What is Corporate Governance – Business Essay
Stakeholder – Any one with a vested interest in the business. Includes shareholders, managers, employees, community, suppliers, buyer’s etc: any one who uses or relies on the business in some way. Definition
from “Business Studies Excel”
•Start of the essay with a summary of the year’s performance, this is found on page one. This summary outlines the performance of the company throughout the last financial year. Although it does not analyse it in great detail it allows the stakeholder to have a brief description of the companies whereabouts in respect to its market share and the way the company is heading. It outlines to the stakeholder the weaknesses of the company and how these weaknesses are going to be dealt with during the next financial year. It also outlines the coming years focus’s for the business. This reflective summary of the previous year past gives minimal but effective insight.
• Chairman’s report and Management’s discussion and Analysis depict positive corporate governance.
The Chairman’s report emphasized the fact that it was a hard year for Greens and outlines the major causes of their downfall, (Pasta problems, Share Problems and the drivers of these problems, also the change in management and the board also contributed to this. It then lists the consequences of these changes. This demonstrates Greens attempt to clarify with its stakeholders where the company went wrong throughout the year and the factors that contributed to these wrong doings.
It then goes through and list the factors that are strong in the company, despite the companies weak performance in certain aspects of their products. It outlines to the stakeholders how each aspect of the businesses sale items performed.
The Management’s Discussion and Analysis is excellent in answering the stakeholder’s questions in relation to market share, and financial performances. It runs through the major headings that the stakeholders want to know about, (Market position, Products, Sale Revenue, Profit, Debt and expenses, sales performance.
Environmental Aspects are then introduced when the effect of the drought on the cost of raw materials in mentioned. (Need to elaborate on). Especially in the food manufacturing industry it is important for shareholders in particular to know how specific products and lines are performing statistically. As the food industry is also a seasonal product, consumer’s tastes and food preference will change throughout the year; therefore stakeholder must be kept informed as to these changes. Greens have done this very well, using brief to the point detail that leads into the in-depth fact and figures later on in the report.
• The Directors Report is composed by a number of director’s states the names of the directors on the Greens board. It gives a brief description of each and their role in the business.
• A review of results of operation is then reviewed.
It states that “ The Green Family disposed of the majority of their shareholdings. Czarvan PTY LTD, Guinness Peat Group and Continental Venture Capital LTD are now significant shareholders”
This is a statement that directly relates to the social structure of the company. The fact that the Green family disposed of their shares to large businesses such as Guinness Peat and other large companies without and hassle implies that they are a strong social company. That is they have other businesses like them working in their favor.
• On page 9 a section on Corporate Governance and a full report on the companies adherence to corporate governance can be found on page 51 of the report. (I will analyse this later.)
When talking about corporate governance use quotes that depict how important it is to the company.
“In recognizing the need for the highest standards of corporate behavior” pg. 9
Environmental issues are then stated, there is only a small paragraph on this.
Share options are then mentioned, these are possible one of the most important aspect to the stakeholders. (Elaborate on why this is so)
The amount of shares issued and the cost of shares are stated.
Financial Statements essentially present a scorecard of a company’s operations. At a certain time, or for a certain period of time, financial statements show what the company owns and what it owes, its profitability, and the company’s flows of cash.
The three primary Financial Statements are the Balance Sheet, the Income Statement (or Earnings Statement), and the Statement of Changes in Financial Position. A less common Financial Statement is the Statement of Retained Earnings. These are all extremely important to stakeholders of the business. (Expand on why these factors are important)
Financial Position – This statement is important to stakeholders as it outlines the company’s assets, liabilities and the overall liquidity of the business. It can be seen in the Greens Annual Report on Financial Position that Total Assets in well in excess of Total Liabilities, (102,655, 000 in assets – 58,856, 000 in liabilities) These figures from the Statement of Financial Position can be used in conjunction with accounting ratios to depict the liquidity of the business. (Go through all the relevant ratios and explain what they mean). This is possibly the most important aspect to stakeholders, knowing whether or not and how liquid the company is.
(Go through the most important ratios and apply the figures to them and give percentages of liquidity) Show Acid – Test Ratio, Gross Profit Ratio and Debt to total asset ratio.
Cash Flows – The Cash Flow Statement is another important aspect that stakeholders are concerned with. This statement shows where cash is coming and going from in the business, it also displays how much the figures of cash leaving and entering are. Name and explain the main ways that cash in entering and leaving.
• The statement of significant accounting policies outlines all the significant policies that have been adopted in the preparation of the financial report.
There are a few main heading that we should look at and analyse a bit further:
Intangibles, Employee entitlements (as this is excellent for the social and corporate governance side of the essay), Artwork and design (environmentally friendly packaging to benefit environment)
• See customer relations print out for ideas on the social side of Greens, in respect to gaining customer feedback and satisfaction.
See environmental printout. Greens indicate and acknowledge that its environment is a key factor in its future outcomes. Expand on this idea
Overall the Financial statements of Greens company are quite good in the way that they present the information of financial reports to their stakeholder. It is clear and precise and well explained. The needs of major stakeholders have been met through the many comprehensive Financial Statements that Greens have made available.
Get Smart Business Studies (pg 88) Author – Geoff Wing and Ray Wooby
An Introduction to Accounting (pg134) Author – Carrick Martin