CASE STUDIES IN FINANCE (FIN3CSF) 代写

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CASE STUDIES IN FINANCE (FIN3CSF) 代写

CASE STUDIES IN FINANCE (FIN3CSF) – STUDY PERIOD 1, 2017

CASE STUDY 4: FINANCIAL STATEMENT ANALYSIS AND FINANCIAL

DISTRESS PREDICTION

Maurice Blackburn Lawyers has been approached by a number of disgruntled shareholders of

DSHE Holdings Limited (previously named Dick Smith Holdings Limited until June 2016, and

popularly known as the Dick Smith Electronics business) looking to form a class action to

commence legal proceedings against the directors of DSHE Holdings Limited and the company

auditors, Deloitte Australia (Australian partnership of Deloitte Touche Tohmatsu). The

potential class action claim against the directors of DSHE Holdings Limited is centred on

incompetent and fraudulent management, failure to inform shareholders and the market earlier

about inventory, cash resources and financing issues impacting on the going concern likelihood

of the company, and the resulting entry of the company into voluntary administration. The

related allegation is that Deloitte Australia, as the company’s auditor, failed to identify the

development of these operating and financial issues as part of the auditing of Dick Smith

Holdings Limited’s 2015 financial statements and issued a clean, unqualified audit opinion

rather than a qualified or adverse opinion that would likely have been forthcoming had such

issues and associated internal control weaknesses been realised.

The Dick Smith business has been in operation in various forms since the late 1960s. The

business was created in 1968 by the well-known Australian entrepreneur, Dick Smith, and his

wife, with an initial capital investment of just $610, and focused on selling car radios and

electronic components. The business later branched out into computers and other electronic

equipment, including telephone and television products. In 1982, the business was rationalised

and sold to Woolworths Limited, which invested substantially in further developed the retail

chain of Dick Smith Electronics stores. Woolworths Limited operated the business relatively

successfully for approximately 30 years, until they sold the business to the Australian-based

Anchorage Capital Partners private equity firm in 2012. After paying $115 million to purchase

the business (but effectively only $20 million in cash) from Woolworths Limited, the private

equity firm conducted a public listing of the Dick Smith Electronics business (named initially

as Dick Smith Holdings Limited, and most recently DSHE Holdings Limited) on the Australian

Securities Exchange (ASX) in December 2013, with the business valued at the time of public

listing at approximately $520 million. On January 4 th 2014, Dick Smith Holdings Limited

released an announcement on the ASX that, due to cash flow problems and lack of ongoing

funding support from its capital providers and Banking Syndicate, the company has been

placed into voluntary administration. Following the inability of the appointed receiver and

manager, Ferrier Hodgson, to suitably restructure the business or find an alternative buyer, the

decision was made to liquidate the company and close all of the Dick Smith Electronics store,

with the company suspended from official quotation on the ASX on August 23 rd 2016.

Maurice Blackburn Lawyers has requested your accounting and consulting firm to conduct an

investigative and forensic assessment of the Dick Smith Holdings Limited business and provide

a report and analysis to aid in their final decision-making as to whether a class action lawsuit

is likely to be successful. The brief provided to your firm is that the report should include the

following:

 An overall financial statement analysis of the Dick Smith Holdings Limited business, with

particular focus on trends and changes in the inventory, working capital, cash and financing

aspects of the company’s operations.

 An assessment of the financial health of the company using recognised financial distress

(bankruptcy) prediction models

 An examination and reporting on relevant information releases, and any other

documentation, by the company about their operating activities and going concern status.

 Based on the above analysis, an overall recommendation as to whether there is potential

basis for a claim against the Dick Smith Holdings Limited directors and senior management

and/or the company’s audit firm, Deloitte Australia.

Required:

This case study report is due to be submitted to the Managing Partners of Maurice

Blackburn Lawyers by 5.00pm on Friday, 5 th May 2017, via the FIN3CSF LMS site. This

case study contributes 15% to the overall final assessment in the FIN3CSF subject. This

case study is to be completely individually, and the maximum word limit, excluding

calculations and financial analysis reporting, is 1,000 words.

CASE STUDIES IN FINANCE (FIN3CSF) 代写