Financial Statement Analysis (FNCE5006) – Assessment 2

 

This assessment requires students to conduct financial statement analysis, valuation, and investment recommendation for a publicly listed company. Students are required to work in groups for this assignment. Students will be allocated into 4/5 members groups.

 

An important element of this project is the requirement of identifying and obtaining relevant, publicly available information. Therefore, you should ensure that you are able to access sufficient information for your selected company. Annual reports of the companies are uploaded under assessment tab of the Blackboard.

 

Written Section (35%)

This project requires you to conduct financial statement analysis of a publicly listed company for the year 2019. By now, one of the following companies should be allocated by your lecturer (if not, please contact your lecturer asap).

  • Wesfarmers Limited (Stock Code: WES)
  • Woolworths (Stock Code: WOW)

An important element of this project is the requirement of identifying and obtaining relevant, publicly available information. Therefore, you should ensure that you are able to access sufficient information for your selected company. I have uploaded the relevant annual reports in the Blackboard for your convenience.

 

  1. What is the name of the company that you/your group members were assigned to complete this project? What is the industry in which your company belongs to? What is the view of the management of the company about the future outlook and performance of the company?

[0+1+2 = 3 Marks]

 

  1. Identify two (2) pieces of information not included in the principle financial statements that you think would be important to someone considering whether to invest in your company. Discuss your reasons for believing that this information would be important in making an investment decision.

[2+2= 4 Marks]

 

  1. Analyse your selected company’s investing and financing activities for the year 2019 as identified in the statement of cash flows, specifically identifying the two largest investing activities and the two largest financing activities. Evaluate the cash flow from operating activities of the firm (specifically analyse whether the company is performing better over the years, discuss whether cash flow from operating activities appears to be satisfactory given the current business environment and firms’ stage in life cycle).

[1+1+2=4 marks]

 

  1. Assume that, as a credit analyst, you are evaluating your allocated company. Use the most appropriate ratios for the year 2019 from the annual report and evaluate whether one should provide loan to this company [Use at least 4 ratios].

[2+2=4 marks]

 

  1. Assume that you want to buy stock of this company. Use the most appropriate efficiency and profitability ratios from the annual report and use these data to evaluate whether this company is a suitable candidate for investment purpose [Use at least 4 ratios for efficiency and 4 ratios for profitability].

[2+2+2 =6 marks]

 

  1. Assume that you are also considering to invest in the stock of BHP Billiton. You have limited fund to invest and therefore, you can invest in either of the company (BHP Billiton or your allocated company). Compare your company’s financial statements, and performance, with those of the BHP Billiton. If you were making a decision to invest in one of the two companies, which company would you choose? Discuss. [In evaluating and comparing the companies, use appropriate ratios and other analysis. Provide clear justification as to why you believe your approach to evaluation is appropriate for investment decision purpose].

[8 marks]

 

  1. Perform a valuation of your base company using an appropriate discounted cash flow model. Carefully explain the assumptions used to select inputs for your model. On the basis of your work make an investment recommendation for your base company.

[6 marks]

 

Submission: Your report should be a readily comprehensible and condense report of your work. Accordingly, you should like the report to 20 sides of A4 (Size 12 font, 1.5 spaced) including all tables and appendices. Please cite any sources used.

 

Only electronic copy is required. Your report should be submitted via the turnitin function on Blackboard. Only one electronic copy should be submitted per group.

 

If there are any problems with your group then you should inform your lecturer as soon as possible. If you do not contribute equally to the completion of the project then you will receive a penalty of 50%.

 

The project should be submitted in Week 12 (23 October at 18:00PM). Late submissions will not be accepted.

Presentation (15%)

The final stage of the project will consist of a group presentation. Prepare a 15- minute presentation summarizing the findings of your team’s project, and your investment recommendation. Presentation slides should also include brief discussion about your company. All the group members must participate in the presentation session.

 

Marks for the presentation will be awarded on the basis of professionalism and appropriateness of content [8 marks-group mark], the style & creativity of presentation [3 mark-group mark], as well as public speaking skills [4 marks-individual mark].

 

For face-to-face students, the group presentation will be held in week 13 during allocated tutorial time (October 30 from 18:00PM) in the venue of 407.309.

For online students, the group presentation will be held in week 13 during allocated lecture time (October 29 from 13:00PM) through Webex meeting (links will be provided later).

 

Learning outcomes associated with assignment

Completion of this report and presentation will bring together the key concepts covered in this unit, and assess the following unit learning outcomes:

 

  1. Develop financial analysis and reporting skills using quantitative and qualitative data approaches.
  2. Develop professional skills and competencies that are recognized in financial analysis practice.