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Assignment #1 Steps 3-6Daniel MuirCQ UniversityStep 3 – My Company: Pacific Star NetworkIntroducing my company Pacific Star Network Limited. me preface this by saying that Mr. Turner could not have assigned me a company better suited to me unless it was The Richmond Tigers itself. Pacific Star Network is a media company that own and operate ABC sports radio channels 1116 SEN (SEN) and SEN+. Now if you are a mad Australian Rules Football League (AFL) supporter like I am then you will be very familiar with SEN. Although I have listened to SEN on and off for a long time now, I had no idea who they were owned by. Of course SEN is not the only form of media that they operate. In broadcasting, according to their website they also operate 3 digital only radio stations named Aussie, which surprise surprise, is an Australian themed station, Koool (yes three o’s!!) which plays songs from the 70’s and 80’s and Rythmos which is an ethnic radio station.In December 2014 Pacific Star Network found its way into the publishing game when they acquired Morrison Media Services Pty Ltd. Morrison Media publish magazines such as Frankie, Spaces, Smith Journal, Slow Living and SEN Inside Football. This however was relatively short lived because in 2018 pacific Star Network decided to divest itself of Morrison Media. According to an article published by Proactive Investors Australia this is potentially due to the publishing revenue slumping 29% in 2017. Following this divestment, Pacific Star Network made two strategic investments to align with their “whole of sport” agenda. These two investments were the acquisition of the AFL publishing business and a 25% shareholding in Melbourne United Basketball Club. These two acquisitions are expected to have a positive cash flow impact for the 2019 financial year.I’m sure we are all familiar with Mr. Turner’s readings where he mentions how about half of listed company CEO’s have an accounting background. Well Pacific Star Network is part of the half that does not. While the Chairman Craig Coleman has an extensive history in the finance industry, the CEO & Managing director is Craig Hutchison. Mr. Hutchison has an extensive history in journalism, particularly in sports media. For those who watch the AFL and AFL related TV shows Mr. Hutchison would be recognised as a co-host for Footy Classified and also from providing AFL news on the Footy Show.After doing some research on the company it appears that even though the website displays a copyright 2019 symbol on the homepage, it perhaps isn’t completely up to date. Firstly, there is still mention of Morrison Media and it’s publications on the website. Secondly, on 3rd April 2018 there was a news article published by Proactive Investors Australia advising that Pacific Star Network had just completed a merger with Crocmedia (the link is at the end of this document if you want to read it). This merger is the reason that Mr. Hutchison was appointed CEO. Mr Hutchison was the co-founder and CEO of Crocmedia prior to its merger. On the Pacific Star Network website there is no mention of Crocmedia. Now I know I have no knowledge of the entertainment/Broadcasting industry but I would have thought that there would be some mention of Crocmedia on the Pacific Star Network website rather than it just vanishing in the wind when the merger was complete. Thirdly, when I googled the Koool radio station I found an article published on 24th October 2018 by Radio Today stating that Pacific Star Network had decided to get rid of Koool and Aussie and rebrand them to SEN2 and SEN3, two more separate sports radio channels. This news was not taken well by the listeners of Koool and Aussie. How will this effect Pacific Star Network? Will they lose money because of the loss of listeners? It makes sense to me that they would and I would assume if this was the case then there will be evidence in the 2018/19 financial report.Aside from the Pacific Star Network site being very simple to use, it has very little information about the company. It has a basic front page where it briefly describes what they do but not much else. It has a few tabs, which contain a list of the board members, and of course the annual reports. I suppose that given Pacific Star network is the parent company to SEN and other radio stations, it doesn’t need to be that flash. The SEN website on the other hand was great. It was easy to navigate and amongst all the Toyota sponsorship ads it was complete with all the latest AFL news you could want. The website also has the capability to live stream 1116SEN so you can listen to it anywhere in Australia and possibly around the world.Pacific Star Network is currently listed on the Australian Stock Exchange (ASX) under the code PNW. Pacific Star Network is currently listed at $0.360 per share as at the end of trade 18/03/2019. Some further research on the Commsec website shows Pacific Star Network to be showing signs of a bullish trend, which essentially means it is increasing or potentially going to increase in value. It is further stated on the Commsec website that the quantitative Morningstar rating has Pacific Star Network undervalued at $0.360 and suggests that a fair value is $0.390. I have provided a link to the Pacific Star Network Commsec website but it may not work unless you have a Commsec account to login to.The 2017/18 Pacific Star Network annual report can be found here. The first thing that jumped out at me from the annual report was the amount of dividends paid. In 2017/18 Pacific Star Network did not pay out any dividends at all while in 2014/15, 2015/16 and 2016/17 they paid dividends of $1350, $1681 and $1172 respectively. What does this mean? Is this good or bad? The reason I mentioned this is because dividends are paid to investors as a percentage of the profits. To me this means that if the dividends paid are a small amount then perhaps the profits are reflected that way as well. At first glance I wouldn’t have thought these amounts would be a lot. I don’t know why, it’s just my initial reaction. I don’t have a lot of experience dealing with the payment of dividends, I am just going by the general knowledge I have of them.In the section Notes to the Consolidated Financial statement for the year ended 30 June 2018 Pacific Network is referred to as a parent entity and also an individual entity. It states that the financial statements include information from the parent entity and its controlled entities however the information relating to Pacific Star Network as an individual entity is not included as permitted by the Corporations Act 2011.What is the difference between a parent entity and an individual entity? I see the difference to be that Pacific Star Network as a parent entity controls all the SEN radio station, the AFL Publishing Company etc. The Financial reports are based on the income and expenditure of Pacific Star Network and its subsidiaries. I take it that Pacific Star Network also operates as an individual entity separate to its subsidiaries and perhaps under the Corporations Act 2011 is not obliged to release its financial reports to the public as in individual entity. I have no basis for this assumption as I have no prior experience in reading and interpreting financial reports or the terminology used within the reports. I also wonder if operating as a parent entity and an individual entity provides a loophole where there are some financials that would otherwise have to be provided as a parent entity can be otherwise classified and not released under the umbrella of the individual entity.Links to articles and websites mentioned: AND FEEDBACKI was a little bit apprehensive about this part of the course as I am usually one who likes to go it alone without discussing my work with others. Having said that, the discussions I have been included in so far have been helpful.On Thursday 19th March I attended a PASS session hosted by Danielle Bradley. In this session I briefly discussed the question in relation to whether or not a company’s profits correlated to the amount of dividends paid. Now without getting a definitive answer to the question the issue was raised of what variables might be present that would also have an effect on the dividends paid. This helped me look at the question from a different angle and steer my research in different directions as well.Discussing my peer’s companies and giving and receiving feedback on their blogs has proved very helpful. It has helped me further develop my skill in recognising and developing KCQ’s. I can also feel within myself that my critical thinking skills have further developed. (I am attending another PASS session on Sunday and will expand on this section for my final copy after I have given and received feedback)MY TOP 3 BLOGSPort of Where? By Lisa O’neill.Introducing Incitec Pivot By Stuart Hentschke.Growth of Engenco By Thea Dobbins.The title of my number one blog grabbed me straight away. Port of Where? I thought it was clever because I certainly had never heard of the Port of Tauranga. Lisa provided a light-hearted humorous blog containing some great information about her company. Lisa also touched on some issues with the company that she felt was important such as environmental issues and went on to briefly explain how the company are combatting those issues. Overall, for me this was an entertaining read.I chose my number two blog “Introducing Incitec Pivot” because I found it the easiest to relate to in terms of Stuart’s passion for the industry and his want to learn more. His passion was evident and shone through in they way his blog was written. It seems that we were both given a company that we are very excited to research. He has previously worked in the Agriculture industry and I am a mad footy head so I think even though our companies are so contrasting, it really didn’t feel that way.I felt that Thea’s blog “Growth of Engenco” it was written very concisely. I thought that the amount of information that was provided gave me a good insight into what the company is about and what they do. I thought that it was a good draft, which was very well written, and I look forward to reading the finished product.Step 4 – Input of financial statementsFor step four please see the uploaded spreadsheet titled Pacific Star Network Spreadsheet.Step 5 – Reflections on chapters 3 and 4It is evident that Mr. Turner favours the “real learning” style. I enjoyed reading the expansion on the topic from the introduction. I particularly like the concept of building our knowledge into something that belongs to us or is ours. For me it really does make the most sense that this is the best learning style. When comparing this course to the other courses I am studying, I am finding myself wanting to spend more time learning about accounting as I am enjoying it the most. I feel like I am learning in a way that will help me retain the information in the long run. Although I am studying by distance, I feel like I am beginning to know some of my peers through the online communication component.Accrual accounting was something that I had never heard of but when I was reading about it, it just made sense. I understand accrual accounting to be the type of accounting used when companies are assessing their financial position at a given time. It is used to account for cash that is yet to be received for goods or services that have already been provided. Does accrual accounting work both ways? An electricity company who sells electricity to a firm accounts for the cash that hasn’t been received but does the firm who uses the electricity before they pay for it also account for the expense when assessing their financial position? My thought is that it would. The reason being, even as an individual I account for the electricity in my monthly budget. I put money aside for the day when my bill arrives. I think it is safe to assume that a company or firm would do the same thing and if there were an overlap between when the bill is due and when the annual report is to be complete then the amount to be paid would still be counted in the financials.When I read through the “Quality of Information” section I felt like I understood it. The idea of relevance and faithful representation as the two key qualities made sense to me. I mean why would you want to use any information if it wasn’t relevant or you could not depend on it. These two terms are also relevant to my line of work. As a police officer I also tend to rely on facts that are relevant and information I can depend on. This is especially the case if I commence proceedings against someone based on the information provided by an informant. I need the informant to provide me with relevant information and a faithful representation of what occurred because I then need to collate that information so it can be presented to a Magistrate.As I began reading chapter 3, the analogy of referring to financial statements as people you might meet at a party quickly drew my attention. I thought it was a great way of keeping it simple so it was easy to understand. The thought of developing a personal relationship with my firm’s financial statements was real and it made me look at them in a different light. Not so much as just a few sheets of paper with different names and numbers on them but something I could really delve into and take everything I could out of them for my own benefit.Reading about the concept of Cash got me thinking. Cash to me is exactly that, cash, in the hand. If I don’t have any cash on me (which is barely ever) then my money is in the bank. I see that the reading states that cash is an asset. So the question I have is how is cash an asset? Does having a particular amount of cash put more cash in your pocket? I understand that you can invest in cash. Although I have read a little bit about that, I am still unsure of what it means. It is my understanding that investing in cash provides little or no interest and has minimal risk (low risk low return). So again, how is cash an asset? I have gone back through the readings to find the definition Mr. Turner provides of an asset and I can see how it makes sense in that context, maybe I’m just overthinking it because to me cash (or money in the bank) is something that is used to accrue assets e.g. real estate, shares etc. Now does that statement imply that cash is an asset? Now I’m starting to confuse myself. I’m going to talk about dividends again. This time in relation to section 3.4 of chapter 3. I previously spoke about dividends in relation to my company and whether or not the amount of dividends paid is correlated to profit. Now I am reading about dividends in relation to cash flow and valuing an asset or business. It makes sense to value an asset or business based on the future cash flow and dividends are a form of cash flow, which is paid out to equity investors. There is a formula presented showing how dividends and cash flow are related. Ok, I’m starting to get it. I then come across the section about free cash flow and how that is what is left over after allowing for the operating cash flow and capital outlay. It seems that dividends are paid from this free cash flow. Is free cash flow the same as profit or is it as I said money left over to be used as necessary? Further to this, it seems you can borrow money to pay dividends as Ryman Healthcare did in 2018 after having a free cash flow of negative $115.5m. Well I think I understand dividends a little better after reading that section, unless I’ve completely misunderstood it.In conclusion, chapters 2 and 3 were both very enjoyable to read and introduced some very interesting concepts. I must admit that they really got me thinking and had my synapses firing. Mr. Turner writes in a way that makes things make sense even though I am still quite unfamiliar with accounting and business. Step 6(To be completed once I have finished giving and receiving feedback) ................
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