100.0% | 100.0% | 100.0% |
Current liabilities | |||
Trade and other payables | 10.4% | 14.7% | 11.0% |
Derivative financial instruments | 0.3% | 0.2% | 0.2% |
Interest bearing liabilities | 2.0% | 0.0% | 0.0% |
Lease liabilities | 0.7% | 0.8% | 0.7% |
Provisions | 2.7% | 3.4% | 2.0% |
Current tax liabilities | 0.5% | 1.0% | 0.4% |
Total current liabilities | 16.7% | 20.1% | 14.4% |
Non-current liabilities | |||
Trade and other payables | 0.1% | 0.0% | 0.0% |
Derivative financial instruments | 0.0% | 0.0% | 0.0% |
Interest bearing liabilities | 19.2% | 16.5% | 17.0% |
Lease liabilities | 1.6% | 1.6% | 1.6% |
Provisions | 0.4% | 0.4% | 0.3% |
Retirement benefit obligations | 0.6% | 0.6% | 0.3% |
Deferred tax liabilities | 3.1% | 2.6% | 3.2% |
Other non-current liabilities | 1.0% | 1.0% | 0.9% |
Total non-current liabilities | 26.0% | 22.8% | 23.5% |
Total liabilities | 42.7% | 42.8% | 37.9% |
Net assets | 57.3% | 57.2% | 62.1% |
Equity | |||
issued capital | 32.9% | 28.1% | 29.7% |
Reserves | -4.9% | -3.1% | -5.7% |
Retained profits | 28.8% | 31.7% | 37.6% |
Total equity attributable to Ansell Limited shareholders | 56.8% | 56.7% | 61.6% |
Non-controlling interests | 0.5% | 0.5% | 0.5% |
Total equity | 57.3% | 57.2% | 62.1% |
Horizontal Analysis | |||
ANSELL LIMITED | |||
Balance Sheet Data Entry in US$m | |||
YEAR ENDED 30 JUNE | |||
Account Details | 2020 | 2021 | 2022 |
Current Assets | |||
Cash and cash equivalents | 100.0% | 58.7% | 50.4% |
Trade and other receivables | 100.0% | 151.3% | 111.3% |
Derivative financial instruments | 100.0% | 68.4% | 301.8% |
Inventories | 100.0% | 179.7% | 153.3% |
Other current assets | 100.0% | 149.0% | 151.8% |
Total Current assets | 100.0% | 121.4% | 102.4% |
Non - current assets | |||
Trade and other receivables | 100.0% | 36.6% | 41.5% |
Derivative financial instruments | 100.0% | 61.1% | 105.6% |
Investments | 100.0% | 184.0% | 151.3% |
Property,plant and equipments | 100.0% | 117.3% | 119.0% |
Right-of-use assets | 100.0% | 110.1% | 103.1% |
Intangible Assets | 100.0% | 101.1% | 98.5% |
Deffered tax assets | 100.0% | 121.3% | 95.0% |
Retirement benefit assets | 100.0% | 133.3% | 114.3% |
Other non-current assets | 100.0% | 103.8% | 101.1% |
Total non-current assets | 100.0% | 105.6% | 102.3% |
Total assets | 100.0% | 111.8% | 102.4% |
Current liabilities | |||
Trade and other payables | 100.0% | 158.2% | 108.5% |
Derivative financial instruments | 100.0% | 76.1% | 92.5% |
Interest bearing liabilities | 100.0% | 0.0% | 0.0% |
Lease liabilities | 100.0% | 113.7% | 99.5% |
Provisions | 100.0% | 139.3% | 73.9% |
Current tax liabilities | 100.0% | 232.5% | 85.4% |
Total current liabilities | 100.0% | 134.6% | 88.2% |
Non-current liabilities | |||
Trade and other payables | 100.0% | 50.0% | 43.8% |
Derivative financial instruments | 100.0% | 0.0% | 0.0% |
Interest bearing liabilities | 100.0% | 96.1% | 90.7% |
Lease liabilities | 100.0% | 109.4% | 105.1% |
Provisions | 100.0% | 130.1% | 93.5% |
Retirement benefit obligations | 100.0% | 105.4% | 55.0% |
Deferred tax liabilities | 100.0% | 94.4% | 105.0% |
Other non-current liabilities | 100.0% | 113.1% | 97.1% |
Total non-current liabilities | 100.0% | 97.9% | 92.5% |
Total liabilities | 100.0% | 112.2% | 90.9% |
Net assets | 100.0% | 111.5% | 110.9% |
Equity | |||
issued capital | 100.0% | 95.4% | 92.3% |
Reserves | 100.0% | 70.4% | 118.9% |
Retained profits | 100.0% | 122.8% | 133.5% |
Total equity attributable to Ansell Limited shareholders | 100.0% | 111.5% | 110.9% |
Non-controlling interests | 100.0% | 112.6% | 115.1% |
Total equity | 100.0% | 111.5% | 110.9% |
Related Book For
Modern Advanced Accounting In Canada
ISBN: 9781259066481
7th Edition
Authors: Hilton Murray, Herauf Darrell
Posted Date: