Financial Position and Severe Financial Loss

Question: Describe about the Financial Position and Severe Financial Loss. Answer: Introduction According to the case study and the annual report of 2014-2015 of the company Dick Smith Holding shows that the financial position of the company in 2015 was positive as revealed by a retailer of electronic goods. The announcement by a press release in the 2nd quarter of the particular year states that in the year of 2015-2016 the sales volume and cash generation of the company was really disappointing. Hence the investors, who invested on Dick Smith Holding Company has to face severe financial loss, which is about several million dollars for the collapse of the company (Dick Smith Holdings, 2016). Therefore, in this specific situation the shareholders and investors of the company inquired about the reason of the collapse that lead to such negative result in the month of OCT. 2015 to Dec. 2015 from the positive result of August 2015. The Chief Executive of the company has resigned following the situations as well as numerous people have criticized the owner of the company. Main context History of ownership The company Dick Smith Holding has a very rich and interesting history; the company was commenced in 1968 by young electronics technicians who love anything that had wire. The company was established by the young electronics technicians Dick Smith with only $610 and the next is history. His initial focus was on the installation and providing services of car radios. Furthermore, in the following years he felt that he not only required a big shop but also need many shops (Berk and DeMarzo, 2007). He shifted his business to larger premises initially at Atkinson Street and St Leonards and afterwards at Carlotta Street, Artarmon along with a flagship store adjacent to the pacific Highway and Gore Hill. Along with the main car radio business, the company then ventured into Dick Smith Whole sale business of the electronic goods with a range of electronic products and which was delight for the consumers. Moreover, the company was achieved huge growth during next few years (Wolf, 2008). By th e year of 1980 the company had opened 20 stores and achieved significant growth and in this year the company Dick Smith Holding sold 60% of its share to the Woolworths Company and within the next subsequent two years the rest of the shares were sold to the Woolworths Company and the Woolworths Company took the complete ownership of the companyc (Elliott and Elliott, 2008). Afterwards the company Dick Smith Holding continued its growth and development and opened around 100 of Dick Smith stores across the country Australia, which are comprised with David Jones Electronics Stores, which are powered by the brand Dick Smith. Moreover then in May 2016 the company has been acquired by Kogan.com. Discussion of ethical considerations facing Anchorage Capital Partners The actual value of Dick Smith Holdings was misrepresented in front of the public. In the first quarter the value of Dick Smith Holdings was positive but in the second quarter the value becomes negative. Therefore, it means that the value was misrepresented by the Dick Smith Holdings which is considered as an unethical act. The act was unethical because the financial report shows wrong values that led to the loss of million dollars that was invested by the investors into the company due to the collapse. Dick Smith Holdings was acquired by Anchorage Capital Partners in 2012 from Woolworth and earned huge profits (Helbk, Lindest and McLellan, 2010). Anchorage capital partners purchased Dick Smith Holdings from Woolworths at a much cheaper rate. It was an unethical act by misrepresenting the value of Dick Smith Holdings. The information was released by press that led to the loss of million dollars of the investors. In order to secure orders the firms started to offer back to back rebate s. In short term, the inventory value was written down. Dick Smith Holdings wanted to sell the inventories but they do not want to sell at loss as because the loss would be shown in the financial statements and that will make harder to float the organization. The financial report of the company was misrepresented that led to loss of million dollars and to be considered as an illegal or unethical act done by the top officials of the company. In the year 2013, the actual value of Dick Smith Holdings was misrepresented on the Australian Stock Change (Hillier, 2010). The act violated legal and ethical values as well as misguiding large number of people. Anchorage Capital Partners paid $115 to Woolworth for Dick Smith and acquired it. The misrepresentation of financial reports consider as violation of moral and ethical values that misguided many people. It is the responsibility of the Anchorage Capital Partners to perform their business ethically acquiring Dick Smith Holdings. It is the responsibility of the senior officials and directors to shows the actual value of the company. The Anchorage Capital Partners need to review and analyze the current situation and actual value of Dick Smith Holdings (Stittle and Wearing, 2008). Discussion of ethical considerations facing DSH directors and senior The directors and senior executives of Dick Smith Holdings were responsible to misrepresent the actual value of the organization in the year 2014/2015. The act was unethical that led to the loss of million dollars of investors invested into the company. Subsequently, the chief executive officer resigned from the organization after the disclosure of the negative value of the company. New chairman was appointed, Robert Murray and independent non execute director were given to Robert and loma Raine during its formation (Holton, 2012). The board of directors of the company was mainly responsible to review and analyze the financial statements of the company. Therefore, it was very much important to present fair value of the company in their financial statements. The profit or loss and other financial information are derived from financial report that helps the investors to take decision and analyze the present value of the company. The aim of the board of directors is to generate maximum returns for their shareholders by increasing the profitability as well as verifying all the accounts. The risk management process has been implemented to determine, evaluate and mitigate the error risks in the financial statements. It is the process of determining, assessing, analyzing, controlling and eliminating the unacceptable risks (Kieso, Weygandt and Warfield, 2007). The board of directors would have implemented appropriate risk management process in order to cope of with the situation of representing wrong value of the company. The self evaluation of financial statements will also help the board of directors to review the financial statements and all errors that are presented. Ethical guidelines should be followed by all the members of the company. The financial report was misrepresented as because there was a lack of rules and regulations implemented by the board of directors. The implementation of appropriate diversity policy is very much important as because it will help to balance skills, experiences and knowledge within the organization. The performance of the organization would have analyzed by evaluating strategic objectives, plans and personal objectives. It was the responsibility of the board members to present true and fair value of the company in front of the investors (Moles, 2011). The financial statements show the real value of a company and current performance in the market. It includes cash flow statements, balance sheet, statement of equity and income statement. The investors determine and analyze the financial performance with the help of financial statements. Conclusions From the case study it is clearly understood that the public were misguided by the management authority of the company Dick Smith Holding as the annual report of the company was misrepresented and produces wrong information to the public so that they unconsciously invest in the company and lost millions of dollars because of the collapse of the company Dick Smith Holding. The misrepresentation of the data in the financial statement of the annual report of the company Dick Smith Holding led to the dreadful loss of the company. As the data did not represent the actual value of the company, many of the investors were misguided and take investment decision in favor of the Dick Smith Holding company. The shareholders of the Dick Smith Holding Company were also misguided and face severe loss due to the collapse of the company (Spiceland, Sepe and Nelson, 2011). The company Dick Smith Holding was bought by Anchorage capital Partners from Woolworths at much lower price because of the loss re present in the financial report of the Dick Smith Holding. The directors and auditors of the company are found guilty for misrepresenting the financial data of the company, which misrepresented the actual value of the company. Furthermore, the act by the directors and auditors of the company is unethical as they violate the business ethics along with they breach the respective laws of business which led to severe loss to the investors. References Berk, J. and DeMarzo, P. (2007).Corporate finance. 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