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Financial Analysis

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Individual Assignment (40 Marks)
 
Part 1: Write-up is limited to 2 pages of text with 2 pages of supporting materials, i.e. the reformatting, as an appendix. Please use a font size of 12 and 2.5cm margins.
Due: Lecture 7

  1. Reformatted Financial Statements and Financial Analysis (10 marks)

Reformat at least the last 5 years of your company’s financial statements. Use ratio analysis and cash flow analysis to evaluate the current and past performance of the business and assess its sustainability.

  • Reformat at least 5 years
  • Prepare 4 years of ratios
  • Prepare risk ratios for cash flow analysis
  • WRITE UP – what happened AND WHY the ratios/ cash flow changed

 
Part 2&3: Write-up limited to 10 pages of text with 10 pages of supporting tables. Please use a font size of 12 and 2.5cm margins.
Due: Lecture 11

  1. Prospective Analysis (15 marks)

 
Forecast future financial performance. Use the four valuation models outlined in class to produce an estimate of firm value, and compare to stock price. Perform sensitivity analysis and discuss the results.

  • Prepare your forecasts and write up the reasons for your forecast assumptions
  • Prepare your valuations and write up just the $ answers to your 4 models, as well as include share price on the date of your valuation (the date of your last set of reformatted financial statements (table 1)
  • For all of your forecasting and cost of capital assumptions1, write up your reasons for your optimistic and pessimistic outcomes (best and worst they ever did in last 5 years perhaps?) and calculate your sensitivity analysis. Only use the AOI model and Table 2 reports your sensitivity results. Again compare to share price and discuss your results

 

  1. Application (15 marks)

 
Using your sensitivity analysis, and as a potential management consultant to your chosen firm, provide a discussion as to the possible opportunities for improvement, and potential challenges for your firm. Provide remedies for these concerns. You should be quite specific in any recommendations you make.

  • Your sensitivity testing will show you that your firm will be more sensitive to one of: sales growth/cost of capital, PM, AO.
  • Depending on which of the three above is most important to your firm, come up with some ideas for specific things that your firm can do. For example, if sales growth matters don’t just say “increase sales”. You need to come up with creative ideas for your firm to increase sales. You never know, yours may be the next assignment sent on to your firm!
Marking Criteria  Marks Comments
Ratio analysis:
•       Calculate key ratios for the past four years which include ROE, RNOA, PM, ATO, FLEV, NBC. Pick three most material accounts from the income statement and balance sheet and use these accounts to analyse PM and ATO in details.
•       Describe the most important patter in ratios over the last five years and identify factors that drive these patters. Your analysis should include but not limited to strategic and macroeconomic factors that might affect the analysed ratios.
 		  
 
 
 
 
/5
Cash flow analysis:
•       Calculate liquidity, solvency and cash flow ratios.
•       Analyse financial risk and cash flow management of the company based on ratios.		  
 
/2
Reformatting: 
Present past five years’ reformatted financial statements in appendix.		  
 
/2
Produce a quality professional report:
•       Using tables and graphs to effectively present ratios
•       Report is readily comprehensible
•       Report is condensed and within page limit		  
 
 
/1
Total Marks out of Total 10 Marks /10
 
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