Financial Reporting Analysis Sample
The process of obtaining financial documentation that is reported and analyzed regularly is necessary for all business organizations. Financial documentation is useful in helping companies or business organizations to carry out efficient budget allocation and debt management (Wahlen et al., 2017). With this documentation, there is explicit insightful information provided about the key spending areas. Business organizations that use financial reporting analysis to monitor their expenses and income can track their debts consistently and remain transparent within the competitive marketplace in the contemporary business world. In this paper, there will be an in-depth assessment of the financial reporting analysis of the Dunelm Group PLC company within the last fiscal year.
Over the past fiscal year, the company's revenue has risen from 1,058 million British pounds to 1,336 million British pounds (Dunelm PLC Group, 2021; Fidelity, 2022). Revenue generally represents the finances a business organization generates over a specified period. The increase in revenue seen here can be attributed to four factors. These factors include increased customer or client base, the increased average size of transactions, increased frequency of the transactions made per client or customer, and an increase in the company’s price (Dunelm PLC Group, 2021; Fidelity, 2022; Wahlen et al., 2017). The post-lockdown period saw the company increase some of its products and services prices, which increased the revenue of the business organization.
Higher levels of profitability often accompany higher revenues generated in any business organization. In the same period, the company's gross profit significantly increased from 532 million British pounds to 689 million British pounds (Dunelm PLC Group, 2021; Fidelity, 2022). Gross profits help companies record the costs or expenses needed to produce revenue. This increase in gross profit can be attributed to a slight decrease in the cost of production due to government subsidies in the post-lockdown period and an increase in the price of goods, as highlighted before in the paper.
The company's operating income has likewise increased from 116 million British pounds to 166 million British pounds. There has also been an increase in the operating margin percentage and the overall net income. The operating margin has increased from 10.97 percent to 12.45 percent, while the net income has increased from 88 million British pounds to 129 million British pounds (Dunelm Group PLC, 2021). The increase in all these financial metrics also proves to be a key engine for attaining more growth, increasing profits, expanding, and acquiring (for instance, new capabilities, other companies, talent, and extra products).
The cash flow in the past fiscal year has increased from 19 million British pounds to 90 million British pounds. However, the free cash flow has reduced from 219 million British pounds to 169 million British pounds (Dunelm PLC Group, 2021; Fidelity, 2022). Free cash flows signify that a business organization has enough finances to expand, buy back stocks, reduce debt levels, develop new services or products, and pay dividends (Wahlen et al., 2017). The decline in this financial metric over the past fiscal year highlights how Dunelm Group PLC has not thrived so much.
On the other hand, the investment losses have reduced from -25 million British pounds to -16 million British pounds (Dunelm PLC Group, 2021; Fidelity, 2022). A decrease in investment losses means that the investment gains are increasing. Investment gains within a business organization are associated with an increase in the value of the company’s capital assets. Such capital gains are increased whenever the assets are sold, which Dunelm Group PLC heavily carried out in the post-lockdown period.
The last fiscal year has also seen a significant increase in the cash dividends from -106 million British pounds to -24 million British pounds (Dunelm PLC Group, 2021; Fidelity, 2022). The increase in the company’s cash dividends is a major reflection of its increase in net profits, as was already highlighted before in the paper. However, another factor might have resulted in the massive increase in dividends seen in the last fiscal year. This factor revolves around the notion that the company has not had suitable projects in the past year to generate better returns, specifically in future years (Fidelity, 2022). Following the lockdown period caused by the coronavirus pandemic, the company has become extremely cautious in the projects it invests in or what it implements due to the many uncertainties in the financial market (Fidelity, 2022). The overall result of this level of cautiousness stands to be limited innovation or fewer risks being taken. The lack of such projects results in the company using the cash it has to pay its shareholders rather than reinvesting it right back into the business organization for growth.
Dunelm Group PLC represents one homewares retailer firm. This company operates from high streets and out-of-town superstores as it provides extra multi-channel convenience via online, telephone, mobile, and catalog ordering (Dunelm PLC Group, 2021; Fidelity, 2022). The company's current assets have increased from 229 million British pounds to 316 million British pounds. On the other hand, the company's current liabilities have slightly increased from 228 million British pounds to 236 million British pounds (Dunelm PLC Group, 2021; Fidelity, 2022). In the same period, the company's total capital and equity have increased.
In contrast, there has been a decrease in the company’s total debt (making the total debt-to-equity ratio become 0.868777) (Fidelity, 2022). The total capital has increased from 218 million British pounds to 281 million British pounds, and the total equity has moved from 173 million British pounds to 281 million British pounds (the return on equity being 64.61%) (Dunelm PLC Group, 2021; Fidelity, 2022). The decrease experienced in the company’s total debt has moved from 359 million British pounds to 293 million British pounds.
The financial metrics explained above show that the Dunelm Group PLC firm currently stands to have more assets compared to liabilities. This collectively highlights that the business organization is or should be comfortable when it comes to meeting its general short-term obligations. This can be cited as one of the reasons why the total debt associated with the company might have decreased within the past fiscal year by a great value of over 60 million British pounds (Fidelity, 2022). The increase in the overall assets can be attributed to the ROA percentage (return on asset %, which was 15.50 for the last fiscal year) since the company is effectively controlling the overall business expenses (Wahlen et al., 2017; Fidelity, 2022). In situations where there is an increase in the overall capital or earnings of a company, there are heavy investments that have been made to achieve that.
Dunelm Group PLC represents a public company for manufacturing and industrial retail goods. However, the company’s main competitors are not public but are either subsidiaries or private. The three main competitors of Dunelm Group PLC include Hearth & Home Technologies (a subsidiary company), The Range (a private company), and Crate & Barrel (a private company). In the past fiscal year, Hearth & Home Technologies had a revenue of 481 million British pounds (Fidelity, 2022). On the other hand, the Range had annual revenue of more than 600,000 British pounds. Crate & Barrel has, for the past fiscal year, reported revenue that amounts to 1.27 billion British Pounds (Fidelity, 2022). Dunelm Group PLC is good in its current marketplace since its revenue exceeds that of its other top competitors. Despite the stiff competition Dunelm Group PLC faces, it has managed to boast more than 3 million customers or clients who visit the company’s stores and online platforms weekly.
In its financial statements, Dunelm Group PLC has been effective enough to ensure that it provides a report of all the transactions and other key events that have taken place over the last fiscal year. Therefore, the information provided in the company’s financial statement is a major reflection of the key underlying events that prudently represent estimates and uncertainties via proper disclosure (Penman, 2012). These attributes, properties, or characteristics associated with Dunelm Group PLC’s financial statements make it very reliable. The reliability of this financial statement is also enhanced by the fact that the documentation complies with the highest auditing standards. These high auditing standards require the information provided in financial statements to be completely free of any misleading data, bias, or material error.
A fiscal report is a coordinated and efficient portrayal of an assortment of monetary information. These assertions also address the monetary exhibition of the substance and its ongoing financial situation. A budget report is ready by understanding specific sensible and reliable bookkeeping standards, presumptions, and methodologies (Micheal & Albert, 2014). So the term fiscal summaries, by and large, allude to three significant explanations. The data should be promptly justifiable to clients of the fiscal summaries. This implies that data should be introduced, with extra data provided in the supporting references case-by-case basis to aid explanation. The data should be pertinent to the clients' necessities, which is when the data impacts their monetary choices (Wahlen et al., 2017). This might include detailing especially significant data or data whose oversight or misquote could impact the financial choices of clients.
The revised version of ISA formulated and approved in 2019 (September) was set to be effective from the 15th of December 2021 for all audits made when analyzing financial statements of business organizations. Audits are normally performed following risk-based approaches, which makes the provisions stated in the revised version of the ISA 315 very important not just for planning audits but also for making sure that the audits get executed in ways that address all the available risks. This revised version is now coming up with major changes within the risk-based approach that will identify and evaluate risks, ensuring there are focused responses and solutions from the auditors to the risks (SAICA, 2021). These enhancements in the revised version will impact all audits and audit processes. Regardless of their size, audit firms will now have to revise the approach they employ toward risk assessment or evaluation.
Financial Reporting analyses are useful in helping companies or business organizations to carry out efficient budget allocation and debt management. Business organizations that use financial reporting analysis to monitor their expenses and income can track their debts consistently and remain transparent within the competitive marketplace in the contemporary business world. The company has performed significantly better (compared to the last financial year) from a financial perspective. The increases in most of the company’s financial metrics prove to be a key engine for attaining more growth, increasing profits, and expanding and acquiring (for instance, new capabilities, other companies, talent, and extra products). In its financial statements, Dunelm Group PLC has been effective enough to ensure that it provides a report of all the transactions and other key events that have taken place over the last fiscal year. Despite the stiff competition Dunelm Group PLC faces, it has managed to boast more than 3 million customers or clients who visit the company’s stores and online platforms weekly. From all the information provided about Dunelm PLC Group as a business organization, it stands to be in a relatively good position from a financial point of view. This good position is not just because of its ability to outshine its top competitors but also because of its capacity to improve its operations and financial metrics from time to time, as has been seen in the last two financial years.
