Financial Statements of Ainsworth Game Technology Company - Case Study Example

1. Overview and background information Ainsworth Game Technology is engaged in the deigning, development and the overall generation of gaming machines as well as other related equipment and services. It also focuses on leasing and selling as well as servicing this equipment at an affordable cost. Recently, the company indicated that it was extending its interests on on-line gaming markets that relate to social gaming and permitted gabling sectors. It was founded in 1995 and has its headquarters in Newington, Australia. The company major markets are in Australia; the Americas; New Zealand as well as European markets. According to Yahoo Finance (2015), the company enjoys a market capitalisation of $720.98M. It is listed and trades its stock within the Australian Stock Exchange under the symbol AGI. It is popularly known for the design and production of A600, Ambassador and Celebrity kind of gaming-related components. 2. Financial Statements of Each Company A. Assets = Liabilities + Equity 2014: 288,660= 53,358+235,302 2015: 348,632=68,145+280,487 B. Total Revenue less Total Expenses = Profit (Loss) 2014: (244,118+396-88,542)-77,726= 78,246 2015: (240,643+445-88,640) -86,795= 65,653 C. Retained earnings (Accumulated losses from the Balance Sheet)= Profits(from the income statement)- (Transfer between reserves+ accumulated losses/retained earnings closing balance of previous year less share based payment adjustment on non-vesting options) 2014: (21,516) = 61,570- (54,581+28,511-6) 2015: (18,258) = 70,353-(21,516+67,150-64) D. Cash From Operating, Investing And Financial Activities = Net Increase/Decrease In Cash And Cash Equivalents 2014: 57,597+ 6,968-32,767= 31,798 2015: 20,203+28,530-23,346=31,673 E. Cash & Cash Equivalents; Opening; net decrease/increase in cash and cash equivalents+ cash and cash equivalents as at July 1, 2014+Effect of exchange rate fluctuations on cash held = 31,798+40,135-4=71,929 Closing: net decrease/increase in cash and cash equivalents+ cash and cash equivalents as at July 1, 2015+Effect of exchange rate fluctuations on cash held = 31,673+71,929+1044= 41,300 3. Simple Diagram to Show the Above Linkages 4. Other Information in the Annual Report A. Performance Highlights This section provides information related to the company’s immediate performances for the current year. The section presents the performance for both earnings and profitability in such markets as; North America: Latin America; Australia and other regions as well as other online platform. B. Chairman’s Report The report provides information confirming FYI15 results to the existing shareholders. It is presented on the viewpoint of the chairman where it presents the real progress for different fronts that include; online and social businesses; Rest of the World markets where revenues grew by more than 46%; as well as in the building scale and the immediate contributions that were made through the underlying operations for areas where there was leasing and renting of machines to different clients. The section also confirms that the shareholders will be receiving a franked dividend of 10 cents per each share held. All in all, the section is an affirmation by the Chairman that the company’s operations are heading the right way and that the shareholders should not worry about anything else. D. Chief’s Executive Officer Report The section provides an affirmation of the CEO to the existing shareholders in regards to the company’s immediate operations. Through this report section, the CEO avails pertinent information related to financial performance within the existing year as well as progress made for the business to expand in different international markets. It highlights the possible areas that the company is likely to experience growth in the coming operational year of 2016. For instance, the section report indicates that AGT will in April 2016 engage in furthering its overall growth and progress in North America and open a relatively new facility in Nevada. The CEO confirms that the company will experience even growth in areas related to international markets as well as emphasize on the current positive cohesion amongst different employees within the organisation. E. Shareholder Information Section This section avails information relating to the existing shareholders as a requirement by the Australian Securities Exchange Limited Listing Rules. It provides information related to the exact number of shareholdings and shares on issue; substantial shareholders; voting rights; distribution of shareholders; and, also the regulatory considerations that will likely affect these existing shareholders’ base. F. Director’s Report This section presents information related to the composition of the company’s immediate directors presenting their names; age; experiences and special responsibilities and other forms of directorships. Certainly, it provides information related to company secretary, the number of meetings; major forms of activities for the company; affirms the operational and financial information presented in financial statements; directors’ interests, likely future developments; and such other important information as the indemnification and insurance of officers and auditors. Important information presented in this section is the remuneration statuses especially of the executive team and directors of the company. G. Director’s Declaration This is a section that puts forward a declaration by company’s directors affirming that the financial statements have been prepared in accordance with set guidelines like Corporations Act 2001; the entity will be able to pay its immediate level of debt; and that the CEO and CFO have adhered to the Corporations Act 2001 in conducting operations of the company. H. Independent Auditors Report This is a section that the auditor; KPMG, affirms that it has successfully audited the financial position of the firm and goes ahead to give out its opinion. For this case, the opinion is that the company adhered to Corporations Act 2001 thereby availing a true and fair view of its financial position within the underlying performance year. I. Corporate Directory This is a section that presents information related to address of the company, names of the auditor and their address; chairman; CEO and directors of the company. 5.1 Income Statement (Statement of Profit and Loss) Main source of income: is the sales revenue from its products and services offered (Note 8, pg. 48). Sales revenues are posted from the sale of goods; the rendering of related services as well as rental and participation revenues. Main Source of Expenses; for this company relates to sales, service and marketing expenses. It is expected that since AGT is a manufacturing company, then this type of expense would be the major one since it needs a significant sales workforce to promote, distribute and campaign for its online gaming products across the world. 5.2 Balance Sheet (Statement of Financial Position) Main Type of Assets: for the company relate to its overall property, plant and equipment. This is definitely because it is focused in the, designing, production and distribution of gaming machines as well as other related equipment and services (Note 13, pg.50). In fact, it is ascertained that the company acquires such substantial level of assets as personal computers and motor vehicles through hire purchase means. Main Type of Liability: for the company relates to trade and other payables. This is expected because the company is certainly selling most of its products on credit facilities to its loyal customers. The amount is also inclusive of amounts that are payable to directors/shareholders on controlled entities (Note 24, pg. 65). Main Type of Equity Accounts: are share capital, which forms the largest percentage share since it comes directly from sale of shares on securities market and because it is less expensive; reserves, which are sourced from the company’s foreign reserve accounts; as well as accumulated losses that are a direct component of the income/loss operations within the period- losses that are kept within the company for operations. 5.3 Statement of Cash Flows Main Source of Cash Inflows: of the company relates to cash receipts from customers. It is expected that this inflow is greater in value because AGT focuses on selling products to larger extent on markets in both cash and credit facilities. Main Source of Cash Outflows; for the company relates to the money spent for acquisition of property, plant and equipment. As noted earlier on in the paper, this item is expected to constitute the enormous payment since AGT focuses on the manufacture of gaming machines that require huge investments on modern equipment. 6. Ratio Analysis 6.1 Profit Margin = Profit after interest and tax / Revenue 2015: 70,353/240,643= 0.29*100%, 29% The ratio indicates the level of sales that a company is actually retaining as a form of earnings. For this case, AGT seems to have improved on its profit margin by 29%. 6.2 Return on Equity = (Profit after interest and tax – Preference Dividends)/ Average Ordinary Shareholder’s Equity 2015: 70,353-0/182,360 = 0.39*100%= 39% ROE is a ratio that measures that ability of a company to generate sales returns from the existing level of equity provided by shareholders. For this case, AGT seems to be performing positively in how it is utilizing its equity funds to generate profits within the current period. 6.3 Current Ratio = Current Assets / Current Liabilities 2015: 221,180/52,482= 4.21 Current ratio is a ratio that helps measure the immediate capacity of a company to meet its short-term commitments as and whenever they fall due like office supplies among others. For most cases, the standard current is set at 2:1. For the case of AGT, the ratio is highly above meaning that it has substantial short term resources that can be used to offset its short term obligations at any given moment in time. 6.4 Debt Ratio = Total Liabilities / Total Assets 2015: 68,145/348,632 = 0.19 Debt ratio is used to measure the level of liabilities that are funded by debt funds as opposed to internally-generated resources in the company. For this case, AGT seems to have concentrated minimising the level of debt funds used to counter its liabilities within the period. 6.5 Cash Flow to Revenue = Cash from Operating Activities / Revenue 2015: 20,203/240,643 = 0.08 Cash flow to revenues is a ratio used to measure the ability of a company to translate sales into immediate cash resource. For this case, the company does not seem to grow its cash base in a similar way that it is posting sales revenues, which is an unhealthy indication. References List Ainsworth Game Technology.2015. Annual Report. Print Yahoo Finance.2015. Company Profile: Ainsworth Game Technology Ltd. Retrieved from https://au.finance.yahoo.com/q/pr?s=AGI.AX Read More