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STEP 1Well, it’s been a while since I’ve done KCQ’s so I won’t lie, I went back and watched the material on writing them for a refresher. When I studied ACCT11059 back in my first term here in 2019, I remember Danielle from Cairns and how useful her top tips where so I shall be using them again! I won’t lie, I really struggled with my studies in 2020. It might sound silly to some but being on campus in a learning environment is what I need to be able to get the most out of my studies so studying from home after week 3 of term 1, my usual organisation and motivation took a massive dive. The biggest struggle for me though was being cut off from my family if anything happened back home we couldn’t get back, along with money stresses with neither me or my husband working through Covid it all got a bit too much! Luckily going into my final term , we are back to a sense or normality, Mum and Dad have had their vaccines back home, we are both working, and I was really happy when I realised that I would be studying under Martin and Lois again to (hopefully!) finish my degree on a high.When I think about analysing a firms financial statements, my eyes are always drawn to the bottom line and how this compared to the previous year. In my previous role as a Business Manager at Macca’s in the UK, it was all about bottom line and increasing on the previous year, after 20 years of this, it has stuck with me. In my current role as an accountants assistant (yay I got my dream job!), I do a lot of audit work for clients and I must admit, this is something I always look at and the comparison to the previous year but I do always look at how well organised they are (this also makes auditing their accounts a lot easier!), how well the committee/ members work together, do they just look after themselves or do they think of others? To me, when it comes to fundamental analysis, there are more important elements to look at than what the financials tell you. For me, company reputation with regards to how they treat their employees, what they are doing with their local communities and to help the environment are all just as important to me as the financials. I believe the investment markets have evolved from when it was about profit and it didn’t matter how you increased it and who got hurt to improve it, to a market where how you treat your stakeholders and what you are doing to make the world a better place are all hugely important. In my Macca’s days, our people where our biggest priority, we HAD to get involved in our local communities and give back, and from a company point of view, we had many incentives on how as a company we were going to make the world a better place. I guess these values have made an impact on me and for the right reasons. I also believe that financial statements are more than just what the bottom line tells us. Do I think I’m qualified and experienced enough to get the full value of information from the financial statements? Definitely not so that analysis I would leave to the experts or even ask my boss as he has been dabbling in the share market for many years and has been pretty successful.So why do some critics say doing fundamental analysis on a listed company is a waste of time? Do they think they know everything? Are their values and reasons for investing in that company the same as mine? I am also a strong believer in that the full story isn’t always reported, sometimes you have to dig a little deeper to find out the nitty gritty or maybe it’s because if I don’t trust the person giving me the information, I need to get it for myself. I promise I don’t have trust issues!I agree that just using fundamental analysis to dissect a firms financial statement to gain a better understanding of the value of a firm isn’t enough because to me, a firms value is more than what the financial statements tell us. As I previously stated, a firm should also have ethical values that are just as important to some investors. Yes these are reported but I guess I want to see what the communities that they have been working with have to say about them too. Looking at frameworks, I immediately recognise discounted cash flow and economic profit. I won’t lie, I had to go back and refresh myself on these but when I went back, I was just confirming what I remembered which did surprise me a little. Maybe I need to have more faith in my ability? Plus, am I the only person who isn’t into Harry Potter? Sorry I just don’t get the appeal! Although we don’t have any clients at work that are listed companies, I have been tasked with putting together financial statements to enable us to complete their tax returns. We have clients that aren’t bothered about expenses as they can claim it back but for example, the price some of them pay for a mobile phone contract makes my eyes water! Do I compare what I see, of course I do but I do wonder if these companies were looking for investors, would their financials look as they do? Some I’m guessing not.Knowing we will be completing spreadsheets again makes me feel good as I am also studying Business Analytics this term which is also excel based and although I’m working in the accounting world and not the financial world, I know that they will both stand me in good stead for my future. Although I won’t lie, I am feeling a little overwhelmed by the thought of breaking down the financial statements as there is so much to them, will we fit it all into our 12 weeks? Well here goes to giving it a darn good go.STEP 2So, moving on to chapter 2, and how a firm adds value. Going back to what I said in step 1, to me it’s not all about bottom line. Obviously this is important but it’s also about your company ethics and morals as well. “When you make an investment in a firm you are not buying its past”. This is true, and you can’t change the past, you have to learn from your mistakes and move on but sometimes mud sticks, and it can take while for that mud to fully come off. I always remember implementing strategies, you had your plan in place so it would run smoothly but then an external factor such as a coach load of customers turning up at your quietest time of the day (when we normally would do things such as training sessions) or a power cut would interrupt and your plan would go off the rails (note the railway reference). Sometimes external factors are the downfall of your strategy so you have to adjust to get back on track. I think we will all agree that the biggest external factor of 2020 and even 2021 is Covid-19.“A key to being wise before the event is to engage with and deeply understand a firm’s strategy”. Knowledge to me is power so if I want to succeed, I need to have a solid understanding of what I’m getting in to. My company that I have been given for this unit, I’ll be honest, I’ve never heard of them so before I start looking at their financial statements, I need to know who they are and what they do and what sector are they in. Reading a quote from William Shakespeare makes me shudder, I remember studying Macbeth when I was in high school and not having a clue what it was about. I explained this to my teacher at the time who replied with ‘you should know what it’s about, it’s a classic’. At which point I lost all interest and have no idea how I managed to pass my English literature exam with a decent grade. My first experience of design school.“Un reve ou un bouquet de reves en quete de realitie” I can personally relate to this. Coming to study at CQU was the first stage in my strategy to achieve our dream of getting permanent residency in Australia. To me, the only straight forward step in our strategy is my study. The rest of the steps are going to be testing, stressful and expensive but we are prepared as much as we can be. Overall it will have been at least a 4 year strategy that will have taken up a big chunk of our savings and most of our sanity but if you want to achieve your dream you do whatever it takes right?When I think about qualitative and quantitative measures I try and remember it as qualitative measures are the plans written on paper and quantitative measures are the benefits or rewards you get from your qualitative measures. So basically you have your strategy in place to reap the rewards after its success. Ahh the Olympics, I was fortunate enough to work at the London games in 2012 and got free tickets to see many events on my days off including Johnny Peacock (GBR) beat the then undisputed champion Oscar Pistorius (SA) in the 100 metre final in the Paralympics. I’d like to think that I was part of Johnny’s strategy as I lost my voice screaming at him, willing him on as he won the biggest race of his career. Awesome memories.When it comes to the five P’s, I agree, a strategy should and will always start with a plan of what you are wanting to achieve. The ploy is to stop or reduce your competitors from being able to compete with you. I know at Macca’s back in the UK, they owned plots of land everywhere, they didn’t do anything with it, they just stopped the competition getting prime locations that could affect the profits of nearby stores. Great business sense if you ask me. Pattern, every Macca’s that you go into does things the same way. To me it shows consistency in high standards and also, your customers know what to expect no matter where in the world they go into a Macca’s. People like to know what they are getting and with the patterns at Macca’s they do. As the world has evolved and become more technical, Macca’s moved with it first to get the edge over the competition having self-order kiosks, table service and delivery. As far as I know, they still hold the edge over the competition in all these areas. With regards to position, I know that in the UK, the fast food sector where under pressure from the Government and the health department as the nation’s obesity problem was getting worse. Macca’s were the first to introduce healthy options such as salads and yoghurts and I even remember when we had apples for sale, not that we ever sold any! It’s about reacting to the change in environment and although I wouldn’t class the Government as a position, they have the power to change the position. Macca’s put themselves in the position to be ahead of the competition by bringing in the new technology and kept themselves in the best position by ensuring that competition can’t open up nearby. I’m now aware of my company for my assessment and if I’m honest, I had never heard of them and then after doing a bit of research, I worked out what they do but I have no idea about their competitive market or even who their competitors could be? I know I will need to research a lot more than I did with Jumbo in ACCT11059.As I read that management and accountants have lots of flexibility when putting together the financial statements it makes me wonder if we can trust what they say at all? I get you need a little bit of flexibility but how much flexibility do the accounting standards give them? Surely the standards are there to ensure the reports are honest and truthful? As I read on, I see that Ryman change the valuation of its properties each year, I suppose this makes sense as the property market does change constantly but surely plant and equipment would only decrease in value as it is used? As I move into chapter 3, and how accounting has always been around and stems from Greek mathematics, the basics haven’t changed since then. It makes me think of my boss who after starting his career with Deloitte back in the 1970’s before opening his own practice in 1983. He always says to me that accounting is simple, it’s either there or it’s not which is very true but then I go back to what I have just learnt about the amount of flexibility accountants have with the accounting standards and I’m a little bit puzzled again. Obviously we only provide accounts to be submitted as part of the company’s tax returns so I question are the financials reported by listed companies the figures they report to the ATO? Do they do different figures to show to the majority of our shareholders to look good because the ATO are the one stakeholder you have to be honest with?Reading on, it seems like many have tried to make the analysing of financial statements a lot more complicated than it needs to be. William Beaver wanting to point out how companies are going to fail is a funny one. What would you get out of proving that a company is going to fail? Maybe I’m too nice of a person and don’t want anyone to fail. I feel like once I restate my firms financial statements, a lot of what I’m reading will make more sense and the confusion and strained facial expressions will stop and I will be able to read the current and future financial state of Infomedia. STEP 3So now I have my company, INFOMEDIA who apparently are in the software and services industry. I won’t lie I’ve never heard of them and don’t really know much about the industry but I’m happy they are an Australian company even though my first look at their website left me clueless. Clearly they are in a high tech industry and I am certainly not high tech… So after looking at the website and reading their annual report, they are a SaaS business. My first question, what is SaaS? ‘Software as a service’ is what they do, something I have never come across but I am always open to broadening my horizons so here goes! Infomedia was founded in 1987 with its head office in Sydney and they have been on the ASX since 2000. They now have offices in the United Kingdom, America and China with customers in 186 countries. Infomedia deal with the automotive industry and develop and supply electronic parts catalogues along with service quoting software, data analytics and business insights for aftersales parts and service for some of the biggest automotive builders in the world. Their customers include, Aston Martin, BMW, Dodge, Ferrari, Ford, General Motors, Holden, Jaguar, Volkswagen dealerships and many many more covering the full range of the automotive market. After watching the ‘about us’ video on the company website several times, I have worked out that they run a software program that runs between OEMs (original equipment manufacturers) and the wholesale customer which I take to be car sales dealerships. There are lots of acronyms on the home page SaaS (Software as a Service), OEM, OE (original equipment) and I’m feeling a little overwhelmed by my lack of acronym knowledge, clearly I’m not down with the kids anymore. I’m loving their car themed core values, ‘accelerate performance’, ‘drive innovation and service’, ‘navigate global and steer local’ and my personal favourite ‘have fun in the fast lane’. It’s cheesy but also engaging which is what you want when you are trying to entice potential new customers. Before I looked into the SaaS market, I presumed that Infomedia would be a major player in the industry so when I did some research, I was shocked to see that they weren’t even in the top ten! In 2020, the automotive software industry was worth over $9.1 billion (AUS)* (Statista, Nov 2020) and Infomedia is only worth $565 million of this (Simply Wall St, March 2020). That’s not even 1%, I am now in awe at the size of the industry.*Exchange rate used is end of FY2020 average from the ATO website: I move to the financial statements, the statement of profit and loss is very basic, only having eleven lines if you take away totals. Now this had me worried, surely it should have more information than that? Only one source of revenue? Surely that’s not right? So I dig deeper and in the notes it tells me that 95% of their income is from software subscriptions which makes sense as they don’t have their fingers in lots of pies, just the one. The other 5% is made up of software development services and training. I guess what I see as a lack of entries in the profit and loss account isn’t actually a lack of entries, it’s just being online, software as a service doesn’t have that many sources of income or that many different expenses. I’ve a lot of experience with profit and loss and balance sheets from my time at Macca’s and also in my current role as an accounts assistant so reading these doesn’t really cause me any issues with the accompanying notes helping explain the vagueness of the reports.Clearly the most important part of their business is the software they provide as subscriptions to these are the main source of revenue. Now I’m no expert but I know that software needs to be constantly updated, my MacBook gets updates at least once a month, more so when they release new products, and you need to be ahead of the game to offer something that your competitors can’t or don’t. Infomedia do have their own software platforms, Microcat LIVE, Microcat Market, Auto PartsBridge as the parts platforms and Superservice Menus, Superservice Triage, Superservice Insight, Superservice Register and Superservice Connect as service platforms (Infomedia, 2021). Phew that’s a lot of different platforms! 2020 was a challenging year for most industries with the impact of Covid-19 but Infomedia sustained their performance and managed to invest almost $84 million into their software ensuring that they remain current. One thing that did affect the industry was the decline in new car sales during the pandemic. In Australia, up until November 2020, the automotive industry had seen 31 months of decline in new car sales, something that is needed for Infomedia to be able to sell their software subscriptions (Caradvice, 2021). America in 2019, new car sales were down 5.1% and according to Ward’s Auto website, the only thing keeping the American market going is population growth as due to price hikes, the industry has priced millions of potential buyers out of the market (WardAutos, March 2021)Now thinking about strategy, Infomedia make a statement in the Chairman and CEO Report in the 2020 Annual report that ‘the strategic decisions we have made in FY20 have been intentionally bold to ensure Infomedia is well placed to sustain growth into the future’. In an industry that to me, has to be constantly evolving to keep up with the latest technology, Looking through the AGM report, I come across the strategy that the board want us to see.Being in a global market, and with the continuing pandemic, different markets will be having different issues. I know in the UK and many parts of Europe they have been in lockdown for over 12 months now and buying a new car isn’t classed as an essential service so that market will be suffering. As previously stated, the Australian market has been growing since November 2020 and although this is more related to the 2021 financial year, your strategy is working towards your future goals. I believe that in the long run, Covid will help Infomedia to grow sales as I don’t believe that social distancing will ever go away now. I believe that our lives will be different from now on and as Infomedia is an online platform, this is what automotive dealerships will want. I do wonder if they are working on a customer service platform though for customers to access instead of going to the dealership, I guess only time will tell.Taking with the other students in my class Sam and Emily, neither of them have similar companies. Emily has Galliford Try, a UK construction company who I have heard of, but only because they are from my homeland and have been in the news recently as they have been struggling with covid. Emily looked worried that I’d seen them in the news recently but was happy when we found out it was a $40 million restructure not them going into administration as I first told her (oops). Sam has Lycopodium, an Australian engineering firm that I hadn’t heard of but from looking at them online and talking to Sam about them, they mainly work on big projects like building tunnels and ports. We are a very diverse group when it comes to our companies!Favourite 3 blogsI do love reading other people’s blogs and how their experiences are going. It makes me feel better that I’m not alone often in the way I feel, we all have bad day and we all feel a bit overwhelmed at times too. My favourite three to read are:Elizabeth Carr - Liz’s blog takes me back to when I was setting up my own blog in ACCT11059 and how I felt. Just like me, she’s learning about blogging as she goes and her writing flows and is easy to read.Lisa O’Neill - . I studied ACCT11059 in the same term as Lisa and it’s great to be studying ACCT13017 at the same time too. Like me, she is a mature student with a hectic homelife but manages to make it all work. She says she waffles I say she tells a great story.Evan Spurway - . I’ve studied many units with Evan and if I’m honest, I’m a bit in awe of him. He seems so organised, understands everything, asks questions that I’ve never even thought about and is a general nice guy. His latest blog post isn’t about him, it’s about how to get a great score on Peerwise to help everyone out. Like I said, all round great guy.REFERENCESCaradvice (March 2021), VFACTS February 2021: New cars sales recovery continues despite stock shortages. Retrieved from: (2020), 2020 Annual report. Retrieved from: (2021), Global leaders in parts and service software. Retrieved from:Simply Wall St (24 March 2021). Is Infomedia Ltd (ASX:IFM) popular amongst institutions? Retrieved from: (November 2020). Size of the automotive software market worldwide from 2018-2024. Retrieved from: (March 2021), The auto industry is asking for it. Retrieved from: STEP 6Straight away the chapter heading jumps out at me ’Understanding the Past’. The past is our history, everything and everybody has one, it’s how we learn from the past to make the future better that is important. From when I first became a Business Manager at Macca’s at the ripe old age of 26 to when I stepped down to return to studying at 38, I was a completely different manager because I evaluated my performance, listened to feedback and looked at others who had succeeded and adjusted how I worked. It helped me grow and become very good at what I did.It’s been 2 years since I studied ACCT11059 and last restated financial statements. I must admit, I watched Maria’s videos again and once they got going it all came back to me, I wanted to get it right, hopefully I’ve succeeded.When I read about Ryman Healthcare revaluating their assets such as land and buildings, I wonder to myself is this cheating a little? In my current job as an accounts assistant, we look after many trust and SMSF’s that have property, none that I have worked on have ever had their properties revaluated. In the current property market boom around North Brisbane, their assets will clearly have increased in value so why aren’t they getting them revalued? It is because it costs money? Do they think the market will change back? Do they not want the tax man to know that their assets have increased in value? I’m guessing this is one to ask my boss on Monday.So as I’m reading through the chapter, I become intrigued to find out about some of the financial standings of Infomedia. So how are the operating assets funded in Infomedia?$ 000’s%Operating Liabilities (OL)17,15125Net Financial Obligations (NFO)00Ordinary Share Holders Equity (BV)49,85675Operating Assets (OA)67,007100As the table shows, 75% of the funding comes through ordinary share holders value. Now 66% of the book value is in retained profits, is this the company being cautious because of the how the market has been or do they have big plans for the future? I’m going with big plans for the future as they are wanting to grow their share in the SaaS automotive market. Profit margin has always been an important one for me so this also piqued my interest. For Infomedia, their profit margin is 18,85296,058× 100%=19.62% I wondered if this was a one off for 2020 as it is quite high but all 4 years report a profit margin of over 15%. So I start to think why this is and when you think about the industry they are in, the overheads are a lot lower than in some. They have no retail spaces to rent out and staff, just the offices their teams work from, they have no inventory or stock costs as it is an online service which will reduce losses too.Efficiency, a company needs to be efficient to be successful. I guess I’d compare it to productivity, the more productive you are, the more you achieve. 2017201820192020Sales70,33073,72588,90596,058NOA49,85659,16968,840158,898ATO1.41.251.30.6So up to 2020, it was pretty steady. In 2020 they invested heavily in new software at a cost of over $80million so this explains to me why the asset turnover efficiency dropped in 2020. I won’t lie, my brain is slightly frazzled at reading about all the different formulas to calculate different measures of the financial statements but I understand why they do it. As you say Martin, the original financial statements don’t tell us the full story so you have to delve a little deeper (this bit might be me). ................
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