(solution) 1. What is the purpose and importance of measuring financial

(solution) 1. What is the purpose and importance of measuring financial

1. What is the purpose and importance of measuring financial performance?

Locate the income statement, the statement of comprehensive income, the statement of changes in equity and the five year summary for your company:

2. What items of profit does the company report?

From the notes to the accounts, briefly describe the company?s policy on revenue recognition.

3. If the company has other items of comprehensive income, make a note of these and the financial effect of these items.

4. From the statement of changes in equity, have any distributions been made from retained earnings in each year? What are they and have they changed?

5. Comment on the change in profit over the last five years. For example: Did profit increase or decrease? What was the major reason for the change ? was it changes in income or expenses ? or a write-down? Include any change in the different measures of profit that appear in the summary statement.

6. Locate press releases for the company and/or disclosures to the share market for the last year that relate to earnings. These are often annual or half yearly earnings announcements, announcements that may impact on future earnings, analysts forecasts etc. You should have at least two press releases/disclosures.

a. Summarise these, commenting on whether the company emphasises EBIT, EBITDA or other expressions of earnings.

b. Note the date of the announcement and then find and comment on the share price reactions to these earnings announcements. (This should be available from the ASX website.) Why do you think the share market reacted in such a way?

600-800 words.