Review And Evaluation Of Financial Processes For Bondi Junction Meeting Spaces And Financial Analysis Of Domino’s Pizza Enterprise Ltd
Review and Evaluation of Financial Processes for Bondi Junction Meeting Spaces
Description of the Business
The assessment considers the performance and different areas of Domino’s Pizza Enterprise Ltd. The management of the company is engaged in the business of providing catering services and pizza as the main product of choice for the business. The other services which is provided by the business are catering services, home delivery services, hosting parties which may be birthday parties or graduation parties. The company is a public listed company and the company has an ABN number which is registered with the Australian Government which is shown to be ABN 16 010 489 326. The business is located in Albion of Australia and this is also the headquarters of the company (Annualreports.com. 2018).
The business offers best quality of pizzas and is the largest pizza chain in Australia in terms of number of stores which operates in Australia. The business is very much popular among the residents and the business has therefore expanded in most of the countries which suggest the overall growth of the business. The major strength of the business is the popular brand name which the company enjoys. In addition to this, the overall quality of the products which are offered by the business is very good and therefore customers prefer Domino’s Food chain. In addition to this, the management of the business is involved in innovative approaches and product innovations which catches the minds of younger generations and attracts more customers to the business. The major weakness which the business faces is related to the operational management of the business which is due to the number of franchises and shop outlets which the business owns. The overall competitiveness which the business of Domino’s Pizza face from its close competitors are immense.
In order to determine the overall performance of the business, financial analysis of the Financial Statements is necessary. The income statement for the year 2017 for Domino’s Pizza Enterprise ltd reveals that the business has followed all the relevant standards which are associated with the business. The total sales revenue which is generated by the business has improved significantly which is shown to have increased to $ 790,861,000 for 2017 and the same was shown to be $ 705,702,000 in 2016. This means that the business has definitely grown in term previous year (Palepu, Healy and Peek 2013). The net profit of the business is shown to be on an increasing trend which is also evident from the results which are shown in the annual reports for 2015. This suggest that the business is following an aggressive sales strategy which will also be increasing the variable cost of the business (Brochet, Jagolinzer and Riedl 2013).
The food, equipment and packaging expenses of the business has also increased which is shown to be $ 354,127,000 for the year 2017. The finance costs of the business have also increased which is shown to be $ 4,451,000 for the year 2017 and the same in 2016 was $ 3,297,000. The profit which is generated by the business for the year 2016 is shown to be $ 86,592,000 and the same has increased to about $ 105,804,000 which shows a significant increase in the overall profitability of the business. The increase in overall profitability of the business can be attributed to increase in overall sales of the business and generation of more revenue for the business (Weygandt, Kimmel and Kieso 2015). The main reason for the overall increase in the sales revenue means that the business is growing and increasing the level of operations of the business.
Allocation of Funds and Budget for the Organization
The financial dates of the business which needs to be considered are balance sheet date of the business, date of the audit report of the business. The date of audit report which is to be considered is shown to be 14th August 2017. The auditor independence statement and auditor report is provided on the same date. The audit report is formulated by the auditor after conducting a detailed examination of the financial statements and various records of accounting. The balance sheet date of the company is shown to be 2nd July 2017 which represents the date at which the Balance sheet and other segments of financial statements are prepared. The balance sheet of the company is prepared by considering all the assets and liabilities of the business.
The cash flow statement of Domino’s Pizza Enterprise ltd shows cash from operating activities, cash from investing activities and cash from financing activities. The receipts from customers of the business is shown to be $ 1,223,033,000 for the year 2017 which is much more than the receipts from customers of the business for the year 2016. The payments which are made by the business is shown to have also increased in the year 2017 (Bhandari and Iyer 2013). The cash generated from operating activities is shown to be positive which suggest that the operational efficiency of the business is great. As per the cash from investing activities of the business which is shown to be negative is mainly due to which payments made for acquisition for property, plants and equipment, intangible assets. The cash flow from financing activities show that the business has repaid a significant part of borrowings back and the additional borrowings which is taken during the year is shown to be $ 47,916. The dividend payments which is made by Domino’s Pizza to shareholders has also increased which can be due to the overall increase in the profits of the business (Anjum and Malik 2013). This also suggests that the business is effectively meeting the needs of the shareholders of the company.
The management of the company needs to follow all the necessary regulation of accounting standards which are issued for effective accounting practice of the business. The company also needs to comply with relevant principles of accounting and a proper framework for conducting the accounting process (Sealy and Worthington 2013). In addition to this, the management also needs to get proper licensing for the franchise business and opening different outlets in the country. The business also needs to follow the rules which are established in ITAA 1997 for computing tax liabilities of the business.
The management of the company uses computerized software for the purpose of managing the financial resources of the business. The recording of sales revenue which is generated by Domino’s in day to day business activities. As per analysis, the company has developed a in-store system which can handle all the operations of the business (Brooks and Mukherjee 2013). The company with a combined partnership with Servant system has developed Domino’s PULSE which is known for its timely and accurate reporting function and is used by most of the domino’s stores across 14 countries. The software is highly efficient in various areas such as inventory management, cash recording, reporting of expenses and consolidating the items as well.
Financial Analysis of Domino’s Pizza Enterprise Ltd
The business which is considered for this assessment is Yum Restaurants Private ltd which is a private company and the same operates in Australia. The business is engaged in the business of providing fast foods to the customers and have three popular brands which are Pizza Hut, KFC and Taco Bell. The management of the company operates in Australia and has an ABN number which is registered with Australian Government and the same is ABN 16 000 674 993. The services which is provided by the company are similar to the services which is provided by Domino’s which are dine in services, party services, Home delivery services (Yum.com. 2018). The basic strength of the company is the efficient management team which Yum Inc has and also the financial strength of the business which allows the business to undertake innovative approaches and also try product innovation for the three popular brands of the business. The weakness which the management of the company faces issues which was related to the appropriate research and development operations which can be considered to be a serious weakness in modern day scenario. Another weakness which can be identified for the company is related to proper supply chain management of the company which can further distribute the products of the business.
As per the financial statement of the business for the year 2017 shows that there is a fall in the sales which is made by the company (Minnis and Sutherland 2017). The sales of the business is shown to be $ 3,573 million which is significantly fallen from estimates of 2016 which is shown to be $ 4,189 million. The revenue which the business is able to generate from franchise operations has improved significantly. The current year 2017 shows that there is no income from discontinued operations as shown in the annual reports of the business. The overall net profits of the company has also fallen which is clearly shown in the income statement of the business.
|
Cash Budget for two years |
||
|
Particulars |
1st year |
2nd year |
|
millions |
millions |
|
|
Sales Revenue |
$ 3,500 |
$ 4,200 |
|
Purchase of Supplies |
$ 1,800 |
$ 2,000 |
|
Salary to Support Staffs |
$ 230 |
$ 250 |
|
Electricity |
$ 400 |
$ 390 |
|
Telephone & Internet |
$ 130 |
$ 100 |
|
Legal Fees & Registration |
$ 60 |
$ 40 |
|
Software Installation |
$ 500 |
$ 500 |
|
Rent for Office Floor |
$ 150 |
$ 170 |
|
Advertisement |
$ 300 |
$ 340 |
|
Insurance |
$ 60 |
$ 80 |
|
Net cash inflow |
$ (130) |
$ 330 |
|
Opening cash Balance |
$ 430 |
$ 300 |
|
Closing Cash Balance |
$ 300 |
$ 630 |
|
Profit and Loss Statement for the year 2017 |
||
|
Particulars |
2016 |
2017 |
|
Company sales |
$4,189 |
$3,572 |
|
Franchise and license fees and income |
$2,167 |
$2,306 |
|
Total revenues |
$6,356 |
$5,878 |
|
Cost of Sales: |
||
|
Food and paper |
$1,267 |
$1,103 |
|
Payroll and employee benefits |
$1,106 |
$939 |
|
Occupancy and other operating expenses |
$1,116 |
$912 |
|
General and administrative expenses |
$1,129 |
$999 |
|
Franchise and license expenses |
$4 |
$4 |
|
Legal Fees & Registration |
$201 |
$237 |
|
Software Installation |
$500 |
$500 |
|
Closures and impairment (income) expenses |
$15 |
$3 |
|
Advertisement |
$300 |
$340 |
|
Refranchising (gain) loss |
$1,083 |
$163 |
|
Other (income) expense |
$440 |
$305 |
|
Total Operating Expenses |
-$805 |
$373 |
|
Net Profit before Interest & Tax |
$4,994 |
$3,199 |
|
Less: Interest Expenses |
$47 |
$32 |
|
Net Profit before Tax |
$4,947 |
$3,167 |
|
Less: Income Tax Expenses @30% |
$1,484 |
$950 |
|
Net Profit for the Period |
$3,463 |
$2,217 |
|
Profit and loss Statement for the year 2018 |
||
|
Particulars |
2017 |
2018 |
|
Company sales |
$3,572 |
$3,929.20 |
|
Franchise and license fees and income |
$ 2,306 |
$2,767.20 |
|
Total revenues |
$ 5,878 |
$6,696 |
|
Cost of Sales: |
||
|
Food and paper |
$ 1,103 |
$1,350 |
|
Payroll and employee benefits |
$ 939 |
$970 |
|
Occupancy and other operating expenses |
$ 912 |
$1,160 |
|
General and administrative expenses |
$ 999 |
$330 |
|
Franchise and license expenses |
$ 4 |
$5 |
|
Legal Fees & Registration |
$ 237 |
$267 |
|
Software Installation |
$ 500 |
$500 |
|
Closures and impairment (income) expenses |
$ 3 |
$3 |
|
Advertisement |
$ 340 |
$340 |
|
Refranchising (gain) loss |
$ 163 |
$175 |
|
Other (income) expense |
$ 305 |
$400 |
|
Total Operating Expenses |
$ 373 |
$1,196 |
|
Net Profit before Interest & Tax |
$ 3,199 |
$2,733 |
|
Less: Interest Expenses |
$ 32 |
$45 |
|
Net Profit before Tax |
$ 3,167 |
$2,688 |
|
Less: Income Tax Expenses @30% |
$ 950 |
$806 |
|
Net Profit for the Period |
$ 2,217 |
$1,881 |
The two items which are included in the profit and loss statement are Installation of Software and Advertisement cost which is shown on an estimated basis for the business. Due to the changing environment and the level of competition, new software needs to be incorporated in the reporting framework so that the business can stay ahead of its competitors (Warren, Reeve and Duchac 2013). In addition to this, the changing environment and the expansion plan of the business requires aggressive sales policy which can be achieved by effective advertisement and proper investment in advertisement of the products of the business.
The basic statutory requirement which Yum Inc needs to follow is the relevant rules and regulations which are prevailing in the country. The management of the company needs to follow all relevant accounting standards which are applicable to the business in the process of accounting and reporting of business transactions (Martínez, Fernández and Fernández 2016). The management of the company also needs to follow relevant taxation laws and rulings which are covered in ITAA 1997 for the purpose of estimating the tax liability of the business. In addition to this, the business also needs to acquire licensing for franchise business and shop outlet which is opened by the business. The licensing expenses which is incurred by the business is shown in the statement of profit or loss of the business and the same is shown to be $ 237 million which is a material amount. The expense is of a significant amount due to the large number of franchise business and outlets which is opened.
The business is still at its growth phase and therefore, the business requires rapid expansion plan both in Australia and also globally. In order to achieve this goal, the business needs to acquire significant amount of funds which can be accumulated through equity and debt sources of capital. In addition to this, the company will be requiring more shop locations in order to further expand its businesses.
References
Anjum, S. and Malik, Q.A., 2013. Determinants of corporate liquidity-An analysis of cash holdings. Journal of Business and Management, 7(2), pp.94-100.
Annualreports.com. (2018). Domino’s Pizza Enterprises Ltd. – AnnualReports.com. [online] Available at: https://www.annualreports.com/Company/dominos-pizza-enterprises-ltd [Accessed 6 Aug. 2018].
Bhandari, S.B. and Iyer, R., 2013. Predicting business failure using cash flow statement based measures. Managerial Finance, 39(7), pp.667-676.
Brochet, F., Jagolinzer, A.D. and Riedl, E.J., 2013. Mandatory IFRS adoption and financial statement comparability. Contemporary Accounting Research, 30(4), pp.1373-1400.
Brooks, R. and Mukherjee, A.K., 2013. Financial management: core concepts. Pearson.
Martínez, J.B., Fernández, M.L. and Fernández, P.M.R., 2016. Corporate social responsibility: Evolution through institutional and stakeholder perspectives. European journal of management and business economics, 25(1), pp.8-14.
Minnis, M. and Sutherland, A., 2017. Financial statements as monitoring mechanisms: Evidence from small commercial loans. Journal of Accounting Research, 55(1), pp.197-233.
Palepu, K.G., Healy, P.M. and Peek, E., 2013. Business analysis and valuation: IFRS edition. Cengage learning.
Sealy, L. and Worthington, S., 2013. Sealy & Worthington’s Cases and Materials in Company Law. Oxford University Press.
Warren, C., Reeve, J.M. and Duchac, J., 2013. Financial & managerial accounting. Cengage Learning.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015.Financial & managerial accounting. John Wiley & Sons.
Yum.com. (2018). 2017 Yum! Brands Annual Report. [online] Available at: https://www.yum.com/annualreport/ [Accessed 6 Aug. 2018].