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AF101 – Introduction to Accounting and Financial Management

Major Assignment- Semester 1, 2022

GROUP ASSIGNMENT

Name ID

Nasoni Shaw S11129919

Shiwashna Prasad S11211244

Diristi Chand S11208420

Mataiasi kelekelevula S11211342

Campus: Laucala Campus

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ACADEMIC HONESTY DECLARATION: AF101
THIS IS TO BE SIGNED BY ALL MEMBERS OF THE GROUP AND DATED.

I. I/We understand what academic dishonesty entails and am/are aware of USP’s policies
in this regard
II. I/We declare that this assignment is my/our own original work. Where I/we have used
someone else’s work, I/we have indicated this by using the prescribed style of
referencing. Every contribution to, and quotation in, this assignment from the work or
works of other people has been referenced according to this style.
III. I/We did not make use of another student’s work and submit it as my/our own.

Name Student ID Signature

Diristi chand S11208420

Nasoni Shaw S11129919

Mataiasi kelekelevula S11211342

Shiwashna Prasad

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Contents
INTRODUCTION 4

1. DECISION MAKING & ROLE OF ACCOUNTING 5

3. CASH 8

4. RECEIVABLES/ INVENTORIES 10

6. LIABILITIES 14

7. OPINION 16

CONCLUSION & RECOMMENDATION 17

BIBLIOGRAPHY 18

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 INTRODUCTION

The Flour Mills of Fiji Food Limited was recognized in 1973 by Mr. Hari Punja, is a present Group
of Companies, located in Suva, with six manufacturing facilities, each concentrating on its
operational performance. It sets out its operation in Suva, Fiji Walu Bay. The introductory
imitativeness, that was assisted by the government of Fiji, was a landmark in the development
of Fiji’s manufacturing industry. It began with milling flour and sharps, with a day to
day capacity of 200 tons. Fijians currently have access to natural, extremely- conditioned wheat
flour all because of FMF.

The main activities of FMF Fiji are involved in milling of wheat, rice and peas. It also
manufactures packaging materials inclusive of corrugated cartons and assorted boxes and
packets. FMF also manufactures biscuits and snack food products, the sale of crushed and feed
wheat and associated products and investments. (FMF Annual Report, 2021)

Hence, the main objective of this project is to examine the group's financial annual report for
the year 2021 for the purpose of withdrawing applicable facts and figures from the company’s
auditor’s report to corporate reporting. To add on, this report also highlights the method used
by the company to value its assets and evaluate its liabilities.

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 1. DECISION MAKING & ROLE OF ACCOUNTING
The main activities or operation of the entity consists of milling of wheat and whole peas,
manufacturing of packaging materials including corrugated cartons, assorted containers and
Bags, manufacturing of biscuits and snack food products, sale of rice, wheat and associated
products and investment.

Financial decisions made by the entity during the year were to declare an interim dividend of
3.00cents per equity share. However, the directors take hold of suitable steps prior to the
financial statements to discover the current assets of the entity that had appeared in the book
of account at a value equal or below that will be anticipated so that it can be recognized in the
ordinary course of the business at the date of the report.

The heads of the company have made a resolution that states that Financial position,
performance and cash flow statements to be produced in agreement with the Companies Act
2015 so that Statements are relevant and reflect a true and fair view. The heads also accept
that the Group has the ability to pay back its debts as falls due and payable.

Independent Auditor

PricewaterhouseCoopers is an external audit firm which provides professional services in

auditing and assurance, advisory and tax services. It also has audited statements of the FMF
food Limited and its subsidiaries, which contains the consolidated statement of financial
position as at 30 June 2021, statement of profit or loss and other comprehensive revenue,
consolidated statement of changes in equity and consolidated statement of cash flows for the
year ended. Under the auditor independence declaration to the directors, it has been stated
that there has been no violation of the auditor independence specification of the Groups and
any relevant code of professional conduct in association with the audit. In the auditor's
judgment the financial statement offers a true and fair perspective of the financial information
provided to users.

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Auditors have stated that PricewaterhouseCoopers is an independent group that follows ethical
preconditions of the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants. The IESBA Code allows auditors to provide relevant audits of the
amalgamated accounting statements in Fiji.

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 2. REGULATIONS & AND THE CONCEPTION FRAMEWORK

There are two categories of users; internal users and external users. Internal users obtain
accounting in order to plan and control the operations of the business entity and external users
are people from the outside of the entity that uses financial information to know the
performance of the company. In FMF food Ltd, the main users of financial reports are
management and shareholders. Management use annual report to make decision such as
outlining and setting future goals of the company and helps in drawing the clear conclusion on
the financial position of the business which will allow managers to approach new projects for
example, the changes made business during COVID-19 such consumer behavior, purchases
patterns, increase in commodity prices, working environment & maintaining. The shareholders
use annual reports in order to make potential inventing decisions as annual reports provide
sufficient information regarding the return on investment at the end of the accounting period
year; for example, in 2021 FMF provided a $3.00 dividend per share.

Method of valuing assets

FMF food Ltd uses a historical costs system for valuing its assets, which means that transactions
occurring in the business should be recorded in their original cost, for example non- current
assets bought at their original value at the time. “Historical cost includes expenditure that is
directly attributable to the acquisition of the items” (FMF Annual Report, 2021). However,
according to FMF’s financial report the assets were not revalued by the company throughout 12
months.

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 3. CASH
Cash is distinguished as a current asset under the financial position, with that cash being used
to identify money in the transaction such as cheque and postal note. When cash is affected in
the business transaction, it either causes a rise on the debit side and a decline on the credit
side.

To add on, the total cash held by the business at 30 June 2021 was $23141m whereas in 2020
total cash held by the business was $22025m, which indicates that there is significant increase
in cash over the period by $1116m. However, the cash flow statement shows a deficit balance
of ($3,123m) which indicates that there is decrease of cash inflow in the business.

The internal control placed in FMF food Limited:

Separation of duties- is having more than one person required to complete a task for example
one person will be responsible for the paycheck and another person is in charge depositing the
paycheck to respective employees. Separation of duties is key internal control because it
reduces the risk of fraud and error.

Whistle blower policy encourages employees, members of the public to expose any kind of
information that is deemed illegal, or unethical within an organization. Moreover, in annual
report it has been stated that whistle blower policy in place against sexual harassment with at
the company also has a policy on prevention of insider trading that will manage ethical trading
of company’s securities.

Furthermore, FMF food limited has an internal audit department, the major function of this
department is to achieve the objectives by assessing and ameliorating the usefulness of the
Group’s risk management, control, and governance.

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Cash sufficiency ratio

Ratio Formula 2021 2020

Cash flow Cash Flow from Operating activities $33906m $6337

adequacy
Repayment of long-term $3488m + $6566m + $2000m + $10701m
borrowing + assets acquired + $5201m + $3701
dividend paid

$33906m $6337m
$15255m $16402m

2.22:1 0.39:1

The ratio specifies that the firm has the potential to make adequate cash from operating
activities to cover its dividends, debt and acquisition of assets as there is an increase in cash
flow adequacy in 2021 by 1.83.

Ratio Formula 2021 2020

Repayment Repayment of long-term borrowing $3488m $2000m

of long-term
Cash flow from operating activities $33906m $6337m
borrowing

0.10 0.32

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The above table shows that in 2020 only 32% of the company’s cash from operating activities
was used for the reimbursement of long-term liabilities, hence, in 2021, 10% debt was paid off
which indicates positive results as there is a decrease in repayment of long- term borrowing.

4. RECEIVABLES/ INVENTORIES
To begin with, trade receivable, also known as accounts receivable, are well-defined as the
amount possessed to a business by its customers resulting from the credit sale. As stated in the
financial report of the firm, in 2021 the trade receivable is $29,029m which specifies that there
is an upsurge of $68,89m when comparing to 2020 net trade receivable which was $22,140m.
To add on, the figure at the end is net receivable. The balance on provision for doubtful debts
on the same date is $1,870m.

Receivable turnover

Ratio Formulas 2021 2020

Receivable Net sales revenue $217,321 $204,885

turnover
Avg receivable balance $25584.40 $25584.50

8.49 times 8 times

The above table shows that from 2020 to 2021 the turnover has increased by 0.49 times. It
indicates that receivable turnover has changed over the 12 months period due to the strategy
implemented by the company being effective, thus allowing an increase in cash inflow from the
credit sales.

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After analyzing the current assets and liabilities presented in the annual report, it is determined
the current asset is more than liabilities thus ensuring business with positive results as it has
enough assets to meet its short-term obligation.

The accounting policies used by the company for the valuation of inventories is Weighted
average cost, it is used to determine the cost of inventories. It also reduces the consequence of
remarkably high and low material values, it is a practical and suitable method used for charging
the cost for material accustomed to production and allows management to evaluate operating
results.

5. PROPERTY, PLANT, AND EQUIPMENT

The composition of property, plant and equipment are defined at historical cost less
depreciation. Historical cost comprises expenses that are directly attributable to the acquisition
of the items.

The depreciation of property, plant, and equipment is determined by a straight-line method

(Net price minus salvage value and divided by the useful life).

The company has disclosed the following rate of depreciation on the respective assets:

Fixed Assets Rate

Buildings 2% - 10%

Plant and machinery 4% - 33%

Motor Vehicles 25%

Computers 33%

Furniture, fixtures, and office equipment 6.7% - 25%

(FMF Annual Report, page 20, note 2.9)

The total of depreciation charged by business on these assets for the present and previous
years are as follows:

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 Years Amount ($m)

2021 $8001

2020 $7998

2019 $8116

Ratio Formula 2021 2020

Return on asset Profit $9,196m x 100 $12,393 x 100

Average total asset $220252.25m $215180

4.17% 5.76%

During the year 2021, through normal activities the business produces 4.17c in earnings before
tax for every dollar invested in the firm in comparison with 10.1c in 2020. The decrease in
return on asset is resulted from decline in profit and arise in investment. However, a properly
investigation needs to be set in order to detect any fraudulently act causing a decline in profit.

Ratio Formula 2021 2020

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 Profit margin Profit ×100 $9,196 × 100 $12,393 x 100
Revenue $217,321 $204,885

4.23% 6.05%

Profit margin, it measures net profit per dollar of sale. In year 2021, 4.23cent was earned on
each dollar of sale, while in year 2020, company successfully earned 6.05cents on each dollar of
sale. This analyze indicates a diminishing profitability tendency which should be concerning for
the business thus investigation should be conducted.

Ratio Formula 2021 2020

Asset turnover ratio Revenue $217,321m $204,885m

Average total asset $220252.25m $215180m

0.99 times 0.95 times

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Asset turnover ratio, measures the usefulness of a company in utilizing its assets during the
year. There is slight surge in asset turnover in year 2021 by 0.04 times which gesture towards a
positive outcome of business evaluating its long-term stability.

6. LIABILITIES
Liquidity ratio

Ratio Formulas 2021 2020

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 Cash assets + Receivables $23,141m + $29,029m $22,025m + $ 22,140m
Current liabilities 51,390 59,187
Quick asset
ratio
52,170 44,165
51,390 59,187

1.02:1 0.75:1

The above table shows that there is an upsurge in the quick asset ratio in 2021 by 0.27 times
when compared to 2020 the quick asset ratio was 0.75: 1. The results are favorable for the
business as it indicates that the business will be able to meet its short-term debt in the event of
an emergency.

Ratios Formula 2021 2020

Average Avg receivable balance × 365 days $25584.50 × 365 $24589.50 ×365
collection
Net sale revenue $217,321 $204,885
period

42.97 days 43.81 days

During 2021, the company took 42.97 days to collect sales which is an indication of
improvement in credit policy implement by the business. When credit policy is effective it
reduces the amount of bad debts write off.

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Financial Stability ratio

Ratio Formulas 2021 2020

Debt ratio Total liabilities $67,400 $78,490

Total asset $216,738 $223,767

0.311 or 31.1% 0.351 or 35.1%

In 2021, there is a decline in debt ratio by 0.04/ 4% which indicates the positive outcome for
the business, as the lower the ratio, the greater the asset protection to the creditor thus it is
favorable to the company.

Ratio Formula 2021 2020

Equity ratio Total equity $149,338 $145,277

Total asset $216,738 $223,767

0.68 or 68% 0.65 or 65%

From 2021 to 2020, an increase of 3% was noted in the equity ratio of the business, which
indicates satisfactory results because an increase in equity ratio will allow the firm to have
enough cash flow and leverage to fulfill its debt obligation.

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 7. OPINION
The occurrence of COVID-19 pandemic has resulted in significant adverse financial and social
impact globally as well as in Fiji. Protocols implemented by the Ministry of Health resulted in
logistic delays and changes in the working environment, imposing challenges for the business,
with fluctuations also noted in consumer behavior and buying patterns due to inflation. The
Group has estimated that there will be a decrease in demand for staple products such as flour
and rice, with that the sale of impulse purchase products will be heavily affected by economic
conditions. The board is reviewing the lasting impact of the pandemic, and proceeding with
measurable initiative in order to adapt emerging changes and the new normal.

During COVID – 19 prospective investors who are interested in investing in the company will
have to gather, analyze and assess the information on the business in order to get a clear
picture on the company’s performance. However, despite all the challenges imposed by the
pandemic, there was growth in revenue by 6% during the year. Hence, the prospective
investors are advised to invest in the business that could provide decent return at the end of
the accounting period.

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 CONCLUSION & RECOMMENDATION
Despite the challenges imposed by COVID-19 and the critical Fijian economy, FMF food Limited
stood out by making sound economic decisions that helped them in providing better customer
service in such an unconventional environment. There was notable growth in the company's
revenue throughout the year which motivated potential investors to invest in the business.

In order to determine how the business is meeting its short-term and long-term obligations in
the crucial time, certain calculations were carried out thus cash sufficient ratio, concept of
financial and liquidity stability ratio were approached respectively. Through this analysis it was
shown that there is improvement in the undeniable area of the business such in accounts
receivable turnover, debt ratio and quick asset ratio. This analysis is evidently the business
capability and sagacious decision-making skills that assistance them during pandemic.

The company continues making progress with new developments in line which can provide an
excellent success for the business in the future. However, the company can always rethink and
reform their sale strategy as there was a decline in the demand of certain products.

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 BIBLIOGRAPHY
Flour Mills of Fiji,2020. FMF Annual Report, Retrieved from

https://announcements.spx.com.fj/ftp/news/021728084.PDF

Flour Mills of Fiji,2021. FMF Annual Report, Retrieved from

https://announcements.spx.com.fj/ftp/news/021728084.PDF

Hoggett, J. Medlin, J(eds) 2021, Accounting: Analysis and Interpretation (12th ed.). Wiley

Approximate words: 2727

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