Chapter 1 & 3 - Questions

Question 1.1

What is double entry accounting? Why do we have to put everything in twice?

~ Double entry simply does not mean that only two accounts are affected. For every transaction entered in the accounts, total debits must equal total credits. Everything must be recorded twice to show the increase and decrease of the affected accounts. 

For example: If stock is purchased; the cash at bank account would decrease, the inventories account would increase, and if GST is applicable to the purchase then this account would also be affected.

Question 1.2

Identify three assets, three liabilities and three items of equity in your firm's spreadsheet. 

Assets
Property, plant & equipment: large items bought by the business that has significant value.
Inventories: items held for sale in the ordinary course of the normal operations of a business.
Trade and other receivables: money that is owed to the business by customers from sales.

Liabilities
Borrowings: the amount that has been borrowed from other parties and is owed by the business.
Trade and other payables: money that is owed to another business from purchases.
Current tax payable: amount of tax to be paid by the business.

Equity
Dividends: a sum of money paid regularly by a company to shareholders out of its profits.
Share-based payments: payments given to employees on the basis of share or equity of the company.
Capital: money placed into the business by the owner.



Question 3.1

What is wrong with just doing what 'works' in relation to analysing financial statements? There are plenty of experienced practitioners in our capital markets. Why do we not simply find out what most are doing and just do this ourselves? What do you think and why?

When analysing financial statements we can not just do what 'works'. Every person has a different way of understand what the figures mean and where they come from. We cannot simply just follow what practitioners are doing as every business in the world is different and so is their financial statements. Some people may be more skilled at reading financial statement for companies about clothing or retail as opposed to those about automotive products because that is what they are familiar with.


Question 3.2

What is the benefit of having a structure, such as the du Pont company's framework, to help use the ratios to analyse a firm's financial statements? Is it any better (or worse) than simply doing what experienced practitioners do? Why or why not?

Du Pont's company's framework is highly beneficial to many businesses as it solely focuses on the financial statements and it very easy to understand and read.

2012 Financial Highlights

2012 Financial Highlights

• Noticeable increase in the amount of debt.
• Turnover increased greatly.
• Profit attributable to shareholders decreased.

DCH 2012 Turnover

Turnover in 2012 was HK$48,014 million, increased by 4.1% compared with HK$46,109 million in 2011, this was mainly attributable to the followings:

Motor & Motor Related Business:

- Turnover of Motor & Motor Related Business Segment increased by 3.8% mainly attributable to the growth of the PRC segment turnover by 3.4% with the robust sales growth achieved by the super luxury passenger cars, the continued expansion of our 4S shop network. 


Food & Consumer Products Business:

- Turnover of Food and Consumer Products Business Segment increased by 5.6% mainly due to the 9.6% increase in segment turnover in the Hong Kong and Macao market driven by the expansion of food trading and retail, food processing and strong growth in distribution of FMCG and electrical appliances businesses.


Logistics Businesses:

- Turnover of Logistics Business Segment grew by 19.7% with Hong Kong and Macao growing steadily by 5.4% and PRC grew by 60.7% attributable to the commencement of new logistics facilities in Shanghai, and also the growth in the business of Xinhui logistics centre. 

Key Concepts when reading the 2012 Annual Report

Concepts

Motor & Motor Related Business

• Segment turnover rose by 3.8%
• Sold around 81,000 units of vehicle in mainland China
• The number of 4S shops increased to 69% in 2012, and a total of 21 4S greenfield projects are in the pipe line in mainland China.
• In the PRC, dealership after-sales service unit and revenue were up by 10.1% and 28.4%. 
• In Hong Kong and Macao, DCH sold around 10,800 units of vehicles.
• Infiniti, the renowned luxury car brand, has been soft launched in 2012.
• The group added the distributorship of SINOTRUK into its portfolio in Hong Kong, and will represent DAF, a renowned European commercial vehicle brand in 2013.
• The first electric bus will be delivered to Hong Kong in March 2013.
• The isuzu distributorship in Taiwan officially commenced operation.
• Sales of the lubrication oil blending plan tripled in 2012 to 6.4 million litres.

Food & Consumer Products Business

• 5.6% growth in segment turnover
• In mainland China, dairy and beverage products achieved an outstanding growth of 42.9% and 59.5% respectively
• Our joint venture with Brasil Foods S.A commenced distribution of branded frozen products in Hong Kong and mainland China
• Our food processing business in Hong Kong recorded significant sales growth of 46.2%
• The number of DCH Foodmart outlets increased to 85 by the end of 2012
• Private label products are being developed with the newly launched house brand Cheer dairy and nut product lines introduced in Hong Kong
• DCH has successfully established a retail chain-store network totaling 47 DCH AV shops in key cities in the PRC.

Logistics Business

• Segment turnover rose by 19.7%
• Signed contract with a major confectionery supplier to extend repacking service from Xinhui to Shanghai
• Established temperature controlled fleet to enhance cold chain capability in Shanghai.

My Top Three!!!

After looking at almost everyone's blogs I have finally picked my top three blogs. In no particular order, my three favourite blogs are:

Megan McCormick ---> Amcom Telecommunications

• I really admire Megan's blog as it is set out exceptionally well and has so much information about her company! Great work Megan! :) 
• http://meganelouise.blogspot.com.au 

Bronte Marshall ---> Greencross Vets

• Bronte's blog really stood out to me. She went into extensive detail about her company, their partnerships, their services and annual reports. It was so easy to be able to understand her company in the information that she gave. This is definitely one worth looking at!
• http://bmarshallaccounting.blogspot.com.au

Evelyn De Lange ---> Saunders International 

• Evelyn's blog was one of the first blogs I looked at and has always been one of my favourites. I just had to place her in my top three! I absolutely love the way you have presented you blog, it has so much information and is so easy to read. Fantastic work!
• http://evedelange.blogspot.com.au

Questions when reading the 2012 Annual Report

Questions

1. As my company, DCH is a Hong Kong company, do I have to change the currency when completing my financial statement as its says in the annual reports that all figures are in Hong Kong millions?

2. What are the restated financial statements and what else may they be called in a company's financial reports? I cannot find my company's restated financial statements anywhere. Please help!

3. What may non-controlling interests in the income statement be?

4. In my companies financial highlights it has basic earnings per share and diluted earnings per share. What is the difference between the two?

Dah Chong Hong Holdings - About The Company.

About Dah Chong Hong Holdings

Dah Chong Hong Holdings is well known as one of Hong Kong's leading business conglomerates. DCH has a special focus in Motor and Motor Related Businesses and Food Consumer Products Businesses.


Motor and Motor Related Businesses

DCH is one of China's leading vehicle distributors and dealers representing 20 renowned international brands. Some brands include Bentley; Honda; Lexus; Isuzu; Nissan; Toyota and Mercedes Benz. DCH recently started distributing commercial Isuzu in Singapore. This successful business has also been established in Taiwan, where DCH is the national distributor and importer of Isuzu vehicles as well as the dealer for Audi passenger cars.


Food and Consumer Products Businesses

Over the last 50 years DCH has grown into food manufacturing (offering a range or frozen and chilled food products as well as tea and coffee blending), distribution and retailing, forging a Total Food Supply Chain. At the end of 2013 there was a total of 85 DCH Food Mart and DCH Food Mart Deluxe outlets in Hong Kong.

Logistics Business

This arm plays an important role to support DCH's Total Food Supply Chain development. DCH has developed a nation-wide distribution capabilities in mainland China and a seamless modern cold=chain logistics network that has been extended from Hong Kong, Macao, Xinhui, Shenzhen, Guangzhou, Xiamen to Shanghai. These facilities provide strong support to the Group's Food Business.