Using accounting for decision Making assignment 1

Beverley K. Nyirenda S0209821

Beverley Nyirenda

Company: Medical australia  S0209821

Step 1

I commenced Step 1 by setting up my personal profile on Moodle which included a brief

description of myself and uploaded a profile picture as shown below.

Hie, my name is Beverley Nyirenda and I am a fulltime student in

my third year of Bachelor of Accounting/Bachelor of Business, a mum of an amazing 7 year old

girl and a wife. I am a good natured person who loves to smile and l enjoy reading.

I then set up my blog on WordPress and included a welcome message on my blog in the About

section. Here is a link to my blog: https://accountinginsightsblog.wordpress.com/

Step 2; Identifying my company

Company name: Medical Australia Limited

Industry: HealthCare

Location: Lidcombe, NSW, Australia

Who then is Medical Australia? I asked myself the same question when I received my company

because l had never heard of it before. At first glance on finding out what my company was, I

was excited because it is an Australian company and I would understand their financial

statements since l am familiar with the currency and the accounting standards they use.

Who then is Medical Australia Ltd?

http://www.medaust.com/irm/content/default.aspx

Medical Australia is an Australian company which manufactures and distributes medical devices

and consumables to the human market and, regenerates medicine therapies and equine (horse)

performance products for animal health.

It is currently listed on the ASX with the share price of $0.054 as at 18 November 2015 which I

was surprised to see since its share price is so low and I was expecting a much higher share price

assuming the healthcare industry is always in demand since people always get sick.

History of the company

http://www.medaust.com/irm/content/our-history.aspx?RID=319

In 2001, BMDi Limited was formed to specialise in the development of products designed to

reduce needle-stick injuries with a focus on safety injection, collection and needle destruction

devices.

In March 2008, BMDi acquired the business and select assets of TUTA Healthcare to form

BMDi TUTA Healthcare Pty Limited.

In 2009, BMDi TUTA acquired the business of Clements Medical Equipment.

At the end of 2009, with the acquisition of TUTA and then Clements Medical Equipment, the

decision was made to change the name of the listed company to MEDICAL AUSTRALIA

(ASX: MLA) in line with the acquisitive focus of the business and the need to better reflect the

growing portfolio of companies owned by the business.

Portfolio of Medical Australia

The portfolio of companies incorporates TUTA Healthcare, TUTA vet and Clements Medical

Equipment.

TUTA Healthcare is engaged in the development, manufacture and distribution of quality

medical devices and equipment, with particular expertise in sterile and non-sterile medical

plastics for use in surgery and transfusion.

TUTA Vet which is dedicated to the animal healthcare market.

Clements Medical Equipment specialises in the design, manufacture and distribution of

medical suction, oxygen and laboratory equipment.

Board of Directors

http://www.medaust.com/irm/content/board-of-directors.aspx?RID=330

Bruce Hancox Non- Executive Chairman

Dr. Geoff Cumming Non-Executive Director

Ian Mitchell Non-Executive Director and Company Secretary

Darryl Ellis Chief Executive Officer

Michael Jones General Manager, Corporate Innovation

Michael Andrews Chief Financial Officer

My firm’s annual reports2014 Annual report http://www.medaust.com/irm/content/annualreport/2014/AR2014.pdf

2013 Annual report http://www.medaust.com/IRM/PDF/1274/AnnualReport2013

2012 Annual report http://www.medaust.com/IRM/PDF/1248/AnnualReport2012

Key conceptsMedical Australia’s website was simple, clear and easy to navigate to the last three years of the

annual reports. The directors created understandable annual reports and defined most difficult

key terms in their financial notes which l got a good grasp of.

2014 financial year began in challenging circumstances as Medical Australia had incurred losses

in the last three financial years and management were evaluating their strategies in order to have

different results in that financial year. Management continued to work through the details of a

proposed Medivet transaction which would have a positive input to their earnings whilst

pursuing various opportunities to raise capital as well as restructuring the business.

Thus, on the 9th of December 2013, Medical Australia acquired 100% of Medivet Pty Ltd 20

million ordinary shares. Medivet specialises in animal healthcare and is best known for

developing the world-first in house regenerative animal stem-cell technology, which has been

commercialised for the veterinary and equine markets throughout the world. A successful capital

raising of $4 million occurred to support the acquisition of Medivet and Medical Australia

became the only profitable listed stem cell technology company in the world.

I support the acquisition of Medivet as it has proved beneficial as noted below:

Total assets increased by approximately $5.6 million to $12.1 million which is an 86%

increase from the previous financial year total assets of $6.5 million delivering increase

in cash, debtors, inventory and goodwill.

Total reported liabilities decreased year on year by approximately $160 000 which is a

5% decrease.

Overall sales revenue was higher by approximately 30%. The TUTA direct business grew

by 11%, the supply OEMs grew by 2% and the Clements business grew by 13% as sales

were strong in Asia.

Senior management have changed resulting in a sharper focus on numbers, budgets and

profitability drivers in the firm.

Management were successful in restructuring the business by addressing costs and overheads

with the aim of better aligning business costs with the revenue and profit. For example, the head

office was relocated to the Company’s warehouse and operations centre in Lidcombe NSW

thereby reducing costs.

I found this to be interesting that they decided to restructure the costs and overheads of the firm

after three years of having a loss instead of the first year the loss incurred as it would have

facilitated profitability in the last few years.

Despite the delay in restructuring costs, I agree with the move as it has produced some

significant outcomes as noted below:

Synergies and better communication within the business were obvious.

A small profit of $ 105 241 was achieved as a result of the aggressive overhead reduction

program.

Key suppliers have delivered supply chain efficiencies, improved cost position and more

efficient use of working capital.

I found the corporate governance statement boring as it is long, though, l understood the

importance of having a set of core values and behaviours that support the company’s activities

and ensures transparency, fair dealings and protection of the interests of stakeholders.

I found it interesting in the director’s report that’s almost all directors have an immense number

of shares in the company. I was also surprised to note that while the company was having losses,

specifically in 2013, management enjoyed a remuneration package of $1.2 million. I personally

do not agree with this considering the company had been in a tough spot the last previous years. I

do appreciate the effort management put into their duties though I would have thought they will

make an ethical and profitable move to cut their remuneration packages and assign the savings in

the restructuring of the firm, which they did in the 2014 financial year.

At first, I found the cash flow statement and provisions contained in the balance sheet difficult to

understand then I thought l would treat it as our first introduction at a party, once my motive

changed, l read through the notes to financial statements and I started to comprehend the items it

contained similar to getting to know each other after the introduction phase. For example, I

noticed provisions on the consolidated statement of financial position then my question was,

what are these provisions for? I scrolled down to the notes section where it explained that

provisions are recognized when the group has a present legal or constructive obligation as a

result of a past event. Then l had another question; which past event? I scrolled down again and

found out the provisions were for employee annual leave and long service entitlements.

Media and NewsASX AnnouncementsRelease of restricted securities from Voluntary Escow

The Company intends to release 18,333,334 ordinary fully paid shares from twelve months voluntary escrow provisions on December 7 2015.

http://www.medaust.com/IRM/PDF/1450/ReleaseofRestrictedSecuritiesfromVoluntaryEscrowMedivet Biologics US Animal Health Business

  The Directors are continuing to explore all options for disposal/divestment of the US business including any necessary provisioning for its interest therein in the half-year accounts.

http://www.medaust.com/IRM/PDF/1446/MedivetBiologicsUSAnimalHealthBusinessResults of Annual General Meeting

http://www.medaust.com/IRM/PDF/1448/ResultsofAnnualGeneralMeetingCompany Presentation

Investor Presentation briefing about the acquisition of Medivet

http://www.medaust.com/IRM/PDF/1265/InvestorPresentation

Discussions with other people on the forum.I had a chat with Christyn Kelly who has Hong Kong Exchanges as her company. I noticed a

major difference in our companies’ share price since my company: Medical Australia has a share

price of $0.05 which is rather insignificant and her company: Hong Kong Exchange has a share

price of $309.40. Also Christyn was dealing with figures in the billions and l was dealing with

figure below $15 million. Though these companies are in different industries, there is a vast

difference in similar items such as share price. Also, Hong Kong Stock exchange had a rather

image enhanced annual report compared to Medical Australia’s annual reports which had no

images. In addition, Hong Kong stock exchange experienced a profitable year of $5 138 million,

which was surprising as this company was doing so well regardless of a challenging global

economy whereas my company made a profit of $105 241.

The discussion with Christyn helped me understand my company better as l had not noticed that

my company did not post their payments to staff and suppliers in their "current liabilities’ until

the statement of cash flows. She brought this up and commented on it saying, “It makes the

company look really profitable until you get down to the statement of cash flows and realise that

there is a huge pay out of over $12 million and there goes all that profit.”

I also had a chat with Nicholas Gregory who has Optus International as his company. The latter

had a low share price of $1.17 whilst my company had a much lower share price of $0.06. Optus

International had a 17% increase in revenue in the 2014 financial year whilst my company

increased revenue by 30% in the same period. I was impressed with how Optus decided to

downsize their management because of the challenges they faced in the market.

I also had a look at Samuel Marshall’s blog, he had a question on his blog which l helped him

answer below:

In response to your question What plans does Yue Yuen have in place when China's labour

costs increase, are they simply going to move an even greater share of manufacturing

overseas?

In response to the challenges, the Group has adjusted business strategies accordingly and

accelerated the implementation of such strategies. The Group has continued to place more

strategic emphasis on supply chain value creation, in addition to production economies of scale.

The Group is focused on upgrading its capabilities to offer more valuable manufacturing and

supply chain solutions to our brand customers, particularly in China where the Group can further

leverage the potential synergies between the footwear manufacturing and retail businesses.

This gives your firm competitive advantage and mitigate risk associated with manufacturing

shoes. Their supply chain value creation also reduces waste, overhead costs and shipping delays

in a scientific way.

In addition, I noticed that Sharon Andreassen had an Australian company similar to mine which

was also in the healthcare industry. They were a number of similarities in our firms. In looking at

her company I noted that it has been having losses from the financial reports I had seen from the

last two years. My firm Medical Australia had losses from 2011 to 2013 then they had a small

profit in the 2014 financial year of $105 241 after an aggressive overhead reduction.

My firm raised capital in 2013 of $4 million. Similarly, her company raised capital as well of

$42.2 million in capital, reduced to $39.7 million after netting capital raising fees.

Her Company issued 400,827,747 shares upon the completion of a fully underwritten entitlement

issue at a price of $0.015 per share to raise $6,012,417. This was a very low share price.

In comparison, my company (Medical Australia) also issued 16,666,667 shares at $0.30 per

share to raise $4million. its current share price is $0.054 which is quite low.

No dividends were paid out in my firm and hers.

My top three blogsIn looking at other students’ blogs, in my opinion I chose my favourite blogs in terms of the blog

design; how it looks, the way you navigate around the blog and the content provided. I enjoyed

reading these blogs because they created a connection with their companies which as a reader,

you would be able to relate to and understand their companies.

1. Samuel Marshall http://sbmarsh.blogspot.com.au/2015/11/yue-yuen-holdings-ltd.html

Sam’s blog was simple, clear and he provided a lot of information regarding his company whilst

keeping the blog uncluttered as compared to other people. The boundary of the blog was in

bright colours which increased the visibility of the content. I liked the shoes he put on his

company’s introduction, it makes me want to buy a new pair of trainers! The link to all his blog

posts on the right makes it easy to navigate around his blog.

2. Tiffany Hill http://isitallnumbersandnofun.blogspot.com.au/

Tiffany;s blog was amazing and the layout is perfect. It is easy to read and very engaging. I agree

and like the way she made a psychological link that most people who enjoy confectionery have

an addictive personality, as do most people who gamble thus her company combined

confectionery with sports betting. Her company seems to be doing well despite the challenges

they are facing. She understood her company well and wrote it in a way that the reader would as

well.

3. Christyn Kelly http://christynjade.blogspot.com.au/

Her blog was very informative, simple and engaging. She mentioned the origin of the company

and what they do in great detail showing how well she understood her company. Her blog design

was good and they were a number of cat memes on her posts which made the reading interesting.

She was open about the challenge she faced in reading her firm’s annual report and how that

made her expand her knowledge of accounting terms.

Ideas, reflections and reactions to reading Chapter 1 The author made me wonder what accounting is since a definition was not provided in the first

paragraph. I noted that Accounting was about understanding the business realities in a firm. I

disagree with The Accounting Troll statement ‘we believe numbers create reality’. How can

numbers create reality? I mean, if a business is selling a high number of goods, their sales

revenue will be high as shown by their numbers thereby reflecting reality of what is going on.

When I read in Yeppon businesses were everywhere exchanging value in the market place, my

immediate thought was how can l improve the value of each of these. I imagined myself having

purchased one of the businesses and having accounting information come my way which would

consist of previous years of financial statements. I would look at the amount of revenue which

the business has made, review the business costs and come up with strategies to minimize costs

whilst still creating value for my market. I would also look into the profits the business would

have made if any and how l can improve that. Also, l never gave the thought of businesses in a

shopping mall like Canelands central here in Mackay being sole traders, partnerships, trusts or

companies and how each of them would keep accounts and how different they will be from a

shop which provides services like Mackay Day spa to Myer a departmental store which sells

goods.

I found it interesting that the author took eight hours and a lot of practice to touch type. I found

reading about Christopher Sholes and typewriters boring because of the history it contained

regarding the QWERTY layout.

In understanding bookkeeping, I can describe it as the recording of all financial information and

events of a business in a computer system in this digital age and, it is critical to the success of a

business. The former helps analyse the state of a business and eliminates variations in records

which can be problematic when dealing with the tax office. I agree with what the author said that

everyone’s accounting record keeping is being done digitally and books are a thing of the past. I

reflected on how e-books have taken over in this digital age, even textbooks and I asked myself

if journals and ledgers will exist in the next decade.

The entity concept realises the separation between the business operations in a firm and its

owners. I understood the entity concept well with the dual aspect example of how a coin has two

sides and how double entry simply reflects the heads and tails of every transaction which are the

debits and credits. I found it surprising how double entry accounting is a way of looking at

business and is not designed to check mechanical accuracy of the entry of transactions in a firm’s

account. It is interesting how the equity interests of a firm are dependent upon the difference of

assets and liabilities, since it proves to show the importance of obtaining and maintaining assets

in the long run because they add value to the firm. Also, liabilities take away value from the firm

and if they are higher than the assets, no value is being created for equity interests. My company:

Medical Australia Ltd had been experiencing losses in the last three financial years, l never

thought they reduced or destroyed value for their equity investors then again, they are two sides

to every coin.

This chapter was interesting because I could engage and relate to what the author was saying.

Ideas, reflections and reactions to reading Chapter 3Having the example of Chris and Sarah at a party being introduced to each other made me

picture myself at a party being introduced to financial statements and realizing there is more to

them than meets the eye. I disagree with the author in that not remembering someone’s name

means you are not very interested in the other person whereas they are times you genuinely

forget their name although you found the person interesting.

I agree with Richard Loth’s statement that the financial highlights offered at the beginning of the

report tend to focus on what the company wants you to see. I found this true when looking at my

company’s financial statement, the financial highlights were surely a marketing document

briefing the public how they have managed to successfully lay a platform for profitable trading

and setting the company up for organic growth and value added transactions. As l scrolled down,

I noticed the company had incurred a loss the previous three financial years and they just made a

profit in the 2014 reporting period. I was surprised to note that especially for a company in the

healthcare industry.

I found it interesting how the balance sheet shows the financial position on just one day, why one

day? So it means when a firm creates a balance sheet today, it will be different from the one

created the next day? At the first glance of non-controlling interests I found it hard to understand,

my company’s financial notes had a definition of it which made it a bit easier to understand.

Non-controlling interest is equity owned by a subsidiary company not owned by the parent

company. For example, my company Medical Australia owns equity of 80% and its subsidiary

company, Bio Medical Developments International Pty Ltd owns 20% equity thus non-

controlling interest is the 20% of equity that Medical Australia does not own. Thus the 20% of

Bio Medical Developments Pty Ltd equity is shown in Medical Australia’s consolidated financial

statements as non-controlling interest.

The income statement shows revenue and expenses of a firm and how they are changing over a

period of time resulting in an increase or decrease in the value of equity investors. The statement

of changes in equity in my firm contained a lot of columns and rows which l found confusing

especially when inputting information into my spreadsheet. It shows the different changes in

shareholder’s equity over a period of time. For example, I noticed how equity had a 160%

increase from the 2013 to 2014 financial year in the Medical Australia’s statement of changes in

equity. Similar to Ryman Healthcare, my company also had ‘other comprehensive income’

shown in the statement of comprehensive income.

The cash flow statement interprets the causes of the change in cash during the period. I found it

surprising how the author pointed out that as long as a company does not run out of cash, it will

not go broke regardless of how much losses a business can make. My question was how does a

company manage to keep cash in an account and still make a loss? Since the statement of cash

flow does not include judgements involved with accrual accounting, can we say it is the simplest

financial statement to prepare?

The way the author maintained that a balance sheet expresses the trust relationship that exists

between a firm, its owners and debt providers made me fully acknowledge the importance of this

relationship and that all three parties need to fully cooperate and show honesty to continuously

make it function optimally.

Today, many companies use ratios to assess and analyse financial statements and it helps show

the relation between two or more items. I found ‘Just do what works’ boring as it detailed all the

history and was not engaging for me. The use of Benjamin Graham, David Dodd and Warren

Buffet in the reading made it exciting and inspirational in how we can use financial statements to

gain the business realities of a firm. The example the author gave about Tanby Roses made me

understand capital outlays better. Looking at my firm Medical Australia, capital outlay can be

inventory used to manufacture medical equipment. Overall, the reading was very engaging, easy

to understand and the examples given made it easier to recall the information I had obtained.

Feedback on three students in the course

Name: Thompson Cameron

http://camwithaccounting.blogspot.com.au/

Feedback; Cameron’s photo was very clear, he put a link on the forum which led me straight

to his blog. His blog is well designed and professional and you can easily read through it and

navigate. He provided links on his blog which led to his firm’s annual reports.

In his first blog post, he gave an introduction about himself in detail which he did a good job. I

enjoyed how Cameron provided great detail about his firm Hunting PLC, what it does as in

manufacturing, supplying and distributing equipment that enables companies to extract oil and

gas. I liked the honesty he showed in terms of how he found the income statement and the ‘other

comprehensive income’ confusing which was relatable. I found it interesting that despite the

slight decline in oil prices, Hunting PLC managed to increase its revenue and profits by millions.

I disagree with what he said regarding his company’s website in that it was not user friendly

since they used numerous engineering terms. Though I did not see a link to his firm’s website

which l would have preferred to see, I googled the website and had a look. The website had

mechanical and hydraulic images which l assumed to be what the company manufactures and

they explained their products very well in user friendly language for a non-engineering person

like me. I would also have preferred to see some bullet points instead of one huge essay

describing his company and key concepts.

His spreadsheet was neatly set out and easy to read. All the figures in the financial statements

were visible and I really liked his layout. Cameron showed understanding in his company and

communicated it well to his audience, considering all things, he showed great effort in this

assignment.

Name: Benjamin Caleo

https://bencaleo.wordpress.com/

Feedback: Benjamin’s profile picture on Moodle was clear, he gave a brief introduction of

himself and the link he provided led me straight to his blog.

Benjamin’s blog is neatly designed with an enticing background which I liked and it is easy to

read and navigate around. Links to his firm’s annual report were available at the top of the blog.

He provided minimal information about the background of the company though I would have

liked to see more detail such as Enterprise Inn is one of the largest leased and tenanted pub

business in the UK and much more since his annual report was loaded with information.

Benjamin expressed the key concepts of the company very well with understanding. I was

surprised to note that Enterprise Inns has a significant debt of £2.4 billion which is rather

shocking but I agree with their strong generative nature of business which made them reduce

their debt profile by £117 million. I was also surprised to see Enterprise Inn’s high share price of

£107.80 which is $221.95 AUD compared to my company Medical Australia which has a share

price of $0.054. Benjamin provided great detail about the challenges his company is facing since

profitability has decreased and how they have implemented a leased and tenanted pub model

which focuses on pub operations, property management and capital structure.

In Enterprise Inn’s annual report, I observed how they have variable costs based on commission

from sales of drinks and fixed costs from property lease.

Considering all things, Benjamin showed good understanding of his firm’s annual report though

adding more background information on his blog could have been very helpful.

Name; Mia Etelaaho

http://anotheraspiringaccountant.blogspot.com.au/

Mia’s photo was clear and she provided a good brief introduction of herself and what she likes to

do. The link to her profile led me straight to her blog, another aspiring accountant.

Mia’s blog was neatly set out and had a design with changing colours in the background which I

really liked. She then went on to provide good background information about her company Linde

group communicating what it does and its position in the industry. A link to her firm’s annual

reports was available and visible on her blog. Mia communicated the key concepts well and the

strategies the company has implemented. It was interesting to note that Linde group has spent

€106 million in 2014 and €92 million in 2013 for research and development on hydrogen as a

zero-emissions method of transport. This was a significant amount of money to spend as it surely

is an investment for the company and breakthrough could yield a higher return.

Mia did an amazing job in reflecting on chapter one and three. She communicated her

understanding well and I liked the way she was honest and open about her thoughts and

struggles. I enjoyed reading her reactions and it helped me develop greater understanding on

balance sheets as they provide the overall result of where the company is sitting financially at the

end of the financial year (or any other date the statement is created).

Her spreadsheet was visible and clear though I would have liked to see space in her balance sheet

between current assets and non-current assets and so on. She showed great effort.

Overall, she did well in this assignment and showed great understanding in all concepts.