Comparative Business Financial Condition

Question: Describe about the Comparative Business Financial Condition. Answer: Capilano Honey Limited is one of the biggest providers of pure honey in Australia. The comparative financial condition of the company is given by its balance sheet. The figures for the year 2014-15 are given below: Particulars 2014 ($) 2015 ($) % change Total current assets 30,024,365 47,038,954 56.7% Total non current assets 19,659,436 21,462,378 9.2% Total current liabilities 13,283,147 30,617,919 130.5% Total non current liabilities 7,816,739 4,178,373 (46.5%) Total stockholders equity 28,583,915 33,705,040 17.9% (Capilano, 2015) The current assets comprise of cash and cash equivalents, receivables, inventories and other assets. The increase has been majorly on account of inventories. The company is in the honey business in which the supply of honey is limited; hence it is necessary to have sufficient levels of inventory to meet the high level of demands. Most of the inventory is in the form of raw materials and work in progress. Also the receivables have increased due to an increase in sales. The cash from operations has decreased in 2015 due to an increase in the working capital. The increase in cash equivalents is due to an increase in bank overdraft. The noncurrent assets have increased by a mere 9.2% due to purchase of property, plant and equipment in the form of a new processing system to improve efficiency. The assets comprise of property, plant and equipment, intangible assets and deferred tax assets. The current liabilities comprise of trade and other payables, borrowings, provision for dividend and income tax payable. The increase is majorly on account of trade and other payables increasing by a whopping 139%. Most of the payables belong to the beekeepers who supply raw materials to the company. The purchases have increased due to increasing demands and low supply of honey. The company has taken an overdraft of 0.68 million to finance its operations. The long term liabilities have decreased by 46%. The noncurrent liabilities comprise of only long term borrowings and provisions. The borrowings have decreased by almost 50% in the form of commercial bills and hire purchase. The total equity has increased by 18%. This is on account of increase in issued capital and retained earnings. The company has issued $5 lakh in shares. On the basis of above changes in the items of the balance sheet, it can be said that the working capital of the company has increased and the financial gearing has decreased with a decrease in borrowings and increase in equity. The commercial bills have matured resulting in decreased borrowings and in order to fund the payment of those bills and other company operations, the company has raised equity and taken a bank overdraft. The short term liquidity can sad to be low as current liabilities are more than current assets. However, the risk exposure has decreased with a decrease in long term borrowings and increase in equity. The equity ratio is 0.5 which means that half of the assets of the company are financed by equity and half by debt. Hence it can be concluded that the company has low short term liquidity, however it is quite stable as it has equal debt and equity. It also has large assets to help generate sales. References Capilano, (2015), Appendix 4E: Preliminary Final Report, Capilano Honey Limited and its Controlled Entities.