ACC5502 Accounting and Financial Management

Assessment Task 1 – Corporate Governance and Financial Statement Analysis

Course Level: Undergraduate (Year 2–3)

Assessment Type: Individual Written Assignment

Modules Covered: Modules 1–6

Weighting: 20%

Length: Approximately 1,200–1,500 words plus calculations, tables and references

Submission Format: Single document submitted via the university LMS (DOCX or PDF)

Assessment Context

This assessment examines two central capabilities expected of accounting and finance graduates. The first is the ability to evaluate corporate governance responsibilities and ethical decision-making in real business situations. The second is the ability to interpret financial statements and conduct financial ratio analysis using published corporate reports.

The assignment uses the corporate collapse of Forge Group Ltd as a practical case study. Students analyse governance duties of directors, apply ethical frameworks, and examine the financial statements released prior to the company’s collapse. The exercise reflects the type of financial evaluation tasks regularly undertaken by analysts, auditors, corporate accountants and investment professionals.

Students are expected to demonstrate careful interpretation of financial information, accurate ratio calculations, and clear written reasoning supported by accounting theory and professional ethics principles.

Learning Outcomes Assessed

Explain the fiduciary and statutory duties of company directors.
Apply ethical reasoning frameworks to corporate decision making.
Interpret consolidated financial statements and accompanying notes.
Conduct financial ratio analysis and evaluate company performance.
Communicate accounting analysis clearly using structured written presentation.

Part A – Corporate Governance and Ethics Analysis (25 Marks)

Case Background

Forge Group Ltd was an Australian engineering and construction company that experienced rapid expansion during the resources boom. In January 2012 the company acquired CTEC Engineering for approximately AUD 16 million plus additional earn-out payments. The acquisition provided Forge with two large engineering contracts:

Diamantina Power Station Project
West Angelas Power Station Project

These contracts later experienced substantial cost overruns and operational difficulties. The projects represented roughly 25 percent of Forge Group’s AUD 1.8 billion project order book. In February 2014 the company entered administration following mounting losses and liquidity pressure.

During the period preceding the collapse, media coverage included the following headlines:

Forge wins Roy Hill contract
Forge to lose $290 million
Forge wins pile up
Forge over the barrel
Forge’s baptism of fire
Lawsuits could be next chapter in Forge story
Forge enters trading halt
Forge exits ASX200 index
Forge Group job losses at nearly 1,500 after company collapse

Required Analysis

Director Duties (5 marks)
Explain the key legal and fiduciary duties of company directors in publicly listed corporations. Your discussion should include duties relating to care and diligence, acting in good faith, avoidance of conflicts of interest, and responsibility for financial oversight.
Arguments Supporting the Directors (5 marks)
Present arguments suggesting that the directors of Forge Group may have fulfilled their duties appropriately. Consider strategic expansion decisions, reliance on management reporting, and commercial uncertainty within large engineering projects.
Arguments from Stakeholder Perspective (5 marks)
Explain arguments from shareholders, creditors and employees claiming that the directors failed in their governance responsibilities. Focus on oversight of major contracts, risk management, disclosure obligations, and financial monitoring.
Your Evaluation (2 marks)
Provide a short reasoned judgement regarding whether the directors appear to have met their governance obligations based on available information.
Ethical Analysis – Utilitarianism vs Kantian Ethics (8 marks)
Media reports suggested that some senior managers allegedly accessed leave entitlements early and relocated at company expense shortly before the firm entered administration. Assuming these claims were accurate, compare the ethical principles of utilitarianism and Kantian duty ethics when evaluating such conduct. Explain how each framework would assess the morality of the managers’ actions.

Part B – Financial Statement Analysis of Forge Group Ltd (75 Marks)

Use the consolidated financial statements and notes from the Forge Group Ltd Annual Report for the financial year ending 30 June 2013. The report should be accessed through the company’s archived investor reporting materials.

Section 1 – Financial Statement Interpretation (24 Marks)

Answer the following questions using information from the consolidated financial report.

Identify the primary measurement basis used in the financial statements (e.g., historical cost or alternative valuation methods).
State the accounting equation at the beginning and end of the financial year and identify the change in assets, liabilities and equity.
Explain the change in total equity during the year and suggest possible reasons.
Identify the company’s largest asset category and compare its value to total equity.
Explain the “Other Comprehensive Income” item reported during the year and discuss why it is reported separately from net profit.
Identify the largest expenses reported in the income statement and compare these with balances for cash, receivables, payables and inventory.
State total revenue, EBIT and net profit attributable to shareholders.
Compare net profit with cash flows from operating activities and comment on differences.
Examine the reconciliation between operating cash flow and net profit after tax. Identify the three largest reconciling items.
Explain the financial significance of these reconciliation adjustments.
Describe changes in financing activities during the year.
Identify major investing activities undertaken during 2013 and determine whether the firm made a net investment or divestment.

Section 2 – Financial Ratio Analysis (49 Marks)

Calculate and interpret the following ratios for the financial years ending 30 June 2013 and 30 June 2011.

Return on Equity (ROE)
Return on Assets (ROA)
Profit Margin
Asset Turnover
Current Ratio
Cash Flow Ratio
Debt to Equity Ratio
Interest Coverage Ratio
Debt Coverage Ratio
Net Tangible Asset Backing (NTAB)
Earnings per Share (EPS)
Dividend per Share (DPS)
Price Earnings Ratio (PER)

Each ratio should include:

The calculation formula
Numerical calculation using report figures
A short interpretation of what the ratio indicates about company performance

Comparative Discussion (10 Marks)

After completing the ratio calculations, discuss the major financial differences between the 2013 financial year and the 2011 financial year. The 2011 period occurred before the acquisition of CTEC Engineering. Your discussion should consider profitability, liquidity, leverage and operational efficiency.

Presentation Requirements

Use clear headings and structured paragraphs.
Tables should be used for ratio calculations where appropriate.
All references must appear in a reference list at the end of the document.
Citations should follow APA 7th edition style.
Concise and well-structured writing is expected.

Marking Rubric

Assessment Component	Marks
Director Duties Explanation	5
Arguments Supporting Directors	5
Stakeholder Arguments	5
Personal Evaluation	2
Ethics Analysis	8
Financial Statement Interpretation	24
Financial Ratio Calculations and Interpretation	39
Comparative Financial Discussion	10
Structure, Clarity and Academic Presentation	2
Total	100

Corporate governance failures often emerge gradually rather than through a single identifiable mistake. Large engineering projects carry substantial financial risk because profit margins depend on accurate cost estimates and disciplined contract management. When directors approve acquisitions that include major long-term construction contracts, the board must maintain strong monitoring systems that track project costs, contract variations and cash-flow pressures. Evidence from prior corporate failures shows that early recognition of cost overruns can significantly reduce losses by enabling contract renegotiation or project restructuring.

Ethical evaluation also reveals different interpretations of managerial behaviour during corporate distress. Utilitarian ethics assesses actions by examining their consequences for the largest number of stakeholders. Under that framework, managers extracting personal benefits shortly before administration would likely be considered unethical because the harm to employees, creditors and shareholders outweighs the benefit to a few individuals. Kantian ethics reaches a similar conclusion through a different route because actions that treat other stakeholders merely as a means to personal gain violate the principle of universal moral duty (Velasquez et al., 2019).

Financial statement analysis further illustrates how warning signs often appear before corporate collapse. Profit figures may remain positive while cash flows weaken due to delayed payments, rising receivables or growing project costs. Analysts therefore examine the relationship between earnings and operating cash flows together with leverage ratios and contract liabilities. Weak cash flow relative to reported profit can indicate revenue recognition risks or aggressive project accounting, which are common issues in construction firms (Subramanyam, 2019).

Complete a 4–6 page (1,200–1,500 word) accounting assignment evaluating director duties, ethical frameworks, and financial statement ratios using Forge Group Ltd financial reports.

References and Learning Resources

Subramanyam, K. R. (2019). Financial statement analysis (12th ed.). McGraw-Hill Education. https://www.mheducation.com/highered/product/financial-statement-analysis-subramanyam/M9781260247876.html

Velasquez, M., Andre, C., Shanks, T., & Meyer, M. (2019). Thinking ethically: A framework for moral decision making. Markkula Center for Applied Ethics. https://www.scu.edu/ethics/ethics-resources/ethical-decision-making/thinking-ethically/

Tricker, B. (2019). Corporate governance: Principles, policies and practices (4th ed.). Oxford University Press. https://doi.org/10.1093/oso/9780198809866.001.0001

Robinson, T., Henry, E., Pirie, W., & Broihahn, M. (2020). International financial statement analysis. CFA Institute Investment Series. https://doi.org/10.1002/9781119741838

Australian Securities and Investments Commission. (2023). Directors’ duties and responsibilities. https://asic.gov.au/for-business/running-a-company/company-officeholder-duties/