Table of ContentsExecutive Summary:2Introduction of KiwiRail:3Background of the KiwiRail:5Code of Ethics:7Accounting Standard of KiwiRail:8Working Assumptions:9Answer for Question 1: Ratio & Budget Analysis:10Answer for Question 2: Points on Budgeting and Forecasting:12Answer for Question 3: Reasons for or against Investments:13Answer for Question 4: Occurrence of transaction versus get paid:14Answer for Question 5: FIFO & LIFO Approach:15Answer for Question 6: Impact of Variations - Sales:16Answer for Question 7:17Conclusion:18Recommendation:18References:19Appendices:20Appendix A:20Appendix C:23Appendix D:24Appendix E: FIFO & LIFO25Appendix F: Impact of Variations on Gross Profit, Net Profit and Cash Flows:26

Executive Summary:The following report illustrates the financial decisions and positions of the company KiwiRail of the year of 2012 and 2013. Within the report are discuss ions that analyse certain aspects of KiwiRail financial capabilities. These discussions include the analysis of their financial statements, ratio analysis, sales forecast, assessment of risk, financial reconstruction, and recommendations to management.The "Financial Statement Analysis" includes a detailed review of KiwiRails balance sheet, income statement, and statement of cash flows of 2012 and 2013.The discussion about debt, financial leverage, company growth, the company's net worth, working capital, profitability, ability to service debt, and investing strategy are included in these sections.The "Ratio Analysis" segment contains calculated ratios with explanations to help better understand the performance of KiwiRail. Activity ratios illustrate ratios such as, inventory turnover, average collection period, sales to fixed assets, and total asset turnover. The leverage ratios provide several important ratios such as assets to equity, debt to assets, debt to equity, cash flow to long term debt, and long term debt to equity. The valuation ratios include price to earnings, price to cash flow, Gross profit and Net Profit.The "Sales Forecast" is based on analysis of 2012 and 2013. This "what if" scenario will allow manager to decide which assumption will better fit the company with information provided. The "Risk" segment notes how confident KiwiRail is from a financial standpoint Debt interest rates, and tax policies are taken into consideration in this portion of the report. "Financial Restructuring" is essentially a recap of KiwiRail forecast statement. What will KiwiRail be required to keep progressing with Turnaround Plan in order to maintain financial stability? "Recommend actions" discusses KiwiRails company altogether. This leads into the debate of KiwiRails opportunities and threats. The following report will provide useful information for my manager to better understand the performance of how KiwiRail performed in the year 2012 and 2013 and how they might operate in the future.

Introduction of KiwiRail:KiwiRail is a New Zealand State-claimed endeavour in charge of rail operations, which trades as KiwiRail. Wellington and Auckland is the biggest rail transport administrator in New Zealand. Since July 2010, John Spencer has been the director KiwiRail scenic journeys, Tranz Metro, Interisland Line and KiwiRail Cargo are all backups of KiwiRail. In 2010, Government announced investment, the beginning of a long term plan to create a business, capable of standing on its own feet financially. The subject to business cases, organization's thought about KiwiRail's 10 year course of action for turning around the rail business calls for enthusiasm for KiwiRail's profits to make a sensible and powerful rail industry. This 10 year Turnaround Plan (TAP) hopes to extend rail development volumes and wage, make profit, modernize assets. (KiwiRail, 2011)On 31 December 2012 there was a remake of the Crown's enthusiasm for rail operations. According to the KiwiRail Property Vesting Request 2012 which delivered results from 31 December 2012, the KiwiRail business was traded from NZRC (New Zealand Line Company) into KiwiRail Possessions Constrained. All zone previously held by KiwiRail together with the Wellington Line Station and Social Corridor structures were held by NZRC.Financial Report is the special report that I have prepared on request of my Manager - KiwiRail. It includes all the necessary information regarding financial worth and footage of KiwiRail. It is going to be used for expanding ties with other organizations. It is a report which will identify all the financial activities of a business or entity. (Wikipedia, 2014)Financial Statements will provide the performance of all times how well KiwiRail operating. It shows that financial statements have a value that goes beyond their use of supporting documents. These reports is to summarize financial activities for specific periods. Analysis to evaluate past and current financial condition, diagnose any existing financial problems and forecasting future trends in the organisations financial position. It is the most important document of KiwiRail organisation.In order to show a more comparable view of the performance of the KiwiRail business for the year ended 30 June 2013, the following Performance Statements have been prepared. They comprise the full year Statements of Financial Performance, Financial Position and Cash Flows and accompanying notes for the KiwiRail business as if there was no vesting at 31 December 2012. The land and building assets retained by NZRC in the restructure are shown in these Performance Statements as a transfer out of the KiwiRail business. These Group Performance Statements have not been audited. (Lucy, 2013)

Background of the KiwiRail:From the 1860s onwards New Zealand rail framework made from self-governing beginnings made by individual zones or operators. Colonial Treasurer and later Head Sir Julius Vogel made add to the territory in 1870. By 1880 New Zealand Tracks (NZR) was working more than 1,900 kilometres of track, and passing on pretty much 3 million explorers and 830,000 tons of freight a year. The main 50% of the twentieth century was a 'brilliant age' for rail. (Team, 2014)In 1936 a course of action of transport allowing had been acquainted with shield rail from rivalry. . At initially, road was obliged to passing on burdens near to 30 miles however this a little bit at a time extended, touching base at 150 kilometres in 1977.In 1980, rail passed on pretty about 30 percent of all stock, however taking after deregulation, its bit of the pie dropped by and large. The Railways Dept. was updated in 1982 to transform into an organization guaranteed association with a business request. (Team, 2014)In 1990, the working assets of the Railways Corporation Company were traded to a compelled danger association under government ownership, New Zealand Rail Ltd. In that period Tranz Rail wandered into new markets, including the improvement of mass milk to dairy get ready plants and establishment of New Zealand's first inland port south of Auckland. In 1993, the organization was sold to Wisconsin Central Transportation Corporation and two investment groups. After three years, the new holders made an open offering of shares in Tranz Rail Holdings, posting the organization on the New Zealand Stock Exchange and the NASDAQ showcase in the United States. (Team, 2014)The procedure of deregulation, commercialisation and privatization saw a lessening in the quantity of representatives, from 21,000 with the Railways Department in 1982 to 3,757 with Tranz Rail in 2002. In 2003, Toll Holdings Limited, an Australian-based transportation and logistics administrator, procured more or less 85 percent of the shares in Tranz Rail. Subsequently an assertion in the middle of Toll and the Crown was set off, a key peculiarity of which was the purchase back of track and related framework by the Crown.The Crown embraced to put $200 million in enhancing rail foundation while Toll attempted to put $100 million in new moving stock. In September 2004, possession and administration of the system and its benefits was vested in the current Railway Corporation of New Zealand which received the exchanging name, KiwiRail Network (ONTRACK). Under the understanding, Toll held elite rights to the system for freight purposes, subject to meeting least tonnage levels every year. (Wikipedia, 2014)

Code of Ethics:KiwiRails commitment to corporate responsibility has been defined across five impact areas: To convey to clients what they have guaranteed; They will hear them out and include them in their solutions and innovation To be a good employer, approaching individuals reasonably and with deference, and esteeming their differences. They are focused on making a work environment that makes individuals need to join, stay and work to their maximum capacity. Responsibility to the security and prosperity of individuals is a need. To work with suppliers, develop long term partnerships based on best practice procurement methods which reflect mutually agreeable codes of conduct. To recognise the environmental, social and economic needs of the communities they work in and endeavour to be a good neighbour. Their involvement in relevant communities, in initiatives they implement To help protect the environment by better understanding, managing and measuring our environmental impacts and minimising the carbon intensity of their services. They will do this by commissioning new, more fuel efficient locomotives, increasing focus on fuel saving behaviour and opportunities to improve efficiency, and the completion of some of the big Metro Projects including Auckland metro electrification. (KiwiRail, KiwiRail Statement of Corporate Intent 2012-14, 2014)

Accounting Standard of KiwiRail:KiwiRail Organization principles are readied as indicated by NZ Generally Accepted Accounting Standards and conform to New Zealand Railways Corporation Act 1981. The State Owned Enterprise Act of 1986 & NZ equivalents to International Financial Reporting Standards ("NZ IFRS) and other material budgetary reporting standard as proper for open advantage substances.

Working Assumptions:All parts of the business will be assessed, including the suspicions of KiwiRail's turnaround arrangement, which the Government has sunk over $1 billion into since 2010. (KiwiRail, KiwiRail Statement of Corporate Intent 2013-15, 2015)The association will focus on improving asset and work benefit, making strategies more capable and passing on unsurprising on-time execution for clients. The monetary gauges and execution measures included in Tables 9.1 to 9.3 are in view of various vital subsidizing and capital structure suppositions. The arrangement to turnaround KiwiRail expect the Crown contributes more or less $1.1 billion to backing the 10 year $3.1 billion (barring Metro activities and reestablishments) capital system. The Government has now appropriated the first $750 million of value subsidizing. For the equalization, we have initiated discourses with the Government on financing plans past 2013. As these talks are on-going we have arranged this Statement accepting the Crown gives $146 million in value subsidizing in the 2014 monetary year (of which $52m has as of now been formally appropriated) and $122 million in 2015. In any case it is vital to note that the Government has made no dedication to the unappropriated financing at the time this Statement was readied. We will effectively work with the Government to investigate the most effective approach to meeting these subsidizing perquisites. (KiwiRail, KiwiRail Statement of Corporate Intent 2013-15, 2015)

Answer for Question 1: Ratio & Budget Analysis:(Refer Appendix A for Calculations)1) A company's capability to turn short-range assets into cash to cover debts is of the extreme importance when creditors are looking for payment. Bankruptcy analysts and mortgage inventors normally use the liquidity ratios to define whether a company will be able to endure as a going concern.2) The quick ratio measures the dollar amount of liquid assets available for each dollar of current liabilities. Thus a quick ratio of 1.5 means that a company has $1.50 of liquid assets available to cover each $1 of current liabilities. The advanced the quick ratio, the better the company's liquidity position.3) Higher this ratio is better because it will tell that we can sell more products with less investment in current assets.4) Fixed asset turn over: A higher fixed-asset turn over ratio shows that the business has been more operative in using the asset in fixed assets to make revenues.There is no standard instruction about the best level of asset turnover ratio. Hence, it is important to relate the asset turnover ratio over the years for the same company. This assessment will tell whether the companys performance is refining or failing over the years. It is also important to compare the asset turnover ratio of other companies in the same industry. This comparison will indicate whether the company is performing better or worse than others.5) Debt to total capital ratio: The debt-to-capital ratio is a modification of the debt-to-assets ratio. It measures how much of the capital employed (i.e. the resources on which the company pays a cost) is debt. Higher debt included in the capital employed means higher risk of insolvency6) Inventory turnover Ratio: This estimation likewise indicates speculators how fluid an organization's stock is. Consider it. Stock is one of the greatest resources a retailer provides details regarding its accounting report. In the event that this stock can't be sold, it is useless to the organization. This estimation indicates how effortlessly an organization can transform its stock into money.7) The total asset turnover ratio is a general efficiency ratio that measures how proficiently a company uses all of its assets. This gives savers and creditors an idea of how a company is succeeded and uses its assets to produce products and sales.8) The Net Working Capital turnover ratio is a general proficiency degree that measures how productively an organization utilizes every last bit of its benefits. This gives financial specialists and loan bosses a thought of how an organization is overseen and uses its advantages for produce items and deals.9) Fixed assets ratio proportion lets us know how viably and proficiently an organization is utilizing its altered advantages for produce incomes. This proportion demonstrates the benefit of settled resources in creating incomes. 10) Debtors Turnover Ratio: A ratio that is low by industry standards will generally indicate that your business needs to improve its credit policies and collection procedures. If the ratio is going up, either collection efforts may be improving, sales may be raising or receivables are being reduced.11) Creditors Turnover Ratio: It shows the rate with which instalment is made to banks for the credit buys.

Answer for Question 2: Points on Budgeting and Forecasting:The New Zealand government's yearly records were more awful than figure in the May plan after a write-down in the estimation of KiwiRail weighed on the books, even as the Crown harvested all the more in organization charges.The working adjust before additions and misfortunes (obegal) was a shortage of $9.24 billion in the year finished June 30, more terrible than the $8.44 billion deficit expected by the Treasury, in the wake of running in front of desires in the 11 month accounts. (Desk, 2012)The target was missed to a great extent because of a $1.4 billion hindrance charge on the rail arrange after the administration revalued the advantages and chose to part the fundamental area from the moving stock.The obegal was a deficiency of $18.4 billion in the 2011 money related year as the administration wore the expense of the February Canterbury quake forthright. The legislature took in $55.01 billion in center expense income, beating the $54.74 billion gauge in the monetary allowance.Corporate expense accumulated of $8.61 billion beat the gauge $8.2 billion, while individual duty was in accordance with desires at $24.2 billion. Great and Services Tax was barely shy of figures at $14.57 billion. Center spending of $69.08 billion was not exactly the conjecture $69.63 billion. (Desk, 2012)The working equalization was a greater shortage than conjecture at $14.9 billion, contrasted with deficit of $10.64 billion normal at the monetary allowance. That originated from a victory in the long haul liabilities for the Accident Compensation Corp, reporting a $2.94 billion actuarial misfortune.The Government Superannuation Fund likewise took a charge of $3.9 billion notwithstanding low worldwide investment rates. That implies both elements face littler money streams when deciding the amount they may need to pay out later on.The Crown's net obligation $50.67 billion, or 24.8 percent of terrible household item, as at June 30, was littler than the $51.92 billion planned for. The yield on government's benchmark 10-year security fell 33% of a premise point to 3.532 percent. (Desk, 2012)Answer for Question 3: Reasons for or against Investments:(Refer Appendix C)

Answer for Question 4: Occurrence of transaction versus get paid:(Refer Appendix D)Average Collection Period: Like receivables turnover degree, normal accumulation period is of huge significance when utilized as a part of conjunction with liquidity degrees. A short accumulation period means brief gathering and better administration of receivables. It is hard to set down standard gathering period. It relies on upon nature of business, industry, credit strategy and remaining of the association. When in doubt, receivable ought not to surpass 3-4 months' credit deals. Because of the long term plan they are receiving amounts slowly. Average Payment Period: Average payment period means the average period taken by the organisations in making payments to its creditors. A shorter instalment period shows brief instalments to loan bosses. Like records payable turnover degree, normal instalment period additionally demonstrates the financial soundness of the organization. However a short instalment period may be an evidence that the organization is not exploiting the credit terms permitted by suppliers. Because of the long term plan and 2011 consequences they are paying creditors slowly.

Answer for Question 5: FIFO & LIFO Approach:(Refer Appendix E)LIFO approach is good to sell goods on credit. Because if you refer to appendix E COGS is less than FIFO approach.

Answer for Question 6: Impact of Variations - Sales:(Refer Appendix F for Calculations)

Answer for Question 7:Banks might not lend money to KiwiRail because its going in loss at the moment and also of Turnaround plan of 10 years its still in that process of huge development with Crowns invested money. But after showing same progressive nature of KiwiRail in future it would build a mould of getting money from bank.

Conclusion:KiwiRail is not in an extremely secure money related position.Recommendation:Upgrades in all aspects of the organization are required if the organization is, in the first occurrence, to survive and after that develop. The key zones of change are the liquidity of the organization and the amount and nature of working capital, benefit, and money related solidness. Administration must address these territories at the same time if the organization is to conquer its available poor record.

References:Desk, B. (2012, October 10). NZ govt deficit worse than forecast on KiwiRail writedown, actuarial losses mount.KiwiRail. (2011, December). Railways Corporation, New Zealand (KiwiRail).KiwiRail. (2014). KiwiRail Statement of Corporate Intent 2012-14. KiwiRail Communications.KiwiRail. (2015). KiwiRail Statement of Corporate Intent 2013-15. KiwiRail Communications.Lucy, S. (2013). KiwiRail Annual Report 2013. Auckland: KiwiRail Communications.Team, K. (2014). History of KiwiRail. KiwiRail.Wikipedia, K. (2014, March). KiwiRail Holdings Limited.

Appendices:Appendix A:Ratio Analysis: 1) Liquidity Ratio : 1.1) Current Ratio = Current Assets / Current Liabilities 2013$m2012$m

= 210.8/162.7= 211.6/639.1

= 1.29= 0.33

1.2) Acid Test Ratio/Quick Ratio = Current Assets Inventories / Current Liabilities2013$m2012$m

= 210.8 54.0 / 162.7 = 211.6 -57.9 / 639.1

= 156.80 / 162.7= 153.7 / 639.1

= 0.1= 0.24

1.3) Cash Ratio = Cash / Current Liabilities 2013$m2012$m

= 64.8 /162.7= 36.1 / 639.1

= 0.39= 0.05

2) Assets Turnover Ratio :Net Working Capital Turnover Ratio = Current Assets Current Liabilities / Total Assets 2013$m2012$m

= 210.8 162.7 / / 1009.6= 211.6 639.1 / 4262.4

= 48.1 / 1009.6= (-427.5)/4262.4

= 0.0476= (-0.100)

3) Solvency or Leverage Ratio :Debt Equity Ratio = Total Liabilities/ Total Stockholders Equity2013$m2012$m

= 422.2 / 587.4= 802.2 / 3460.2

= 0.72= 0.232

4) Inventory Turnover Ratio :Inventory Turnover Ratio = Cost of Sales / Average Stock Average Stock = opening + closing / 2 = 57.0 + 57.9 / 2 = 55.95 2013$m2012$m

= 618.8 / 55.95 Dont have sufficient info to calculate.

= 11.05

Note: Assume Operating expense is COGS. 5) Total Turnover Ratio : Total Turnover Ratio = Net Sales/ Total Assets2013$m2012$m

= 727.0 / 1009.6= 715.8 / 4262.4

= 0.72= 0.17

6) Fixed Asset Turnover Ratio: Fixed Asset Turnover Ratio = Sales/Fixed Asset2013$m2012$m

= 727.0 / 798.8= 715.8 / 4050.8

= 0.91= 0.18

7) Current Asset Turnover Ratio:Current Asset Turnover Ratio = Sales/Current Assets2013$m2012$m

= 727.0 / 210.8= 715.8 / 211.6

= 3.45= 3.38

8) Debtors Turnover Ratio : Debtors Turnover Ratio = Credit Sales/Avg. Receivables2013$m2012$m

= 727.0 /146.45 Dont have sufficient info.

= 4.96

Note: Assume Sales as credit sales. Note 2: Average A/c Receivables: Opening + Closing/2

9) Creditors Turnover Ratio :

Creditors Turnover Ratio = Credit Purchases/Average Payables Average Payables = Opening+ Closing/2 = 144.7 + 177.1/2= 233.252013$m2012$m

= 618.8 /233.25

= 2.65

Note: Assuming Operating expense as Credit Purchase

10) Capital Turnover Ratio :

Capital Turnover Ratio = Sales/Capital Employed

2013$m2012$m

= 727.0 /587.4= 715.8 / 3460.2

= 1.24 = 0.21

11) Profitability Ratio :Return on Capital Employed: Net Profit/Capital Employed*1002013$m2012$m

= 174.7 /587.4*100= 2305.1/3460*100

= (-29.74) %= (66.62)%

12) Return on ESH Fund : Return on ESH Fund: PAT-Preference dividend/ESH Fund 2013$m2012$m

= 174.7/87.0 *100= 2305.1 / 1046.9 *100

= 200.80 %= 220.1 %

Appendix C:1) Ratio of 2:1 is desirable to cover the debts but the company has a ratio of 1.2:1 which s not recommendable for investment.2) Ratio of 1 is desirable; the ratio passes the test for short term but cannot sustain long term investments.3) Ratio of 50% is desirable; the ratio passes the criteria for short term investments.4) Since the turnover has reduced from 3.38 $ million in 2012 to 50% in 2013 at 1.72$ million, it can be said that the company has sold less products with more investment. Negative impact cannot be considered for investment purpose. (Neutral).5) The business has been generating sales as compared to 2012; Doing an effective job with a relatively small amount of fixed assets6) Since the debt ratio is more as compared to 2012 the company has more debts to pay off which makes a negative impact on the investor for the investment.ANALYSING THE ABOVE FACTORS FOR THE INVESTMENT PURPOSE IT IS RECOMMENDED THAT THE INVESTOR SHOULDNOT INVEST IN THE BUSINESS.

Appendix D: Profit and Loss accounting = Revenue expenses= profit Revenue (727) Expenses (618.8) = 108.2(Profit)

Account payable: 144.7 $ million 2013 and 177.1 in 2012.(Current liabilities)

Account receivable: 87.9 $ million in 2013 and 117.1 $ million in 2012.(Current asset)

Ratio Analysis:- Average Collection period = Average A/c Receivables* months in a year/Credit sales for the year = 161.05/727.0 *12 = 2.66 months Average A/c receivable = opening + Closing / 2 = 117.1 + 87.9 / 2 = 161.05 Average Payment Period = Average A/c Payables* months in a year/Credit Purchase for the year = 249.45 / 618.8 *12 = 4.84 months Note: Assumed Operating expense as credit sales Average A/c payable = Opening +closing /2 = 177.1 + 144.7 /2 = 249.45

Appendix E: FIFO & LIFOLIFOFIFO

Opening Stock57.9(Last year closing stock is opening stock)57.9

Purchase (Assume Payable is purchase )144.70177.10

Closing Stock(54.0)(54.0)

COGS148.6181.0

Appendix F: Impact of Variations on Gross Profit, Net Profit and Cash Flows:Gross Profit:Gross Profit 201310% increase10%decrease

Operating Revenue727799.7654.3

COGS-618.8-680.68-556.92

Gross Profit 108.2119.0297.38

Net Profit:

Net Profit 201310% increase10%decrease

Net Deficit Before Tax-174.7-192.17-157.23

Taxation(expense)/Credit -

Net Deficit After Tax-174.7-192.17-157.23

Cash Flows:

Cash Flows from operating activities 201310% increase10%decrease

proceeds from

Receipts from customers752.3827.53677.07

Interest received3.23.522.88

Proceeds utilised for:

Payments to suppliers and employees-663.4-729.74-597.06

Interest expense -15.1-16.61-13.59

Net Cash from operating activities 7784.769.3

Cash flows from investing activities

Proceeds from

Sale of property, plant and equipment6.26.825.58

Capital grant receipts181.7199.87163.53

Proceeds utilised for:

Purchase of property, plant and equipment-484.1-532.51-435.69

Purchase of intangibles-1.9-2.09-1.71

Net cash used in investing activities-298.1-327.91-268.29

Cash flows from financing activities

Proceeds from:

Cash balance vested from NZRC

Crown capital investment250275225

Finance lease2.93.192.61

Proceeds utilised for:

Repayment of finance lease liability-0.2-0.22-0.18

Repayment of borrowings-2.9-3.19-2.61

Net cash from financing activities249.8274.78224.82

Net increase / (decrease) in cash and equivalents28.731.5725.83

Cash and cash equivalents36.139.7132.49

at the beginning of the period

Effect of exchange rate fluctuations on cash held

Cash and cash equivalents at the end of the period64.871.2858.32

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