Sime Darby is a Malaysia-based multinational company that involved in 6 main sectors, namely, plantation, property, motors, industrial equipment, energy and ultilites and healthcare. The company have business in 20 countries and have more than 100,000 employees. The company is founded in year 1910 by two British businessmen, William Sime and Henry Darby. The Plantation and Motors is the main sector for the company. It is the largest revenue generator for the company which has RM16,597.0 million and RM14,126.4 million. The company has motor dealerships in eight countries which are Australia, China, Hong Kong, Macau, Malaysia, New Zealand, Singapore and Thailand. Followed by industrial sector which has RM13,168.5 million revenue on 2012, the company operates its business on 14 countries with the key activities on purchasing, leasing and selling of industrial equipment such as heavy duty trucks. They have a dealership with Caterpillar Inc. With the addition of the other sectors in the company, the total revenue for the Sime Darby Berhad in 2012 is RM47,602.3 million.
Sime Darby is committed to building a sustainable future for all its stakeholders. It is one of the largest companies on Bursa Malaysia with a market capitalization of RM59.4 billion as at 30 June 2012.
1. Review the contents of the annual report as per reporting requirement that needs to be observed by incorporated companies.
As requirement, an annual report should include the statement of profit and loss, statements of comprehensive income, statement of financial position or as known as the balance sheet and the statements of cash flow.
(1) Statement of Profit and Loss
Based on the report, in the statements of profit and loss, the revenue for the group is RM47,602.3 million and the other operating income is RM1330.0 million The operating expenses for year 2012 is RM43,119.4 million.
2. Discuss the importance of financial statement to the shareholders.
There are four major components in financial statements, which is, the profit and loss statement, cash flow statement, balance sheet and shareholders' equity statement. The four components in the financial statement provide valuable information to the shareholders to evaluate the company's financial performance. The examination of financial statements can reveal information about the company that might be not good for making an investment.
The profit and loss statement reveals a company's profit or loss within a time frame, usually one year. Also known as income statement, this accounting report includes company's revenue, expenses, net income or loss (if the expenses more than revenues). The time frame of the income statement can be one month, a quarter of one year, half year, one year, or whichever period that the company decides to use. By analyzing a profit and loss statement, shareholders can get to know whether or not the company pulled in a profit during the period of the statement.
Cash flow statements show how the company makes money and where the cash used. The cash flow statement is very important to shareholders because it shows how much cash a company has generated. It also includes supplemental information such as, paid income taxes and interests. Compared to income statement, income statement includes non-cash revenues and expenses, while the cash flow statement excludes. Cash flow statement can let the shareholders seek in a potential investment in the company's ability to generate cash. In the real word, many companies have show profits on the income statement but stumbled later because of insufficient cash flow. A good look on the cash flows statement may have warned the shareholders that the company's hard time were ahead.
Balance sheet is a financial statement that summarizes the company's assets, liabilities, shareholders' equity at the end of a time frame of accounting period. By analyzing the balance sheet, shareholder can know how much cash the company has on hand, and how much money the company owes, when those debt come due and what is left for shareholders. It also provides investor with many clue and information to a company future performance. To evaluate the health of the balance sheet, shareholders will apply ratios (eg: liquidity and leverage) and use these to make comparisons between present year and the past year as well as with other companies too.
Shareholders' equity statement is very useful for the shareholders to determine the financial health of the company. The element of the shareholders' equity includes preferred stock, common stock, treasury stock, unrealized gain and loss, retained earnings and dividends. It is used to determine the debt-to-equity ratio for a company. Shareholders subtract liabilities from the amount of company's total equity to determine the company's net worth. Shareholders will closely analyze the element "retained earnings" because it shows the amount of the company reinvesting on itself for further growth.
3. Explain the requirement of preparing the financial statements with generally accepted accounting principles (GAAP).
Generally accepted accounting principles (GAAP) is a widely accepted set of standard and the procedure for preparing the financial statement. GAAP was established by the Financial Accounting Standards Board (FASB). FASB is a self-regulatory body for the accounting industry. Founded in 1973, the mission of FASB is 'to establish and improve standards of financial accounting and reporting that foster financial reporting by non-governmental entities that provide decision (eg: useful information) to investors and other users of financial reports.' (quote from www.fasb.org)
In the last step of accounting cycle in any companies or organizations, they are required to prepare the financial statements.
