Running Head: TEMID RETAILERS FINANCIAL STATEMENTS 1
TEMID RETAILERS FINANCIAL STATEMENTS 2
Temid Retailers Financial Statements
PART ONE
–Temid retailers are one of the biggest retail company located in the United States. The company has more than 45 branches in the United States where it has an established market for its products. The company has been in the industry for more than 25 years now, and it has been able to strive in the industry because of its strategic plan that it has implemented to help it establish itself in the retail industry. The company like earlier said has more than 45 branches in the United States and it has continued to accrue popularity in the country and the world over. The organization has more than 780 employees who work for the company in its four branches in America (Williams, & Connell, 2010). For the past few years, the company has been earning profit year in year out. Temid retailers are based locally and have no foreign subsidiaries in the world or rather in the other nations. The company has been making more than $45 billion which is the highest in the company history. The company has faced challenges and competitions from other retailers in America including the giant retailer Wal-Mart among other companies. The company has been buying goods from other manufacturers, and it has been able to maintain its place in the retail industry because of its strategic plan which has witnessed the company add value to the products it sells to the people (Agrawal, & Smith, 2015). Other competitors include Home Depot and the Costco. Based on the company profit or rather a revenue, the company is one of the leading retailers in America, and it has been in operation for more than 24 years in the retail industry in the country.
Company Budgeted Financial Statement
Company balance sheet
The company has been in operation in the industry for more than 24 years, and it has been able to gain its current position in the industry because of its strategic plans. A balance sheet is also known as the financial position statement. A balance sheet is made of three parts, the assets, liabilities, and the owners’ equity. Assets are tangible properties that are used to make the business possible. Liabilities are the bills that the business accrues during operations while equity can be described as what the business is worthy (Adrian et al. 2010). A balance sheet can be used to indicate the progress of the business early enough so that appropriate actions can be taken to make amends. It is recommended that company owners examine the balance sheet from time to time to ensure that the business is fine financially. A balance sheet shows the financial ratio of assets and liabilities information that is very important as far as understanding the financial health is concerned. Balance sheets are also important to the potential shareholders as it indicates the growth of the company and owners to attract more investors can, therefore, use it. It helps them to understand where they are investing their money and what they expect to earn on their investments in future.
Temid Retailers Balance Sheet As At 09/01/2018
|
Current Period |
|
Prior Period |
|
Increase (Decrease) |
|
09/01/17 to 09/01/18 |
|
09/01/16 to 09/01/17 |
|
09/01/17 to 09/01/18 |
| ASSETS |
|
|
|
|
|
| Current Assets: |
|
|
|
|
|
| Cash |
$ 13,345.00 |
|
$ 11,368.00 |
|
$ 1,977.00 |
| Petty Cash |
123.00 |
|
120.00 |
|
3.00 |
| Accounts Receivables |
4,015.00 |
|
4,000.00 |
|
15.00 |
| Inventory |
10,887.00 |
|
11,000.00 |
|
(887.00) |
| Prepaid Expenses |
1,198.00 |
|
1,100.00 |
|
(98.00) |
| Employee Advances |
90.00 |
|
– |
|
90.00 |
| Temporary Investments |
– |
|
– |
|
– |
| Total Current Assets |
29,658.00 |
|
27,588.00 |
|
1,995.00 |
| |
|
|
|
|
|
| Fixed Assets: |
|
|
|
|
|
| Land |
110,000.00 |
|
110,000.00 |
|
– |
| Buildings |
34,235.00 |
|
34,235.00 |
|
– |
| Furniture and Equipment |
29,000.00 |
|
28,000.00 |
|
(1,000.00) |
| Computer Equipment |
3,300.00 |
|
3200.00 |
|
– |
| Vehicles |
42,500.00 |
|
42,500.00 |
|
– |
| Less: Accumulated Depreciation |
(31,183.00) |
|
(30, 183.00) |
|
1,000.00 |
| Total Fixed Assets |
187,852.00 |
|
186,752.00 |
|
1,100.00 |
| |
|
|
|
|
|
| Other Assets: |
|
|
|
|
|
| Trademarks |
3,400.00 |
|
3,400.00 |
|
– |
|
|
|
|
|
|
| Security Deposits |
1,100.00 |
|
1,100.00 |
|
– |
| Other Assets |
300.00 |
|
400.00 |
|
(100.00) |
| Total Other Assets |
4800.00 |
|
4900.00 |
|
(100.00) |
| |
|
|
|
|
|
| TOTAL ASSETS |
$ 192,652.00 |
|
$ 196,552.00 |
|
$ 3,900.00 |
| LIABILITIES |
|
|
|
|
|
| Current Liabilities: |
|
|
|
|
|
| Accounts Payable |
15,000.00 |
|
14,900.00 |
|
100.00 |
| Business Credit Cards |
5,000.00 |
|
4,000.00 |
|
1,000.00 |
| Sales Tax Payable |
2,050.00 |
|
2,000.00 |
|
50.00 |
| Payroll Liabilities |
2,300.00 |
|
2,500.00 |
|
(200.00) |
| Other Liabilities |
700.00 |
|
1,000.00 |
|
(300.00) |
| Current Portion of Long-Term Debt |
11,000.00 |
|
11,000.00 |
|
– |
| Total Current Liabilities |
36,050.00 |
|
35,400.00 |
|
650.00 |
| |
|
|
|
|
|
| Long-Term Liabilities: |
|
|
|
|
|
| Notes Payable |
20,000.00 |
|
20, 000.00 |
|
– |
| Mortgage Payable |
142,000.00 |
|
141,000.00 |
|
1,000.00 |
| Less: Current portion of Long-term debt |
(200.00) |
|
(200.00) |
|
– |
| Total Long-Term Liabilities |
162,000.00 |
|
161,000.00 |
|
1,000.00 |
| EQUITY |
|
|
|
|
|
| Capital Stock/Partner’s Equity |
140,000.00 |
|
140,000.00 |
|
– |
| Opening Retained Earnings |
65,500.00 |
|
59,500.00 |
|
(6,000.00) |
| Dividends Paid/Owner’s Draw |
(3,000.00) |
|
(3,000.00) |
|
– |
| Net Income (Loss) |
8,000.00 |
|
9,000.00 |
|
(1000.00) |
| Total Equity |
210,500.00 |
|
205, 500.00 |
|
(5,000.00) |
Significance of a Balance Sheet
The question of the importance of a balance sheet has lingered in the minds of several business owners. From the analysis and literature, a balance sheet is a very important document in the life of business owners and accountants because it provides the easiest way to understand the company financial health at any given time. A balance sheet can be used to indicate the progress of the business early enough so that appropriate actions can be taken to make amends. It is recommended that company owners examine the balance sheet from time to time to ensure that the business is fine financially (Adrian et al. 2010). A balance sheet shows the financial ratio of assets and liabilities information that is very important as far as understanding the financial health is concerned. Balance sheets are also important to the potential shareholders as it indicates the growth of the company and owners to attract more investors can, therefore, use it. It helps them to understand where they are investing their money and what they expect to earn on their investments in future. Apart from the balance sheet is important to investors, it has been used by creditors and other financial institutions to measure the financial capabilities of the company to gauge the amount the company can comfortably pay as a loan.
Income Statement
Among the major financial statements in any given company is the income statement apart from the balance sheet and the cash flow and the statement of shareholders equity. In most cases, the income statement is referred as profit and loss statement and as a statement of income. It should be noted that income statement indicates revenues, expenses, gains, and losses as far as the business operation are concerned (Drehmann, & Tarashev, 2011). However, it does not show cash receipts and cash disbursements. The income statement is important as most of the investors pay attention to the profitability of any organization and one of the documents that can be used to indicate this is the income statement. Bankers and creditors are always worried about the income statement as net loss demonstrates that the company is not able to work effectively and make returns on investments.
Temid Retailers Income Statement for Period Ending 09/01/18
| Income Statement: |
| Revenue |
29,658.00 |
| Cost of Goods Sold |
17,900.00 |
| Gross Profit |
11758.00 |
|
| Operating Expenses: |
| Selling, General, and Administrative Expenses) |
3,720 |
| Other Operating Expense |
200 |
| Operating Income |
9,540 |
| Non-Operating Income Expense |
21 |
| Interest Expense |
400 |
| Unusual Expense |
– |
| Pretax Income |
8,300 |
| Income Taxes |
1,500 |
| Equity In Earnings Of All Affiliates Income |
120 |
| Other After Tax Adjustments |
– |
| Consolidated Net Income |
3,700 |
| Minority Interest Expense |
– |
| Net Income Continuing Operations |
3,700 |
| Preferred Dividends |
– |
| Net Income Available to Common Basic Shares |
3,700 |
|
| Earnings Information: |
| EPS Diluted Before Unusual Expense |
0.67 |
| EPS Basic Before Extraordinariness |
1.21 |
| EPS Fully Diluted |
0.98 |
Significance of Income Statement
Income statements are very important as analysts use them to calculate financial ratios such as return on equity (ROE), return on assets (ROA), gross profit, operating profit, earnings before interest and taxes (EBIT), and earnings before interest taxes and amortization (EBITDA) (Drehmann, & Tarashev, 2011). It is also important as it is used to determine company sales and auditors can use the information to determine major expenses in the organization. Professionals also use the income statement to compare year-over-year (YOY) and quarter-over-quarter (QOQ) performance.
PART TWO
Based on your research Identify the key elements of your company where you would like to evaluate and measure performance.
From the above analysis, it is very clear that the company financial statements have had issues in the past. It is very clear that the selling and general expenses are too high and are eating into the company revenues. It is therefore important to evaluate and measure this element to determine its performance. Evaluating and measuring this element will make it possible for the company management to come up with strategies that the company can implement to reduce the expenses and add on the company profitability. Another element that must be evaluated and measured to determine its performance is the operating income expenses (Said & Tumin, 2011). The figure is too high, and it must be evaluated to determine reasons as to why it is that high in the first place. Having a high figure as income expenses is not a good indicator of the company financial health, and it may result to increase in the net loss hence eat into the company revenue. Another key element in the company that needs to be evaluated and measured to determine its performance is the interest income. Interest income is a key element of the financial statement that must be monitored by the company. The three key elements must be evaluated and measured to come up with different strategies that can be implemented by the company to increase the profitability of the company. Evaluating and measuring the above-identified elements of the balance sheet and income statement is important as it provides a clear picture on how the organization is performing regarding finance and can be used to provide insight on how it can be improved in the short-term.
Create a computer-based analysis. For example, if you select a hospital you may want to know the average cost per patient per day or what is your return on investment.
It may prove to be difficult to monitor the number of goods sold in a single day in a big retail shop like Temid Retailers. However, with a best-developed computer-based analysis system, this may be very simple (Said & Tumin, 2011). Computer-based inventory is one of the analysis systems that can be used by the Retailer in this case to analyze the sales per day. A system where all the goods are entered into the inventory and the system detects the number of products that have been sold and tally them automatically against each product price and at the end of the day provide a print out of all the branch sales is the best system that can be used to analyze stock turnover and sales at the company. The system will be able to subtract buying price from the selling price and provide gross profit at the end of each day which can be used to estimate the return on investment in the company every day depending on the sales and expenses.
Discuss how the analysis you created will improve the performance of the company you have selected.
For a long time now with the recent developments in technology, business has derived accounting system that is based on technology which has helped them meet the required accounting standards. Technology has been important to the business accounting departments as the automated system has helped accountants too identify errors in the financial statements and correct them with a lot of ease before presenting the statements to the managers and the board of directors for analysis. The three key elements must be evaluated and measured to come up with different strategies that can be implemented by the company to increase the profitability of the company (Said & Tumin, 2011). Evaluating and measuring the above-identified elements of the balance sheet and income statement is important as it provides a clear picture on how the organization is performing regarding finance and can be used to provide insight on how it can be improved with time. A system that can be used to analyze financial statements like the one at hand is imperative to any business organization as it will rule out any possibility of fraud in the finance department and will also improve on the reliability of the financial statements in the short-term. With the aid of the internal control measures, the developed system will help to identify some discrepancies in the financial system and allow for their correction before using the data entries to prepare final statements.
Discuss internal controls that need to be put in place to ensure proper financial reporting.
Most companies come up with policies and procedures that they use to ensure that the financial statements made are reliable and valid. This policies and procedures are what is known as the internal controls (Said & Tumin, 2011). It is important for any company to have a genuine financial report as it is based on this that managers and decision-makers derive their decisions from. From the analysis of the company, it is important that the company implement the following measures to ensure proper reporting.
Separation of Duties
Separating the duties of each employee is important as it will allow splitting of tasks such as bookkeeping, deposits, auditing and reporting to be done separately (Altamuro & Beatty, 2010). The more the duties are separated, the fewer chances of employees committing fraud in the company. Separation of duties is recommended at the company to promote reliable and valid financial reporting.
Access Controls
Limiting the number of employees who have access to the accounting system is also one of the ways that the company can use as part of its internal control measures (Altamuro & Beatty, 2010). Controlling the accounting systems using passwords, lockouts and electronic logs is important as it will safeguard the system and avoid any form of manipulation of the system by employees. The company can also achieve this by using robust access and tracking system to deter any employee from interfering with the system.
Physical Audits
Several companies that have had problems with their accounting systems have always used physical auditing system to verify their financial reports. Physical auditing involves counting the money physically and other assets that are tracked in inventories, materials, and tools (Altamuro & Beatty, 2010). Physical counting is the important measure as it can be used to reveal some of the discrepancies in the accounting systems of any company as this can be done without using electronic records. Audits include hand-counting cash and any physical assets tracked in the accounting system, such as inventory, materials, and tools. Counting cash in sales outlets can be done daily or even several times per day.
Documentation
Documenting all financial documents in the company is another mean through which Temid Company can use to mange financial reporting internally? Documents such as invoices, internal materials requests, inventory receipts and travel expense reports, are important should be documented properly to avoid any form of incontinences when they are needed for accounting purposes (Altamuro & Beatty, 2010). Lack of proper documentation system can result in useful documents being overlooked or even mishandled.
Trial Balances
For many years now, most of the accountants have used the trial balance to add reliability to their financial reporting and create confidence in their accounting systems. Using the double-entry process in accounting is important as it ensures that all the books are balanced. A trial balance is also important as it can be used to identify errors in the working before they are posted finally. Maintaining a weekly or daily trial balance is important as it brings insight of the company financial documents (Altamuro & Beatty, 2010). This makes it easy and possible to discover discrepancies and correct them accordingly.
Reconciliations
Timely accounting reconciliation is another system that can be used to control financial reporting in organizations internally. Reconciliation of accounts is important as it allows the accountant to identify any discrepancies in the accounts and correct them early before using the entries. The company can reconcile the accounts by comparing them with the suppliers, and credit customers (Altamuro & Beatty, 2010). This can also be done by reconciling the accounts with the bank statements. Differences between these types of complementary accounts can reveal errors or discrepancies in your accounts, or the errors may invent with the other entities.
Approval Authority
Temid Retailers can also increase the reliability of its accounting statements by having particular company management to sign and approve company transactions on behalf of the company. This will allow scrutiny and evaluation of all transaction documents before they are documented for further use (Altamuro & Beatty, 2010). Requiring approval for large payments and expenses can prevent unscrupulous employees from making large mismanaged transactions with company funds, for example.
Conclusion
Financial statements are the major documents in the company that should be given the utmost priority when it comes to business documentation. A balance sheet is important in the organization as it can be used to determine the net worth of the business and create a clear picture of whether the business is growing of it is at a standstill or even making losses. It is also important as it provides the owner’s equity. The income statement is also important as it can be used to compute return on investments and return on assets, gross profit, operating profit, earnings before interest and taxes, and earnings before interest taxes and amortization. With recent trends in technology, companies can determine their daily sales and gross profits by the use of computer-based analysis systems and make the accounting work ease. It is also important to implement internal control measures to guarantee the reliability of financial statements.
References
Adrian, T., Moench, E., & Shin, H. S. (2010). Financial intermediation, asset prices, and macroeconomic dynamics.
Agrawal, N., & Smith, S. A. (Eds.). (2015). Retail supply chain management: quantitative models and empirical studies (Vol. 223). Springer.
Altamuro, J., & Beatty, A. (2010). How does internal control regulation affect financial reporting?. Journal of Accounting and Economics, 49(1), 58-74.
Drehmann, M., & Tarashev, N. A. (2011). Systemic importance: some simple indicators.
Said, R. M., & Tumin, M. H. (2011). Performance and financial ratios of commercial banks in Malaysia and China. International Review of Business Research Papers, 7(2), 157-169.
Williams, C. L., & Connell, C. (2010). “Looking good and sounding right” aesthetic labor and social inequality in the retail industry. Work and Occupations, 37(3), 349-377.
