ACCT2111_Case_2014

THE CHINESE UNIVERSITY OF HONG KONG

School of Accountancy

ACCT 2111 A, B, & C – Introductory Financial Accounting

(First Term, 2014-15)

Group Assignment – Annual Report Project (Case)

The objective of this project is to help students pull together various accounting concepts learned in this course and apply them to real-world business situations. The project is team-based. Students will be organised in small groups of two to five students each. Each group is required to do online research of two publicly listed companies in Hong Kong and abroad. Students, expected to work closely together as a team, need to gather background information and the most recent annual reports of the selected companies. Based on information contained in the annual reports, students are required to develop a critical analysis of the financial health of the selected companies.

Instructions to Students

The project report should be clear, concise and coherent. In writing the report, you should refer to the annual reports of the companies, quoting references from the annual reports with page numbers where appropriate. Using references from other sources without clear quotation violates the academic honesty code and is subject to University policy and regulations (www.cuhk.edu.hk/policy/academichonesty)

The report should be printed on A4 papers. The report should be no more than 10 pages (one side A4 paper, 12 pt Times Roman or equivalent) plus any exhibits and reference, if any. There is no correlation between length of the report and points earned. It is important to answer all questions directly and please identify the question number in your report.

Deadline of the project is at 5:00 p.m. on December 5, 2014 (Friday) via e-mail.

Instructions on how to find an annual report of a listed company

Annual reports can be found in multiple ways. Financial Statements of Hong Kong listed companies can be obtained from the website of Hong Kong Stock Exchange: http://www.hkexnews.hk/listedco/listconews/advancedsearch/search_active_main.asp. Annual reports are usually also available from stock exchange websites in other countries.

In most cases you can also find the annual report of a company from the company’s website. They are usually provided under an “About Us”, “Investor Relation” or similar section.

The Two Companies

Imagine your first job after university is with Thirsty Investors Ltd. One of your clients is considering investing in an international beverage company – particularly Vitasoy International Holdings LTD (维他奶). Your group has decided that in addition to Vitasoy, The Coca-Cola Company is also an attractive investment options for your client. Your responsibility is to conduct extensive research on Vitasoy and also compare the performance and market potential of Vitasoy [Hong Kong Stock Exchange code: 0345] and Coca-Cola [New York Stock Exchange code: KO].

__________________________________________________________________________________________ACCT2111/Annual Report Project Page 1of 3

http://www.hkexnews.hk/listedco/listconews/advancedsearch/search_active_main.asp

http://www.cuhk.edu.hk/policy/academichonesty

Part A (30%)

Download and read the most recent annual report for Vitasoy (Fiscal Year 2013/14) and answer the following questions. Unless otherwise stated, all questions refer to Vitasoy group and not just the parent company. Remember to cite any direct quotations along with page number if you choose to take sections from the annual report. Quoting phrases/paragraphs directly from the annual report is appropriate (with proper citation), but you must explain/summarize the text in your own words for full credit.

1. Provide a brief introduction of the company listing its primary businesses and markets (½ page or less).

2. Locate the Chairman’s Letter to shareholders. Who is the Chairman of the board for Vitasoy? Summarize his assessment of the company’s performance in the letter including the positioning for the future? (½ page or less).

3. Locate the Independent Auditor’s Report. (a) Who is Vitasoy’s Auditor?(b) Who is responsible for the preparation of the financial statements?(c) What is the Auditor’s responsibility?(d) What is the audit opinion given to Vitasoy’s 2013/2014 Annual Report? What

does this mean?

4. Answer the following questions by reading the financial statements and accompanying notes. If you can’t find pertinent information state that fact in your report. For information separated between the Company and the Group, answer for the Group.(a) What is the basis of preparation of the financial statements?(b) What are the accounting policies for investment properties? What depreciation

method(s) is (are) used?(c) What are the primary categories of revenues that Vitasoy receives?(d) How does Vitasoy account for inventories? How are write-downs treated?(e) In which geographic segment does Vitasoy receive most of its reportable

segment revenues? How much is the reportable segment revenue for this geographic segment in 2014? How does this amount compare with 2013?

(f) What is the largest category of fixed assets recorded by Vitasoy (based on HK$)? What are the cost, accumulated depreciation, and net book value of these assets on Vitasoy’s books at the end of the fiscal year?

(g) What are the primary types of intangible assets recorded by Vitasoy? What is the total value of each of these intangible asset types at the end of the fiscal year?

(h) What was Vitasoy’s Profit for the year 2013/2014? How much of this is attributable to the shareholders of Vitasoy? What is the difference in these two amounts (explain why there is a difference)?

(i) How much total cash did Vitasoy generate in 2013/2014? What is the largest category of cash inflow and cash outflow and what were these amounts?


Part B (20%)

Compute the financial ratios for Vitasoy’s 2013/2014 using the consolidated statement of comprehensive income and the consolidated statement of financial position. Show detailed calculations. Use the average of account balance for the consolidated group where appropriate.

Ratio/Value Numerator Denominator AnswerA Current Ratio

B Quick Ratio

C (Trade) Receivable Turnover

D Inventory Turnover

F Return on Assets

G Return on Equity (company)

H Debt Ratio

I Times-Interest-Earned

Occasionally you might need to read the notes to financial statements to find relevant information. If you can’t find the necessary data to compute certain ratio(s) please state that fact in your report.

Part C (20%)

Find the 2013 annual report of Coca-Cola.a. Provide a brief introduction of the company (less than ½ page).

b. Compute the same ratios (see Part B above) for Coca-Cola for fiscal year 2013.

Part D (30%)

Using the above ratio analyses and other relevant information contained in the annual reports to evaluate the financial strengths and weaknesses of the two companies related to the following dimensions:

a. Cash Conversionb. Short-term liquidityc. Long-term liquidityd. Profitability

Which company would you recommend your client to invest in and why? Overall, which company is in better financial health? What other factors need to be taken into consideration? (No more than 1 page.)


Documents

ACCT2111_Case_2014