Chapter 6 – Understanding Key Cost Relationships

As I begin Chapter 6 I’m crossing my fingers for a little less acronyms and formulas than Chapter 4, but I’m not holding my breath! It’s not that I didn’t thoroughly enjoy – and learn – during the previous chapter, but in the past I’ve fostered a loving, relaxing relationship with reading. It wasn’t until University that reading has become a bit of a stressful endeavor for me!  Nevertheless, I’m excited to see what I’m going to learn today – I have to say, that is one of my favorite aspects of this subject so far; I’m genuinely learning brand new things, and increasing my existing (highly superficial) knowledge of other topics. Based on the first page of Chapter 6, I understand the exchange of value between businesses and customers – a product or service for money, basically. I always assumed that there were more economic, specific, in-detail ways for owners and managers to track the costs of their businesses, however I’ve never been privy to such things. My experience working in retail (many of which have permanently scarred me) has always been from the position of sales assistant, never someone who was in a position that required understanding such things. Once again, I think I’m going to only have a superficial existing understanding to apply to this Chapter.

The process of attaching costs to cost objects is a totally new idea to me – I guess it sort of sounds like the sorting-out and organizing we did in Chapter 4 with our financial statements. Basically, we’re re-arranging and organizing things so that we can get a better idea of what’s going on in our firm – a ‘la Marie Condo for accounting? What is NOT a new idea to me is how imperative it is that managers are aware of what the costs in their firms are, and that those costs are closely managed. In all the small businesses I’ve work casually or part-time in, the outgoings have always seemed to stress my managers out more than anything else. Skellerup Holdings have multiple departments and divisions – they have a range of brands that exist under the Skellerup umbrella, each providing different products and services to different customer bases. It makes me a little uneasy thinking that I’m going to have to dive into each one of these departments and understand what exactly they do. As I’ve mentioned earlier (probably 100 times now) Skellerup Holdings are an agricultural and industrial manufacturer, and I have nada / none / zero / absolutely ZIP experience in those industries, and I’m not someone with very much common sense either so I think this is going to be really challenging for me. This is the vibe I’m getting so far, three pages in. Maybe I’m being over-dramatic? Maybe I should be bracing for impact!

I agree with our friend, Dilbert, that numbers do create our reality. Certainly in business, I think most (if not all) decisions are influenced by numbers – and if they’re not, then maybe they should be. After all, the entire point of business is to make money! Profitability and efficiency (represented by numbers) should drive every decision (within reason – environmental considerations, working conditions, etc.). The idea of holding a firm’s manufactured products or raw materials as inventory (asset) to not overstate or understate the firm’s profit makes perfect sense – I assume this is something that the clothing and shoe boutiques that I have worked for in the past would have to do. I understand the concept of process-costing, however I’m seriously hoping to avoid this with my firm as I would have no idea about the separate manufacturing processes for each intricate, but highly varied product! I understand the idea of apportioning indirect costs, however I’m worried again about applying this to my own company, and how accurate and thorough I will be. At first I was glad to see a diagram (Figure 6.2) until I realized I had no idea what I was looking at … I think the path of overhead costs to products might take a Youtube video for me to wrap my head around (I’ll link any good ones I find on my blog!).

By and large I understand the array of costing systems in a theoretical sense. I do not, however, have any understanding of how I would apply this to my own firm without step-by-step instructions. I am now nervously reading through the chapter wondering what I will be able to apply to my firm, leveraging off my (absolutely insignificant) existing knowledge of agricultural manufacturing! The costing systems which makes the most sense to me is the pre-determined overhead absorption rates – I can faintly recall seeing figures expressed in a similar way to the Cadbury chocolate example in the past, however I feel like this would take exceptionally in-depth work to calculate correctly. I’m breathing a sigh of relief to finally arrive at the fixed and variable costs section of the text – now THIS is something I believe I understand pretty well already, and I feel confident that I could prepare a simplified version of this for my firm, if need be. In saying that, the last time I looked at fixed and variable costs was in high school math – so some revision is well needed. Cost-volume-profit analysis is something else I can remember from high school, and despite my affliction towards equations. I’m so happy to easily understand the cost functions for the gig at Indigo! Who knew I was secretly paying attention in high school all those years ago? Definitely not my math teacher at the time … The break even point of a venture is another aspect I’m surprisingly familiar with – although not from high school. I think I’ve read enough inspirational business start up stories to know the necessity of reaching ones break-even point. However the concept of a contribution margin is something I’ve never heard of. Despite my rollercoaster of emotions, I have greatly enjoyed learning about costs relationships. I find that it’s always easier to connect with information that can be applied to practical, daily scenarios – ones that might face a corner store or fish-and-chip shop owner – rather than trying to imagine how a global corporation would handle such things. The examples used in this chapter remind me of the practical math we used in high school, which I really enjoyed. Here is a short video I found on Youtube that explains the difference between absorption and variable costing:

Chapter 4 – Analysing Financial Statements

Using the analogy of the Sydney Fish Market to describe how the capital market works really helped to ‘set the scene’ for me in Chapter 4. I have previously heard that the capital market was based on trading assumptions/ predictions/ expectations, so although this wasn’t new to me, framing the concept with a simple analogy helped me understand that any difficulty I have in comprehending this kind of market isn’t because it’s too complex for me – it’s just different to anything I know. The notion of understanding a firms past to better predict its future makes a lot of sense to me – no doubt there are multiple aspects that are important in finance forecasting, and past performance seems like one of many important indicators. At the end of the first page, I am starting to assume that Chapter 4 is going to be pivotal to the successful completion of Assignment 1 – and I’m excited. I was initially very overwhelmed reading the outline for our next assignment, so I’m very glad to be jumping right into understanding the ‘what’ and the ‘why.’ From the perspective of someone who is genuinely interested in how companies make their money, I am excited to find out more about the economic profit drivers of Skellerup Holdings. Closing out the first section of Chapter 4, I am a little daunted by all of the acronym talk already – and we haven’t even begun! I’m definitely going to need to keep that cheat sheet handy. When I said I loved the idea of business, but was a complete and total noob at it, I really meant it. Although I’m familiar with the words ‘investor’ and ‘dividends’ (familiar … as in I know how to spell them…?) I would not be able to use them in a sentence. Starting 4.1 with Martin re-iterating the relationship between a firm, its equity investors, and the dividends has helped frame my mind correctly. In regards to how a firm ‘adds value’ vs. simply transferring value – I have no idea. I have never thought about this before!  

Two pages in and I’m learning already! Dividends = transfer of value between the firm and its equity investors and Free Cash Flow = transfer of value within a firm, between its operating and financial activities. I dreaded the day I would finally cross paths with formulas and equations in accounting … and it seems that day has arrived. It has taken reading the ‘Economic Profit = (RNOA – cost of capital) x NOA’ multiple times to get a good handle on what I’m actually looking at. I like the opportunity cost analogy – I have heard this term defined before, but not in a way such as this. It really makes me think: what is the opportunity cost of my own life? I didn’t expect to have a mid-life crisis whilst doing my accounting homework today …  So far the key point I’m understanding in 4.1 is how beneficial it can be to analyse the economic profit of a firm – in contrast to its dividends or cash flow – to help us find where our firms are adding value, rather than cycling cash flow. To understand this, we first need to separate our firms operating and financial activities!

The idea of separating a firms operating and financial activities is not something that has ever crossed my mind, although it does make sense now that the idea is presented to me. I have absolutely no idea how one would attempt this however, and I feel very uneasy that we might be about to venture into unchartered waters. As I have mentioned previously (probably an annoying amount of times) mathematics is NOT a strong point of mine. Here we go … So far into 4.2 I am glad to see a lot of text, rather than numbers. I understand things much easier when they’re explained in a casual, written style, so thank you for that Martin! An analogy involving chocolate? Now you’re speaking my language.  I am a little bit surprised that we have to get through the financial activities first before getting to the operating activities – I assumed it would be the other way around, and that the financial activities we’re the toy inside we are trying to get to.  So far, so good – I’m finding that I need to read sentences 2 – 3 times over for them to sink in, but I’m understanding things so far. The Kinder Surprise analogy is helping more than I thought it would, and once we start applying these concepts to our companies in a practical sense I think I’ll start to get the hang of it quickly! I am surprised at how simple Ryman Healthcare’s Restated Statement of changes in Equity looks – I thought we we’re going to be required to engage some sort of algebra. I had a great experience working collaborate and seeking (and providing!) feedback for Assignment 1, so I am genuinely excited to reach out to my peers again for Assignment 2. I was very surprised with how much awesome help I received last time, and no doubt, it’ll be much needed again!

The contents of page 15 has me feeling worried. I lack common sense at the best of times, so I’m not sure how I’m going to fare when listing the extra items of ‘Other comprehensive income,’ let alone understanding what the items actually are. The additional steps for restating our firm’s Income Statements are the first part of this entire reading that are confusing to me – but I think I’m just getting bogged down in the details and once I’m working through my own firm’s financial statements everything will be less overwhelming. I’m actually really excited to get stuck in! This all seems like a bit of a challenge but I’m sure I’ll have more than enough help along the way.

After working through pages 17 – 22 I’m now seeing how all of the restating pulls together to allow us to look at the economic profit of our firm, and I’m still feeling positive. In addition to this, I believe I have a pretty good understanding about how profitability and profit margins work in a general sense, however I’d be clueless at anything numbers or % related. Actually – I stand corrected. I had no idea profitability interacted with efficiency … let alone do I know what this means! Despite this, I am making good sense of RNOA = PM x ATO. I had no idea about the interaction between profitability and efficiency, but it does make a lot of sense. I’m actually really interested to learn a little bit more about this and I think I’m off to look for some Youtube videos discussing this relationship. Here’s one that I think you might enjoy …

Peer Feedback

Upon discovering that a major part of this assignment would revolve around the giving and receiving of peer feedback, I was actually a little hesitant to participate. I thought, “HOW will students who are unable to speak to each other face-to-face be able to assist me and my work? WHAT possible assistance could I offer someone I don’t know, and is there a risk I could accidentally lead them astray?” Lets put it this way – not only am I completely dramatic – but I was also blatantly wrong. I have always excelled in group or class related activities – I’m one of those weird people who feed off the energy of others and love being around other people – so I have (in general) approached online-based learning as something I would fail at immediately – until I actually tried it. After getting over my hang-up, I have had such a positive learning experience in receiving feedback from my peers, and hopefully I have provided them with a beneficial exchange too! My feedback buddies pointed out a wide array of discrepancies in my work – from the misspelling of words in my Study Guide KCQs, to assistance with making my excel spreadsheets more legible. All of the errors pointed out to me were undoubtedly things I can and have rectified, and without another set of eyes looking over my work, it may not have ever occurred to me to rectify them. Other forms of valuable feedback included positive affirmations when my work was correct – I think this is just as important as corrections – a little pat on the back can go so far, especially for someone who might be feeling out of their depth. I am eager to continue utilising peer feedback in our upcoming Assignment 2 (in conjunction with Studiosity) and to hopefully continue providing valuable input for my peers. I was lucky enough to receive feedback from 8 of my ACCT11059 peers, and provide the same 8 people with feedback.

Here is a link to my finalised Assignment 1, please scroll to ‘Step 6’ of the document to view all the feedback I received, as well as all of the feedback I provided. 🙂

Chapter 2 & Chapter 3

Chapter 2

I have never stopped to think about the financial information of firms (and who and how it can be accessed) other than during the brief news broadcasts we hear every-so-often regarding big business tax evasion, fraud, and embezzlement or inside-trading cases. Truth be told I have no real idea what any of those criminal activities entail, although I assume it’s something along the lines of The Wolf of Wall Street? It’s highly interesting to me, none-the-less. I adore the Albert Einstein quote regarding learning the rules to play the game – and my answer to your rhetorical question, Martin, about accounting being a game? I think it is – just like everything – and some can play much more skillfully than others. I certainly assumed that each individual country would have its own sets of rules and standards (and governing bodies) when it comes to the rules surrounding financial statements. I am not surprised to hear that the GAAP in Australia is thousands of pages long – I knew there was a reason people thought accounting was tedious!

Learning about accounting standards has really brought home the fact that I would never want to be an account – math’s AND complex rules?! Not the profession for me. I’m not really enjoying learning about all the different entities that set different financial reporting rules – there are so many different acronyms here and I’m really getting quite confused. Basically, my understanding is that if you are listed on the stock exchange in Australia (and you produce general-purpose financial statements – which is required if you are a reporting entity) you will need to produce financial statements that adhere to the (voluminous and complex) standards put forth by the range of bodies previously outlined. This applies to firms and government entities alike. Okay – that of course makes sense to me, just don’t ask me what each of those acronyms stand for …

You can’t have a rule for everything in accounting – just like in life. Rather, one must bring together their own personal knowledge, experience and skill to sail through unchartered waters – an experience which we are all familiar with in both our personal and professional lives. It is therefore useful to have a conceptual framework to help guide such processes – such as what is provided by the AABS. Now that I think about it, this framework sounds especially important in our digitized world, with so many new businesses and ways of making money for companies that previously never existed. I’m (surprisingly) grasping the concept of accrual accounting quite easily – we record transactions when the VALUE is exchanged between a firm and its customers or clientele.  Likewise, the notion that financial statements should present information that is relevant, and should provide be a faithful representation are simply enough for me to understand. Once again, these two characteristics are not something I have ever though that a financial statement should have – but then again, I have never given thought to financial statements before this very moment. Following this, I also easily understand the qualities of comparability, verifiability, timelessness and understandability. What a nice change to understand concepts clearly! To be honest, I won’t deny that I am feeling a little bit overwhelmed – Chapter 2 was a lot of information to cover, but now I feel like I really do have a grasp on the ‘rules of the game’ – well, as best a grasp that I can have in my second week of university.

Chapter 3 (3.1 & 3.2)

As I start this new chapter I would like to point out how helpful it is to have key concepts hyperlinked (cheers Martin)! This really helps assist my learning, especially as it’s a sort of ‘call to action’ and a type of passive interactive learning. AND, I’m a millennial – we see a link, we click on it. I fin the ability to instantly read the same information (only explained in a different way) is super helpful. It’s like having a friend next to you in class who is able to present a concept to you in another set of words (maybe using a prose that is more familiar) often helping push your own understanding over the line.  I love that 3.1 outlines the reality that a firm’s annual report is a marketing document. This is something that (although might be obvious for business owners or managers) does not simply occur as common sense to most people. A firm using their annual report as another opportunity for good publicity and positive marketing makes perfect sense – after all, there’s quite a few people I’m sure they’d like to impress. A few paragraphs in and I’m already feeling more business savvy today!

I was expecting the issue of our firm also being the parent to a range of other subsidiary companies. I have previously wondered how this works and I am glad that we are shedding some light on it in this chapter. Surprisingly I understand everything quite easily, however I’m glad that instructions to ignore the ‘parent’ accounts and to instead focus on the ‘group’ or ‘consolidated’ accounts is outlined – this is a simple mistake I could have seen myself making with my total lack of experience in this area. Further to that, the explanation for how non-controlling interests is described on a balance sheet is also helpful and beginning to make things much clearer for me – and, to my surprise, from what I now know – the relationship between subsidiary companies and their parent firms is becoming much more digestible for me. Before beginning this chapter, this was a particular area I thought I would have trouble comprehending – and if I’m completely honest – it’s the only part of the process that I had even faint familiarity with (on a superficial level at least).

As I begin 3.2, I’m glad that I finally have a practical context to place a saying I use far more than necessary – ‘the bottom line.’ The idea that revenue less expenses is a firm’s income for a period is not new to me, although I am glad Martin confirmed this for me (imagine if the one thing I was certain on turned out to be incorrect). I’m surprised to learn that firms are able to set out their financial reports how they please – I assumed that it would all be very ridged in its creation – even possibly a ‘paint by numbers’ scenario where different information for each firm must be entered into the exact same pre-made layout of a report. I think I assumed this based on my own interpretation of accounting and finance in general being such ‘by-the-rule-book’ type of industry. It surprises, and almost concerns me, that this is not the case. Maybe light will be shed on this topic in future chapters, but wouldn’t the unconformity of financial reports be a disservice to all who intend to read such reports? From possible investors (if they can’t easily make sense of what they’re reading, why bother to continue reading?) and taxation and other related government departments, and least of all, concerned employees who want to know how their employer is tracking. Chapter 3.2 has been exceptionally helpful in understanding the role and intention of each statement in the annual report.

Skellerup Holdings Financial Statements

In this excel spreadsheet I present the Statement of Changes in Equity, Income Statements and Balance Sheets for my firm – Skellerup Holdings – for the past 4 years. This information has been obtained directly from Skellerup Holdings Annual Reports.

My Top 3 Blogs

One of my favorite blogs belongs to Maylene Alfaro. ‘Maylene’s Accounting blog’ is straightforward and easy to read, as well as being easy to navigate. I love that Maylene includes pictures in her posts, and I especially appreciate the inclusion of the song Sunset Lover by Petite Biscuit! Maylene is really leaving her mark on her blog and making it her own, and I will continue to follow and interact with her blog as I can see similarities in our personalities.   Here is a link to Maylene’s blog!

Another of my favorite blogs belongs to Sonia Elizabeth Gomez. Of all the blogs I have had the pleasure of reading in the past few weeks, none have been able to compare to Sonia’s in relation to how in-depth and interactive hers is!  Titled ‘accountonme,’ Sonia’s blog features a wide variety of posts (and a much larger number of posts than what I have seen on the blogs of others) including related-interest posts, such as “77 Jokes for Accountants” and an awesome post titled “Step 3 step-by-step” where she breaks down all the individual components of Step 3 that must be completed. I will continue to follow and interact with her blog as I think she provides valuable information for our student cohort, and is someone I would trust with feedback. Sonia’s blog takes my pick for #1. Here is a link to Sonia’s blog!

Another blog I am thoroughly enjoying is “Living the accounting dream” by Dayanara Lopez. Dayanara’s blog is a pleasure to read with her customized fonts, colours and layout. She has gone to a lot of effort to create a visually appealing blog, as much so as she has provided in-depth, thoughtful content. This blog features a variety of posts discussing the individual aspects of assignment 1 – a number more than I have seen on other’s blogs. Dayanara’s posts also feature photos, videos and links – making the reading very process interactive. I will continue to follow and interact with her blog as her writing is a pleasure to read and maintains a certain standard that I would like to achieve with my own blog. Here is a link to Dayanara’s blog!

Studiosity

Before beginning this subject I had no previous experience with Studiosity – in fact, I had never even heard of it – despite having recently completed a Bachelors Degree at another university. Although this service seems like a fantastic idea, this is the first time in my journey through tertiary education that I have found a institution that offers it, and actively encourages its use. Upon submitting my draft for feedback (a process which I must admit took far less time than I was expecting) I was advised that due to a surge in submissions, my document would be delayed in its return to me. I found this completely understandable, and made a mental note that when using the service in the future to account for possible delays. Once I was advised via email that my document had been reviewed, I hurried to inspect my feedback. Upon opening the Studiosity portal, I was very pleasantly surprised. The ‘Feedback’ page provided me with many important insights, particularly surrounding referencing styles. This related to a specific question I had asked when submitting my draft, so I was very glad to see it had been addressed. However, what I found even more helpful was the ‘Your submission’ page where I was able to view the specific examples of grammar, punctuation and spelling that needed to be corrected. This is an awesome feature, and was very easy to navigate. Studiosity is a fantastic service that I will be making use of in the future.

If you’re reading this and you’re yet to experience Studiosity – give it a go! Follow this link.

Understanding Skellerup Holdings

Upon opening the spreadsheet and discovering that my allocated company was an industrial supplier by the name of Skellerup Holdings, I was honestly feeling a little discouraged. I already felt out of my depth in this subject and had hoped that I would be allocated a company that was familiar to me – or at least a company that operated in an industry I was familiar with. I have never heard of Skellerup Holdings before, nor do I have I had any previous exposure to industrial and agricultural manufacturing. However, I re-assured myself that starting with a ‘clean slate’ – a company and industry that I know nothing about it – is actually a fantastic way to have a truly immersive, engaged learning experience, as it’s going to actually require me to actively pursue information and understanding!

My company is the New Zealand based Skellerup Holdings, who are a designer, manufacturer, and distributor of agricultural and industrial rubber products – more specifically, polymer and elastomer products and vacuum systems. The company was founded in 1910 by George Skellerup, and now employs close to 800 people in New Zealand, Australia, the United States, the United Kingdom, and China. Their products are supplied to a wide range of customers, including those in the dairy, mining, automotive, plumbing and other water related industries. Skellerup Holdings are a parent company for a number of industrial and agricultural businesses. Their agricultural businesses are almost all dairy-specific, and include Stevens Filterite, Conewango and Ambic. I am aware that New Zealand has a strong dairy industry, so I am not surprised that this New Zealand based industrial and agricultural company is heavily involved in the dairy industry. In contrast, Skellerup Holdings industrial interests are much more diverse, with their portfolio including businesses such as DEKS, Gulf Rubber, Tumedei, Ultralon, Masport, SRS and Skellerup Flexiflo. Skellerup Holdings industrial portfolio seems large and diverse – although most of the businesses manufacture and supply polymer and elastomer products in some capacity, they seem to cater to different markets and niches – which, in a global economy, I assume is a smart thing to do.

Upon Googling my company, I wasn’t expecting to find many – if any – interesting articles about sudden stock price crashes, insider trading, scandals amongst the board members, or any criminal activities. Why? I try to keep up with the news, and I have never once seen the name ‘Skellerup’ on the 7pm bulletin. An industrial/ agricultural company isn’t whom we usually expect to hear about, nor are they interesting enough to write an expose about – unlike media, banking and retail companies. However, during my research I was pleasantly surprised in finding that the Skellerup brand is an iconic company and household name in New Zealand. “Jandals” is the common name for flip flops (pluggers or thongs here in Australia) and is a trademark of Skellerup Holdings, with the company also a leading producer of gumboots.

Although I have only found a few articles analyzing Skellerup Holdings as an investment option, all have been positive. An article published by Yahoo Finance in December of 2018 describes the company as having strong financial health, and “undervalued with excellent balance sheet and pays a dividend” (Yahoo Finance, 2018). Another article published in late January 2019 questions whether Skellerup Holdings is spending too much money, describing its current positive free cash flow yield of 3.93% as “…not sufficient to compensate for the level of risk investors are taking on” (Simply Wall St, 2019). The article then analyzes Skellerup’s expected operating cash flows over the new few years, –which, to my surprise – are expected to grow by a whopping 41%. The author of the article summarizes by declaring that these figures are only encouraging for investors if “… capital expenditure levels maintain at an appropriate level” (Simply Wall St, 2019). The last and most recent article I was able to find discusses how Skellerup investors have seen the share price rise 62% over the last three years. The article points to a few influencing factors, namely the company’s year-on-year earnings growth, resulting in an increasingly improved market opinion of Skellerup Holdings. Upon concluding my company research I am somewhat humbled by my discoveries, from what I thought was a boring, dreary allocation I have found an iconic company who provide a range of products which many of our influential industries rely on – and in addition, I have uncovered a company that is producing positive growth for its employees and investors. I am excited to now delve into Skellerup Holdings Annual Reports and see what information I can uncover from its financial statements.

Discussion & KCQs: Skellerup Holdings Latest Annual Report

The Skellerup website was exceptionally easy to navigate, with small and precise parcels of information regarding their company over view, board members and governance, their role in the agricultural and industrial industries, and an entire swag on financial information (including a banner displaying their current share price). This leads me to believe that this website was crafted specifically for prospective investors, and upon studying Skellerup Holdings most recent 2018 Annual Report, I am even more inclined to think this is the case, which shares a similar inviting readability.

At first glace, the company seems to be doing very well financially in the last year; a 14% increase in revenue, a 23% increase in earnings per share, and a 16% increase in dividends. Skellerup Holdings is also performing well from a human resources point of view, with their total injury rate down by 16% and a 3% growth in their global team. A quick study of the companies 2017 Annual Report shows consistent positive increases over the last 24 months in the company’s earnings per share and dividends, whilst the yearly revenue figure held stable. Skellerup Holdings 2016 Annual Report paints a slightly different picture, with a small increase in revenue, a decrease in earnings per share and no change in dividend figures. This tells me that although 2016 and 2017 weren’t overwhelmingly negative years, they were quite tumultuous – that is, until 2018. Skellerup Holdings look to have had an overwhelmingly successful 2018 financial year, however to confirm my assumptions I will need to dive a little deeper into their Annual Reports, and study the Income Statement, Balance Sheet and Statement of changes in Equity.

The company’s 2018 Income Statement highlights a large increase in revenue, gross profit, and basic and diluted earnings per share between 2017 and 2018. Despite these increases, the 2018 distribution, marketing, administration and “other” expenses were all held closely to the previous 2017 expense figures. Using the insights I gained whilst reading Chapter 3, I am finding the Income Statement easy to read and understand. From what I gather, these are the figures used to create the colorful, eye-catching info-graphics presented at the start of the Annual Report.  The following document is the Statement of Comprehensive Income, which I did have trouble understanding. I am not sure what cash flow hedges or overseas subsidiaries mean, however will engage in a little more of my own research after this to figure out what exactly they are.

Next up is the company’s balance sheet, and thanks to Chapter 3, I have a rudimentary understanding of the information that’s being presented. Comparing 2017 and 2018 figures, Skellerup Holdings Balance sheet describes strong growth in the overall total assets held by the company. Although growth the company’s current assets was strong – including cash and cash equivalents increasing by nearly a third – the company did not record any growth in its non-current assets. In fact, Skellerup Holdings reported a small decrease in the amount of property, plant and equipment held by the company. In the face of a large cash and overall asset increase, I don’t believe a decrease in property, plant and equipment to be a bad thing – especially if this decrease is due to a selling off of unused or under-utilized machinery (for example). Skellerup Holdings Balance Sheet also describes an increase in the total current liabilities of the firm, but a decrease in the firm’s total non-current liabilities. Overall, a small increase in the company’s total liabilities was recorded, however I do not assume this to be negative as this may indicate that the firm is currently involved in the transfer of economic resources with another firm – or rather, it is “doing business.” The disparity between 2017’s liabilities and 2018’s is not great enough to cause worry or confusion – especially in the face of positive asset growth.

Next is the Statement of Changes in Equity, and although I don’t understand exactly what a Cash Flow Hedge Reserve or what an Employee Share Plan Reserve is, I am able to use the data to come to the conclusion that although there was a small positive growth in dividends and total equity between 2016 and 2017, there was a much larger improvement between 2017 and 2018.  

The following Cash flow Statement is not as hard to comprehend as the previous statements, thanks to its use of plain language. This statement describes an overall increase of cash and cash equivalents held by the company by more than a third, when comparing 2017 and 2018 figures. Skellerup Holdings increased their net cash flow in operating and financing activities, however decreased this net cash flow from investing opportunities. This is found quite interesting, and as I mentioned before I had a hunch that the company may have been selling some of their assets that fall underneath ‘property, plant and equipment.’ This may be true, as statements describes the 2018 ‘proceeds from sale of property, plant and equipment’ figure to be more than four times larger than the figure for 2017. Strangely, the ‘payments for property, plant and equipment’ figure does not represent this change – it’s actually a smaller figure for 2018 than 2017. What I suspect might be happening is that Skellerup Holdings is in the process of off-loading the equipment, therefore we might have to wait until the 2019 Annual Report to see this change represented in the figures.

Skellerup 2018 Annual Report 2018

Skellerup 2018 Annual Report 2017

Skellerup 2018 Annual Report 2016

Skellerup 2018 Annual Report 2015

Setting up my blog & my Moodle

If you’re finding yourself reading this post … congratulations! You’ve made it to my blog, and I’m so glad you’re here. Feel free to poke around, leave me a comment and perhaps a follow and I’ll ensure I do the same for you. Oh and if you’re studying CQU’s Bachelor of Property … definitely reach out to me! We seem to be a rare breed so making as many connections as possible is at the top of my to-do list. If you have time, check out my CQU Moodle profile, too. Although I do not intend to ever become an accountant, I believe their knowledge is invaluable and I am so excited to soak up as much understanding as I can!