Maintaining a stronger equity position is very important for ensuring long-run sustainability of the business. If the companies can maintain strong equity position, they can deal with the business risks properly. This study has evaluated the financial statements of the two companies - AVjenning limited and Aventus Retail Property Fund. In the evaluation, it has been proved that the financial performance of Aventus Retail Property Fund in the last few years was better than the AVjenning limited. The amount of common stock of the company that is Aventus Retail Property Fund was higher than the other company that is AVjenning limited during last few years. The equity and cash flows of AVjenning limited needs to be improved as much as possible. On the other hand, the study has also indicated that the Aventus Retail Property Fund has not shown any income tax expense because the income of the company is entitled to the beneficiaries.
Financial statements indicate the financial position of a company during a specific time span. Preparation of financial statements has been mandated by different accounting authority boards in the world and due to that every company in the world requires emphasizing on the preparation of financial statements. In this point it is important to note that while preparing the financial statements the companies always take care of the presenting true and fair view of the financial position of the business.
This particular study deals with different financial statements of two companies listed under the Australian security Exchange or ASX. The names of these two companies are - AVjenning limited and Aventus Retail Property Fund. During this study, the analysis will be made by focusing on the balance sheet statement, cash flow statement, statement of comprehensive income and income statement of the two companies. Along with these, the evaluation will also be made on the accounting treatment for the corporate income tax in these two companies.
Owner’s equity is one of the key elements shown in the statement of financial position of every company (La Macchia et al., 2017). Higher is the owners’ equity stronger is the financial position of the business. Here, the amounts of owner’s equity of the two companies those are AVjenning limited and Aventus Retail Property Fund have been identified and evaluated below:
List of the equity items of AVjenning limited for the years 2015, 2016 and 2017:
List of the equity items of Aventus Retail Property Fund for the years 2015, 2016 and 2017:
If the equity items of the AVjenning limited are considered, it can be stated that the common stock of the company has not increased from 2015 to 2017; rather, it can be stated that the amount of common stock of the company has declined in 2016, which the company has improved in 2017. However, the company has enhanced the retained earnings, which means the company has kept some amount of capital aside for the future purposes, which is a good decision by the board. Treasure stock of the company has decreased from 2016 to 2017; whereas the amount of other stockholders’ equity has enhanced during the last three years.
Analyzing the situation from the overall perspectives, it can be stated that the shareholders’ equity of Avjenning limited has increased from 2015 to 2017. Though it is showing that the financial position of the company has improved, it is notable that the changes in the equity position were not that high, which means the management of Avjenning limited needs to take special care of their equity position.
On the other hand, the equity items of Aventus Retail Property Fund are analyzed critically, it can be identified that the common stock of the company has increased by higher proportion from 2015 to 2017 and this increment has taken place in every year during the last three years. Continuous growth of common stock indicates that the management has preferred to arrange the funds through equity financing so that the risk level can be balanced and the liability remains at the lower level. At the same time, the retained earnings of the company have also increased, which also indicates that the financial base of the business became stronger. However, there is no treasury stock or other shareholders’ equity in the business (Telecky & Cejka, 2017).
However, if the comparison is made between the equity positions of the two companies, it can be definitely stated that the equity position of Aventus Retail Property Fund was much better than Avjenning limited.
Debt to equity ratio indicates the proportions of the debt capital and equity capital in the capital structure of the business. The risk level of the business depends on the proportions of debt to equity capital in the business (Barrette et al., 2017). If the comparison is made between the debt to equity ratios of the two companies, it can be identified that the debt to equity ratio of Avjenning limited was 34.89, whereas the debt to equity ratio of Aventus Retail Property Fund was 57.54. It is indicating that the management of Aventus Retail Property Fund has used more debt capital than Avjenning limited for the business purposes. This is also indicating the fact that risk level at Avjenning limited is lower than Aventus Retail Property Fund.