Institution of foundation/base for proper management
Discuss about the Analytically Appraise Of Commonwealth Bank.
Institution of foundation/ base for proper management
It is necessarily the liability of the board to manage businesses of the organisation. The board is also accountable to the company’s share holders for carrying out this role. Essentially, the board has the duty to delegate tasks involved in daily management of business to the company’s chief executive officer. Also, it is the role of the board to direct as well as control the company on behalf of the shareholders. Primary responsibilities comprises of the following:
-Ascertainment of Strategies as well as financial objectives of the firm (Commbank.com.au 2018).
– Ascertainment of risk appetite of the business tracking of the risk management framework
– validating financial statements (Taylor et al. 2015)
– approving various initiatives
– Ascertainment of sequences of the remuneration strategy
Examination of Structure as well as composition of CBA’s board
Commonwealth bank’s board has the intent to assure that it can function and can efficiently undertaker delegated roles as well as responsibilities. Yearly declaration of the company shows that there are 12 board members in the company. This bond also wants to augment the performance by establishing committees, planning various programs of the board and reviewing level of performance on a regular basis (Cengiz et al. 2017). There are certain skill sets that members of the board of CBA possess (Commbank.com.au 2018).
Examining whether CBA function ethically and responsibly
Detailed analysis of the annual report of the firm CBA reveals that the firm focuses on its own commitments for acting responsibly and ethically. The business concern has set 8 commitments for this purpose. In addition to this, CBA also has designed policies zero tolerance towards cases of bribery and scams. Furthermore, the business also carries out ethical and accountable exercises by adhering to the formulated Securities trading Policy of its own. This policy prohibits insiders of the corporation pet in any kind of security dealing, trading, hedging or insider trading in any form. Also, firm has established a whistle blower policy for developing the culture that can in inspiring people to raise their voice any kind of concerns, wrongdoings or misconduct of any sort (Omar et al. 2014). Moreover the business enterprise has also declared statement on slavery and human trafficking. This is essentially in compliance with the directives mentioned under UK modern Slavery Act. Management of the firm analytically appraises and at the same time updates the code of conduct for suppliers for supporting human rights. Basic strategy/ principle of CBA’s code of conduct represent the level of commitment of the business enterprise (Commbank.com.au 2018).
Examination of Structure as well as composition of CBA’s board
Maintenance of integrity in financial reporting
CBA’ s policy of code of conduct is imperative for attainment of vision of the firm. The vision of the farm is to excel at improving financial soundness of (individual unit) people involved, society as well as business. Administration of the business enterprise also maintains values for the purpose of attaining integrity, collaborative operation, excellence and higher accountability (Arens et al. 2015).
As per the suggestions in the listing rules of ASX and directives mentioned under corporation Act of financial year 2001 it can be here by said that administration of CBA has devised measures for maintaining integrity of financial reporting. According to the perspective of chief executive officers (CFO) and Chief financial officers CFO, CBA has prepared as well as presented financial assertions as per the regulations of the Corporation Act. Monetary reports and different continuous disclosures are prepared and presented keeping in mind applicable standards (Knechel and Salterio 2016). Adherence to the accounting standards can subsequently help in presenting both true and fair view regarding level of stability and health as well as performance of the business concern
Presentation of timely and properly balanced disclosures
Analysis of the annual report that the company has a written policy for satisfying the obligations of the regulations mentioned under corporation Act (2001) as well as listing regulations presented by Australian Stock Exchange (Commbank.com.au 2018). Addition to this the business enterprise also pronounces all the material information in a well timed way so as to meet the requirement of communication policy set by the business entity (Chan and Vasarhelyi 2018).
Respect towards rights of shareholders
CBA values rights of shareholders take them into account as business owners. Company in tends to present all the requisite information that is needed by the shareholders in a well timed manner. Also the information presented is of good quality and at the same time relevant for the users (Leung et al. 2014). In addition to this CBA also enthusiastically listens to the concerns of the shareholders and apps in response to various feedback gathered from the shareholders. It can also be seen that management of the firm encourages higher attendance of firm’s share holders Annual General Meeting. This is how management of the farm intends to communicate all the requisite material information to shareholders and help them in investment decisions.
Detection and management of risk
Board of CBA keenly monitors the area material risk evaluation and at the same time prioritisation. CBA’s board analyses material risk on a frequent basis and subsequently modifies the same reflect functional as well as strategic necessities of the corporation. The business enterprise appoints chief risk officer accountable for recognition and administration of risk in the business enterprise (William Jr et al. 2016). Apart from this, CBA also has a risk committee that intends to assist the board in meeting their responsibilities.
Examining whether CBA function ethically and responsibly
Risk committee of CBA appraises the designed risk management Framework in place and presents reports on the same. Also that is committee evaluates overall risk appetite of the firm declares the risk appetite statement along with diverse policies of risk management and their implementation (Weirich et al. 2017). Besides this, the company also reduce the risk profile on a time to time basis by monitoring compliance of the same to pertinent risk policies. It is the risk committee that also oversees matters associated to appointment of CRO, level of performance, particular aims and process of removal (Commbank.com.au 2018).
Fair and responsible remuneration policies
According to the pertinent necessities of the principles issued by the ASX Corporate Governance Council, the enterprise under deliberation has the intention of fair and responsible remuneration policies. CBI has a remuneration committee in place that can facilitate board in meeting all the accountabilities (Tricker and Tricker 2015). The remuneration committee can handle considerable transformations in the remuneration strategies as well as framework of the company. The company meets the obligations of CGS principal as regards remuneration by presenting remuneration schemes together with its specific outcomes for specifically chief executive officer, risk personnel, people belonging to the finance department, as well as those who might get influenced by the financial condition of the business concern. The company also aptly presents definite equity plans of work force, schemes of superannuation, payments made at the time of termination besides other significant benefits. Remuneration report prepared by the firm also discloses specific information that in turn can help in the process of evaluating performance chief executive officer of the company along with other personnel (executives).
Thorough evaluation of the assertions presented by the firm reflects strong commitment of the firm towards achievement of superior corporate governance. In conclusion it can be said that CBA has a fitting framework for corporate governance upholds performance of the firm in the long term, insures sustainability and shields shareholders’ interests. Furthermore, it cab also be hereby stated that the business entity undertakes assessment of framework of corporate governance along with business exercises for making certain developments in definite areas of regulations (Soh and Martinov-Bennie 2015). This assessment process can also check extent of fulfilment of expectations of firm’s shareholders and market practices. Fundamentally, in the present case it can be hereby observed that all the suggestions stipulated under it Governance Principles of ASX have been appropriately followed.
Commonwealth Bank offering specialised financial services offers facilities of retail banking, investments and facilities of share broking, specialised insurance related services together with institutional and individual business banking services. This financial service company is registered under the Australian Stock Exchange. Therefore, one of the primary regulators of the firm include the Australian Stock Exchange and the company is also under the Morgan Stanley Global Index, FTSE 4 Good Index as well as under the Dow Jones Sustainability Index (Rezaee et al. 2018).
Maintenance of integrity in financial reporting
Management of the firm follows the business strategy of acquiring greater share of the market pie particularly in the quarters of loan business (particularly home loans), stock broking, products such as personal loans as well as credit cards. There is this intention of the management of CBA to successfully operate the business by effective operations across 1000 branches of the corporation situated throughout the nation Australia.
Calculation of Beta
For the assessment of risk, beta can be considered to be a very relevant measure. In essence beta is a qualitative metric that can assess volatility of stocks against volatility of the entire market (Messier et al. 2015). The enumerated value of beta for the firm Commonwealth Bank stands at 1.22. This reflects a moderate level of risk of the business enterprise (Omar et al. 2014).
Analysis of financial condition of Commonwealth Bank using key financial ratio
Both balance sheet as well as income statement based financial ratios is taken into consideration in this regard.
Operating Profit Margin
Operating margin enumerated for the firm CBA for the specified time period of financial year 2015-2016 replicates a decreasing movement. Operating margin stands at 52% in the FY 2016 as compared to the year ago figure of approximately 53%. Decline in the operating profit margin reflects an undesirable financial situation of CBA as it represents that the business enterprise has failed to amass adequate amount of funds from ongoing business functions to pay for both variable as well as total costs of the corporation (Gitman et al. 2015).
Net Profit Margin
Net Profit Margin calculated for the corporation CBA for the specified time period of financial year 2015-2016 replicates a decreasing movement. Operating margin stands at 37.5% in the FY 2016 as compared to the year ago figure of approximately 38%. Decline in the Net profit margin reflects an undesirable financial situation of CBA as it represents that the business enterprise has failed to acquire higher amount of net income from the sales revenue of CBA (Knechel and Salterio 2016).
Return on equity
Return on equity calculated for the corporation CBA for the specified time period of financial year 2015-2016 replicates a decreasing movement. Return on equity is calculated to be 0.15 in the FY 2016 as compared to the year ago figure of approximately 0.17. Decline in the Return on equity reflects an undesirable financial situation of CBA as it represents that the business enterprise is generating comparatively less profit out of the equity investment of the shareholders (Knechel and Salterio 2016)
Presentation of timely and properly balanced disclosures
Receivable Turnover
Receivable Turnover enumerated for CBA for the specified time period of financial year 2015-2016 replicates an upward increasing movement. Receivable Turnover is calculated to be 2.12 in the FY 2016 as compared to the year ago figure of approximately 1.81. Increase in the Receivable Turnover reflects an desirable financial situation of CBA as it represents greater potential of the firm to gather receivables and in a shorter period (Griffiths 2016).
Debt equity ratio enumerated for CBA for the specified time period of financial year 2015-2016 replicates a downward moving trend. Debt equity ratio is calculated to be 14.4 in the FY 2016 as compared to the year ago figure of approximately 15.64. Decrease in the Debt equity ratio reflects an desirable financial situation of CBA as it represents greater stability of the firm with less interest expenses. This is because low debt equity reveals higher equity based financing in place of debt financing (Gitman et al. 2015).
Quick Ratio
Quick Ratio enumerated for CBA for the specified time period of financial year 2015-2016 replicates a downward moving trend, reflecting unfavourable liquidity condition. Quick Ratio is calculated to be around 0.02 in the FY 2016 as compared to the year ago figure of approximately 0.03. Decrease in the Quick Ratio reflects an undesirable financial situation of CBA as it reflects decrease in liquid assets of the firm (Enekwe 2015). The very liquid assets of the firm (namely cash along with equivalents of cash) have decreased by roughly 31% whereas current liabilities of CBA have increased by around 6% during the FY 2016.
References
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Cengiz, H., Combs, A. and Samy, M., 2017. An Analysis of how Financial Ratios of Companies in Turkey Are Affected by National Standards, and IFRS. International Business Research, 10(12), p.183.
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Commbank.com.au. 2018. Shareholders – Corporate profile – Corporate governance – Commonwealth Bank Group. [online] Available at: https://www.commbank.com.au/about-us/shareholders/corporate-profile/corporate-governance.html [Accessed 25 Apr. 2018].
Enekwe, C.I., 2015. The relationship between financial ratio analysis and corporate profitability: a study of selected quoted oil and gas companies in Nigeria. European Journal of Accounting, Auditing and Finance Research, 3(2), pp.17-34.
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Omar, N., Koya, R.K., Sanusi, Z.M. and Shafie, N.A., 2014. Financial statement fraud: A case examination using Beneish Model and ratio analysis. International Journal of Trade, Economics and Finance, 5(2), p.184.
Omar, N., Koya, R.K., Sanusi, Z.M. and Shafie, N.A., 2014. Financial statement fraud: A case examination using Beneish Model and ratio analysis. International Journal of Trade, Economics and Finance, 5(2), p.184.
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Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and practices. Oxford University Press, USA.
Weirich, T.R., Pearson, T.C. and Churyk, N.T., 2017. Accounting and Auditing Research: Tools and Strategies. Wiley Global Education.
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