Accounting Case Study

Part 1:

1. Three users of financial reports of “Metro Performance Glass” (“Metro Glass”, the company).  Why these users are interested in the final report of the company?

• User 1: The suppliers are the users of the financial reports, because the suppliers need to decide whether to supply the goods or services (like raw materials, construction services, etc.) on credit and also the terms of credit is based these reports.
• User 2: The management team need the financial reports and the analysis in order to make effective decision, and also monitoring, controlling the operation following Metro Glass’ business goal and general strategy.
• User 3: Shareholders will definitely use the reports to identify if there is any risk or good return of their investment in Metro Performance Glass.  

1. Purposes of finical reports that are presented in the annual report of the Metro Glass.

Financial reports help management to engage in effective decision-making regarding Metro Glass’ business goal and general strategy.

The purpose of Income Statement is to reflect the operation performance during the period of 2015-2016 financial year, including the profitability and assets yield.

Balance Sheet shows Metro Glass’ assets, equity and liability on 31st March 2016. It tells the users how much assets does METRO GLASS have and how much the company owes others and how much others owe Metro Glass in 2015-2016 financial year end.  

Statement of Changes in Equity reflects the changes of all components of the owner’s equity in current finance year.  It can provide the structural information in owners’ equity changes, especially to understand the reasons drive such changes.

Cash Flow Statement provide information about Metro Glass’ gross receipts and payments for 2015-2016 financial year.  The cash flow statement combines all the details from in income statement and balance sheet that can give the users a summary of the overall view of the cash inflows (where the company’s cash is being generated) and outflows (where its cash is being spent) for this company. (Luft, 2012) (Faulkenberry, 2016)

1. Brief overview of corporate governance of Metro Glass and why proper corporate governance is important.

For the reporting period to 31 March 2016, the company considers its corporate governance practices and policies comply with the NZX Corporate Governance Best Practice Code and the New Zealand Financial Markets Authority Corporate Governance in New Zealand.

The board and senior management believes a proper corporate governance is important because it is critical to warranting the creation, protection and enhancement of shareholder value. Together they are committed to ensuring that the Company applies and adheres to practices and principles that ensure good governance and that the highest ethical standards are maintained to protect the interests of shareholders and all stakeholders.