Accounting Business Reporting for Decision Making

326 Accounting: Business Reporting for Decision Making

FIGURE 8.3 (continued)

Consolidated Change

Note

A

2015

$’000

B

2014

$’000

C

$’000

D

%

Cash flows from financing activities

Proceeds from issues of equity securities

Proceeds/(repayment) of borrowings

Payments for debt issue costs

Payments for shares bought back

Share issue and buy-back costs

Dividends paid to owners of the company

21

21

24

3 125

(40 113

(484

(4 970

(24

(87 174

)

)

)

)

)

21 523

54 063

(64

(25 830

(118

(77 183

)

)

)

)

(18 398

(94 176

(420

20 860

(94

9 991

)

)

)

)

(85

(174

(656

80

(80

(13

)

)

)

)

)

Net cash (outflow) from financing activities (129 640 ) (27 609 ) 102 031 370

Net increase (decrease) in cash and cash equivalents 5 886 (24 523 ) 30 509 124

Cash and cash equivalents at the beginning of the

financial year

43 445 67 368 (23 923 ) (36)

Effect of exchange rate changes on cash and cash

equivalents

(200) 600 (800) (133)

Cash and cash equivalents at the end of year 49 131 43 445 5 686 13

Source: Adapted from JB Hi-Fi Ltd 2015, preliminary final report, p. 60.

VALUE TO BUSINESS

•   Horizontal analysis compares the reported numbers in the current period with the equivalent

numbers for a preceding period.

•   This permits the user to readily calculate the absolute dollar change and the percentage change in

the reported numbers between periods.

•   The dollar change is calculated as the reported number in the current reporting period less the

reported number in the previous reporting period.

•   The percentage change is calculated as the dollar change in the reported number between

the current and the previous reporting periods, divided by the value of the reported item in the

previous year.

•   Horizontal analysis highlights the magnitude and significance of the dollar changes.

Trend analysis

Trend analysis tries to predict the future direction of various items on the basis of the direction of the

items in the past. To calculate a trend, at least three years of data are required. A public company often

provides a historical summary of various financial items in its annual report. The sales revenue, earnings

before interest and taxation (EBIT), and profit after tax data for JB Hi-Fi Ltd for 2010 to 2015 are pro-

vided in figure 8.4. To identify the trends in these data over the six-year period, it is useful to convert the

numbers into an index. Using 2010 as the base year, and setting the base year at an index of 100, every

subsequent figure is expressed relative to the base year (i.e. relative to 2010). For example, to calculate

the trend in sales revenue, the following calculations are made:

Step 1: Set 2010 as the base year, assigning it a commencing index value of 100.

Step 2: Divide the 2011 revenue by the 2010 revenue, and express this as an index by multiplying the

answer by 100:

$2 959.3 million

×100 = 108

$2 731.3 million