Financial Statement Analysis- MacroEconomic Analysis 1 | Global economy prospects. Group Assignment A

Financial Statement Analysis Group Assignment A. Macro-economic Analysis 1. Global economy prospects Since 2012, World gross product (WGP) has performed at a median annual ratio of 2.5 per cent, appreciably below the ...

Financial Statement Analysis Group Assignment A. Macro-economic Analysis 1. Global economy prospects Since 2012, World gross product (WGP) has performed at a median annual ratio of 2.5 per cent, appreciably below the average of 3.4 per cent recorded at a decade preceding the financial crisis (Figure 1) (United Nations 2016). Driven by prolongation of enfeebled global investment, dwindling world trade growth, low inflation, receding productivity, weak wage growth as well as high debt levels, 2016 marked as a slowest pace for the global growth of output (United Nations 2017). In comparison with 2008, 2016’s WGP is merely higher than 0.3 per cent. Besides mentioned factors, the heavy economic losses are also contributed by low commodity prices and heightened conflicts and geopolitical tensions in various regions (Global Conflict Tracker 2017). Figure 1 (United Nations 2017, p. 2) At issue is whether a sluggish economy growth will be ingrained for a longer period. According to some projections, with the end of American destocking cycle and Japan’s supporting policies, there will be a slight increase for developed economies in gross domestic product growth (United Nations 2017). Even though fiscal incentive, if effectuated, may boost global growth, risks to growth forecast could tilt to the downside, including heightened policy uncertainty, financial market disruptions (World Bank Group 2017). Furthermore, commodity exporters in developing nations are forecast to grow modestly, as stabilisation of commodity prices and inflation pressures influenced by depreciations of exchange rate ease (United Nations 2017). World gross product is projected to swell by 2.71 and 2.9 per cent in 2017 and 2018 (Appendix Table 2), respectively, with this moderate improvement more like a signal of stabilization than an indication of a robust amelioration of global economy. 2. Regional economies 2.1 Australia In 2012-2013, Australian GDP increased 3.75% (Budget 2012-2013). The growth was belowtrend due to mining investment cut down, average growth of consumer expenditure as well as continuing fiscal restraint (RBA 2013). Being impacted by the downturn of global economy, the decline of commodity prices and the threat of international financial status which might turn negative, in 2012, RBA decided to cut down interest rate in by 25 basis points (Janda 2012). Until 2013, the rate reached 2.5%, which was historically low (McGrath 2013). It encouraged dwelling price and construction as well as the turnover housing market (RBA 2013). According to data from the ATO (2017), CPI of June 2012 was 100.4, below the target set. A boost from the incline of fuel prices led to the rise of inflation rate in September Quarter, however, a decline happened at the end of the year as a direct result of the drop of carbon price (RBA, 2013). With a not-too-bright economy picture, Blackmore sales only rose $65,771 from 2012 to 2013 (Blackmores 2016). Australian GDP in 2014 climbed due to 0.4% rise in household spending, 0.8% in net exports, however, being pulled by 0.5% drop in business investment together with 0.2% fall in government investment (Janda 2014). In 2015, GDP 2.2 East Asia and Pacific 2.2.1 China In 2016, national output estimated at 6.7 per cent, marginally decreased from last year growth of 6.9 per cent (Figure 5) 2.2.2 Rest of the region Growth in other East Asia Pacific regions maintained at 4.8 per cent. The major factor is the weakened external demand was primarily offset by resilient domestic demand (World Bank 2017). B. Industry Analysis Allday (2016) states that the industry is forecast to develop significantly due to the rise of consumer expen diture 1. Rivalry among existing firms – Moderate 1.1 Industry Growth According to Allday (2016), an incline in Australian health consciousness has led to the rise of 10.8% in the industry revenue, reac 2.2 Access to channels of distribution and relationship 2.2 Access to channels of distribution and relationships C. Business Strategy Analysis 3.1. Key success factors In 2016, Blackmores Company has achieved a successfully growth as a result of well complying and developing their strategies, which consists of: Consumer Centricity, Asia Growth, Product leadership and Operational effectiveness. 3.1.1 Consumer Centricity 3.1.2 Asia Growth To develop the differentiation strategy, within 2016, Blackmores have produced 117 new products with the new invent in medicinal cannabis of their partnership- BioCeuticals (Blackmores 2016) 3.1.3 Product Leadership To ensure high quality products will be provided to customers, Blackmores put their concentration 3.1.4 Operational effectiveness According to (Blackmores 2017), decreasing and redirecting costs is still a management concentration in the business. 3.3 Forecast the future performance 3.3.1 Sustainability Blackmores (2017) highlights that sustainability is the basic principal objective of the company, including 4 sustainability commitments: 3.3.2 Forecasting Despite the average growth in sales of Asian markets excluding China, Korean operations had quite a tough year D. Accounting analysis Accounting analysis aims to facilitate managerial decision making and assess the liquidity, stability and profitability 1. Step1 – Identify Accounting Policy Blackmores has an accounting system for manufacturer. Sales of goods are main income for the company. Blackmo 2. Step 2 – Access Accounting Flexibility Blackmores are flexible to choose the policy for calculating inventory depreciation and receivables. The requirement f 3. Step 3 – Evaluate Accounting Strategy The accounting policy used by the company help to meet the company strategy and optimise their process . 4. Step 4 – Evaluate The Quality of Disclosure Step 5 – Indentify potential red flags Step 5 – Indentify potential red flags Conclusion Overall, until this point, Blackmores Limited remains its leading position in vitamin and supplement industry. This report has provided a brief analysis for the world economy as well as the economies of countries where Blackmores accounts of a considerable market share such as Australia, China and other Asian countries REFERENCE ‘China-Australia Free Trade Aggreement’ 2016, Ecodate, vol. 30, No. 2, pp. 9-12, viewed 10 April 2017, . Abernethy, J. 2010, ‘Evaluating Blackmores’, Switzer Daily, viewed 10 April 2017, . Allday, A. 2016, Vitamin and Supplement Manufacturing in Australia, IBIS World, viewed 10 April 2017, . ATO 2017, Consumer Price Index (CPI) Rates, viewed 8 April 2017, . Australian Accounting Board 2009, Compiled Accounting Standard AASB 102 --Inventory, viewed 06 April 2017, . Australian Accounting Board 2010, ‘Compiled AASB Standard AASB 118—revenue’, viewed 07 April 2017, . Australian Accounting Standards Board 2009, ‘Compiled AASB Standard AASB 138 Intangible Assets’, viewed 07 April 2017, . Australian Accounting Standards Board 2010, ‘Compiled AASB Standard AASB 139 Financial Instruments: Recognition and Measurement’, viewed 08 April 2017, .7 Australian Accounting Standards Board 2014, ‘Amendments to Australian Accounting Standards Clarification of Acceptable Methods of Depreciation and Amortisation - [AASB 116 & AASB 138]’, viewed 07 April 2017, . Bank for International Settlements 2016, ‘BIS Quarterly Review September 2016: International banking and financial market developments’, BIS, Basel, Switzerland, viewed 10 April 2017, < http://www.bis.org/publ/qtrpdf/r_qt1609.pdf>. Becker, C. & Salahi, L. 2010, ‘Supplement no substitute for healthy diet’, ABC News, 29 October, viewed 9 April 2017, Blackmores 2016, Wellbeing Annual Report 2016, Blackmores, viewed 10 April 2017, < http://blackmores2016.annual-report.com.au/>. Blackmores 2017, ‘Financial Report for the half-year ended 31 December 2016’, Blackmores. Budget 2011, Statement 2: Economic Outlook, viewed 8 April 2017, . Buresti, F., Hill, M. & Clift, J. 2016, ‘General entry form 2016’, The Australian Effie Awards, viewed 10 April 2017, . Clearly, P. 2017, ‘Vitamin ‘bottlers’ like Blackmores find ingredients overseas’, The Australian Business Review, 4 February, viewed 10 April 2017, .8 Cloutman, N. 2017, Supermarkets and Grocery Stores in Australia, IBIS World, viewed 10 April 2017, . Council on Foreign Relations 2016, Global Conflict Tracker, CFR, viewed 10 April 2017, . Dufour, F. 2017, ‘China Dec forex reserves fall less than expected to $3.001 trillion’, CNBC, 6 January, viewed 10 April 2017, . Haggan, M. 2015, ‘OUT OF STOCK FRUSTRATING, BUT QUALITY COMPROMIS WOULD BE WORSE: BLACKMORES’, AJP, viewed 10 April 2017, . IBIS World 2016, Blackmores Limited, IBIS World, viewed 10 April 2017, . Janda, M. 2012, ‘Reserve Bank cuts interest rates’, ABC News, 2 October, viewed 8 April 2017, . Janda, M. 2014, ‘GDP data show Australia in income recession; falling dollar a 'silver lining'’, ABC News, 3 Dec, viewed 7 April 2017, Keythman, B. n.d, ‘What Are the Differences Between Straight Line, Double-Declining Balance & Units of Production?’, Chron, viewed 12 April 2017, .9 Magyer, J. 2016, ‘Why Blackmores is worth holding in 2016’, Financial Review, viewed 10 April 2017, . Marine Stewardship Council n.d, Blackmores Ultra Krill Oil, MSC, viewed 10 April 2017, < https://www.msc.org/where-to-buy/product-finder/products/cfpsproduct-6A786600-06B1- 45A8-B481-3EED378A32BD>. MarketLine 2016, ‘Company Profile Blackmores Limited’, MarketLine, viewed 11 April 2017, . McGrath, P. 2013, ‘Reserve Bank of Australia leaves official interest rate on hold at 2.5 per cent, in line with forecasts’, ABC News, 3 December, viewed 8 April 2017, . Medtrack 2016, ‘Blackmores Australia Medtrack Company Profile’, Medtrack, viewed 11 April 2017, . Murray, L. & Evans, S. 2017, ‘Blackmores fined $65,000 in China’, Companies & Markets, 17 March, pp. 21. Palepu, K., Healy, P. & Bernard, V. 2013, ‘Business Analysis and Valuation using Financial Statements: Text and cases’, Mason, 5th edn, Canada. Parker, J. 2015, ‘Reserve Bank keeps interest rate at 2 per cent, leaves door open for further cut’, ABC News, 15 December, viewed 9 April 2017, .10 Richardson A. 2017, Pharmacies in Australia, IBIS World, viewed 10 April 2017, . Schmidt, L. 2016, ‘Demand for Health Supplements Propels Marcus Blackmore onto Aussie’s Richest’, Forbes, viewed 11 April 2017, . Tang, E. 2016, 2015 GDP growth rate of 2.5 per cent confirms the resilience of our economy, viewed 9 April 2017, . The Reserve Bank 2013, Statement of Monetary Policy, viewed 8 April 2017, . Treasury 2016, Pre-election economic and fiscal outlook 2016, viewed 9 April 2017, . United Nations 2015, World Economic Situation and Prospects 2015, UN, New York, viewed 10 April 2017, . United Nations 2016, ‘World Economic Situation and Prospects 2016’, UN, New York, viewed 10 April 2017, . United Nations 2017, ‘World Economic Situation and Prospects 2017’, UN, New York, viewed 10 April 2017, .11 Willet, W., Sesso, H. & Rimm, E. 2013, ‘Food and Vitamins and Supplements! Oh My!’, viewed 9 April 2017, . World Bank Group 2017, ‘Global Economic Prospects: Weak Investment in Uncertain Times’, WBG, viewed 10 April 2017, . XE 2017, XE Currency Charts: CNY to AUD, XE, viewed 10 April 2017, . Zhang, L. 2016, ‘IMF Working Paper: Rebalancing in China—Progress and Prospects’, International Monetary Fund, Washington. DC, viewed 10 April 2017, .