Essay: Cash Flows Analysis For Security Valuation - A Guide To Analyzing Financial Statements.

Developing as a Leader

To evaluate the performance of a firm and its share’s value a financial analyst must be able to analyse the firm’s financial statements.  When analysing these statements, the analyst must focus on cash flows of the firm because ultimately it is changes in the cash flows of the firm that determines its value. This is also a market consensus. Hence understanding how and why cash flows change is an indispensable component of security valuation.

The objectives of this assignment are:

1.To equip you with a good understanding of the financial statements of the firm;

2.To build up your analytical skills in the area of cash flows analysis;

3.To apply the methods of security valuation to value a real world company.

In addition to developing your knowledge of financial statements and security valuation, the assignment aims to develop the ability to work in groups: learning how to coordinate with and learn from peers as well as how to deal with any negative issues that may arise in the group process.  As such, the assignment submission will include an evaluation of the group process.  The group evaluation will not attract any marks; however the rest of the assignment will not be marked without a group evaluation.  To assist in the smooth running of groups some guidelines are included with the assignment instructions.  These are to be used as a guide only.  Groups have their own personalities, so it is important to establish your group norms and plans in a way that best suits your group.

Assignment requirements:

1.Search for all available financial data* for Wesfarmers Ltd from the Australian Stock Exchange, the company’s and other finance websites.

2.Give a brief description of Wesfarmers..

3.Explain the purpose of financial statement analysis.

4.Analyse the firm’s current operation using its financial statements (i.e. income statement, balance sheet and cash-flow statement). You should also take into account supply and demand factors (i.e. you need to look at the market conditions at both industry and economy levels).

5.Use an appropriate dividend valuation model to value Wesfarmer's shares (Hint: use the total dividend figures).

6.Draw graphs for Wesfarmers’s adjusted share price and return (you can use daily, monthly or quarterly return). Compare the company's share price and return with your analyses in questions (4) and (5) above.

7.Use the information and results from your analyses in questions 4-6 above; identify if there are areas of cash flow to which the firm needs to pay attention.

8.Suggest relevant investment and financing strategies to improve the firm’s cash flow position.

9.State and justify your recommendations in terms of shareholders’ wealth maximisation.

Note: (*) You should use data for the period 2005-2015 in your analysis. You need to obtain financial statements for Wesfarmers as well as all other relevant financial data and announcements. In particular, the details of the three main types of cash flows (operating, financing and investing) and all key financial ratios should be obtained. If you need to use a value for beta, then you should calculate it yourself, or verify (through your own calculations) the reasonableness of the value that you may have sourced elsewhere.

It is said that to make a business successful the major role is played by the leadership and the leadership starts with the leader. For me being a leader means setting an example for the team by defining and exhibiting moral and ethical courage in attaining the organizational objectives. A leader leads his team with a vision that he communicates to his team and together they meet the targets set by the organization. A leader has the leadership skills like communication skills, creative thinking, positivity, delegation, and honesty that he uses to achieve the organization’s aims(Brutus and Duniewicz, 2012). Every leader has a leadership style, and I take myself as a transformational leader. This outcome I received from the personality test I took and the way I carried my leadership duties in the class activities. According to me, a leader is not born with effective leadership skills, but his effort and hard work develop all required traits in a leader. I also want to develop the skills which I lack to be an effective and efficient leader to take my team and the business to the success (Buskey and Karvonen, 2012).

A leader has the duty to guide his team, and for that,a leader has to identify the traits he has and the traits that he has to develop to be an effective leader. As a transformational leader, I find myself a good leader as I have the quality of looking at the future and developing a vision for that, also, I am well organized and efficient; I am friendly with my colleagues and competitive enough to fight and work hard for attaining the success. A transformational leader assesses the situation and accordingly transform himself according to the situation, if a situation requires a strict and authoritative leader then one becomes that, and if someone needs a listening year, then a transformational leader becomes that (Celik, Akgemci and Akyazi, 2016).

The idea about my leadership style and related skills I gained from the personality test I took. This test helped in identifying my skills that I can use to take my team ahead; also, it helped to identify the skills I need to work on and develop to be an effective and efficient leader. The personality test I took scored me on my skills and abilities that it summarized from the answers I gave to the questions asked.  The personality test says that I lack the social boldness which means how well I can keep my thought in public. A leader should convey his thoughts in a vocal form to his team confidently because if leader himself lacks the confidence, then the team will also become demoralized. I am sensitive enough to understand what others are saying but, I don't get budge a lot from it. A leader has to face criticism he should be strong enough to take the criticism positively and develop as a better person. Myvigilance is scored as medium and imaginativeness is also scored medium. A leader should be imaginative to think of ideas out of the box. I am open and honest with myself at less than medium so I should encourage myself to learn about my personal challenges to develop as a better leader. I scored 2.4 for being troubled, every human being has some personal and professional issues and it is in his hand to keep his troubles away from work and let not affect his capabilities.

I am open when it comes to my own way and I am a self-reliant person who is contained to his needs. I am a perfectionist and I have some high standards set for myself to attain. Setting standards helps a leader to perform better than what he has performed before. Impatience does not worry me much and as a leader it is important to not to lose the control when challenging situation arises. By nature, I am a caring and warm person and that showed in my personality test also. I have a humble relation to my team-mates and I try to understand what challenges my team is facing personally to guide them correctly. My reasoning may not come in handy sometimes times as I come to the result very quickly, which a leader should not do. A leader should have the capability of listening and scrutinizing all points before coming on a conclusion for a situation. I am an emotional stable person who knows how to control emotions and let it not affect my work adversely. A leader has to go through many phases during his job and he has to keep his emotions and personal feelings aside while coming on a decision for the betterment pf the organization and his team. I have the power to dominate my team and gain their confidence. A leader has to be dominant, but not a tyrant for his team or his team will not believe on his decisions. I am a lively person who display energy around oneself. I positive and energetic environment at workplace energize its employees to work harder same way a lively leader helps the team to feel energized and lively towards their work and workplace. I am bit relaxed in following rules by the line and that should not be the case as there are certain protocols that a leader should follow to make oneself an example to be followed by the team. This test may be right or may be wrong but, it gave me a path to start exploring my personality and leadership traits to develop them and make them more effective to lead my team to success (Facca and Allen, 2011).

A leader learns from his and others experience, and I learn from what going around me and how people are managing big and small things during life. It is not wrong to say that the time I spent on learning the procedure of being a leader at my college was the best and the most fruitful time for me to understand the concept of leadership and the duties of a leader. In my college I got a chance to theoretically learn the concept, and then, during the class activities, I practically applied my theories to understand it in a better way. Like during the fresher's party, I represented my batch mates in the visionary contest, in which the contestants were asked to visualize the future of the situation given, in that contest I lost because my less vigilant nature did not make understand the importance of being visionary and assume the forthcoming opportunities and threats to avoid them.A leader should always be vigilant enough to judgethe situation and think ahead of time (George, 2011). When I heard what people can think about a situation and how things could be changed with a simple yet unique method, and what minute issues they raised in a particular situation that can act as a hindrance in the smooth-running process. I learned that how important creative thinking, vigilant nature, and vision are for a leader to find success (Hall, Hannum and McCarthy, 2009).

Next time, I was appointed as the leader for the group of ten people who have to develop a market plan for a company in a digital form. Managing people of different frame of mind, and through effective communication and clear vision making them understand the aims and objectives of the project is a job that needs a lot of leadership skills. I divided the roles and responsibilities of each member of my team and individually explain what is expected from them. I guided each and every team member in the process of developing the digital marketing plan (Hamad, 2015). Where ever we stumbled upon something we sat together and brainstormed the situation to find the alternatives, the ideas compiled together were scrutinized and then the best option was selected to further pursue the project. It was the hard work and priceless efforts of my team that we won the competition. We celebrated our victory together with lot of zeal and enthusiasm. During the project, I learned that as a leader I should not lose my control and get tensioned because when I started taking tension my staff also become clueless. Secondly, I lacked the confidence of keeping my thoughts effectively between people, as this was my friends therefore, hesitation does not effect a lot, but in reality, my hesitation will create barriers in keeping my thought in front of my team and my management.Thirdly, every team member should be appreciated and rewarded for the efforts one put in the success of the project. This way my class activities helped to be a leader that want to be (Huang et al., 2015).

My aim is to lead the company and my team to the success that organization aims to achieve and be an effective and efficient leader (Linden, 2010). If I am able to develop my shortcomings as my strengths then, I can grab every opportunity I gather and transform every threat into an opportunity or find a solution for it. The traits that I need to work on includes my communication skills, lack of vigilant, lack of following rules, sensitivity, and be more competitive to give a strong fight to my contenders. After finding my shortcoming it is important that I should work on them and I expect that after the whole procedure I will turn into a better leader (Mumford et al., 2017).

Firstly, I need to focus on my communication skills which is to effectively keep my thought in front of my team and management. It will help in clearly explain my vision and thoughts and attain the organizational goal by saying right things at right time. A leader is the visionary and his team is the creator or developer of his vision. Also, a leader is a thread that binds the employees and the management together, he communicates what management has to say and the reply the employees gave for the management’s message (Nagle, 2016). To develop my communication skills, I try to listen what other wants to communicate and after giving a proper thought I give away my part. I try to take the feedback from my team and colleagues to make sure that I have conveyed the right message and they have received the right message. If I find any miscommunication, then I will work on my part to be more effective and communicative. This way I can improve my communication skills and public speaking quality (Quigley and Langton, 2012).

The second leadership trait is the way I vision my project and plan the steps strategically. A leader has to be creative, experimenting, and visionary, he should be thinking something out of the box that is different yet practical and simple to apply. To develop this trait, it is important that a leader should understand every point of the project. Understanding a project helps a leader in two-ways, he is able to project many options to conduct the project and can select the best out of all, and a leader comes to know about every vulnerable point of the project which prepares him for any possible barriers that may arise in future and knowing them he will be prepared with a contingency plan to handle the barriers. This is the visionary and creative thinking that a leader should develop and for this I will brainstorm the projects with my team and take their input along with mine to initiate the project, this way I will learn how people think and how they are different from others and also efforts of my team members will be recognized and they will feel the part of the management (Stech, 2008). Thirdly, I want to be more competitive, this I will gain when I will gain the will power that what me and my team is doing is right and best for the company. I don’t want to be overconfident but, I want to be confident about myself and my thought process. With experience and making success and failure I can become more efficient and ultimately be confident enough to be competitive. These are some ways that I want to undertake to improve myself as a leader (Young, 2015).

Conclusion

An effective leader is an example that his team follows. Therefore, it is important for him to be perfect and lead his team to success by using his strengths effectively. A person is not always born with all leadership skills and traits he has to make efforts to develop the skills he lacks and turn them into his strengths. I assessed my leadership skills and style to understand my strengths and weaknesses so I could work on them and turn my weaknesses into opportunities to rise in my career. There are certain areas as a transformation leadership style which I follow that I have to work to be an effective transformational leader and for that I decided on some methods. Once I work on my skills I feel I can be a better leader to lead my team to success.

References

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Buskey, F. and Karvonen, M. (2012). Evaluating Innovative Leadership Preparation. Journal of Leadership Education, 11(1), pp.204-221.

Celik, A., Akgemci, T. and Akyazi, T. (2016). A Comparison between the Styles of Transformational Leaders and Authentic Leaders in Crisis Management. International Journal of Academic Research in Business and Social Sciences, 6(2).

Facca, T. and Allen, S. (2011). Using Cluster Analysis to Segment Students Based on Self-Reported Emotionally Intelligent Leadership Behaviors. Journal of Leadership Education, 10(2), pp.72-96.

George, B. (2011). True North Groups: A big idea for developing leaders. Leader to Leader, 2012(63), pp.32-37.

Hall, D., Hannum, K. and McCarthy, J. (2009). Issues & observations-Leadership experience: What is it and what counts?. Leadership in Action, 29(1), pp.21-22.

Hamad, H. (2015). Transformational Leadership Theory: Why Military Leaders are More Charismatic and Transformational?. International Journal on Leadership, 3(1).

Hartman, E. (2016). Decentering Self in Leadership: Putting Community at the Center in Leadership Studies. New Directions for Student Leadership, 2016(150), pp.73-83.

Huang, X., Xu, E., Chiu, W., Lam, C. and Farh, J. (2015). When Authoritarian Leaders Outperform Transformational Leaders: Firm Performance in a Harsh Economic Environment. Academy of Management Discoveries, 1(2), pp.180-200.

Linden, R. (2010). Developing a collaborative mindset. Leader to Leader, 2010(58), pp.57-62.

Mumford, M., Todd, E., Higgs, C. and McIntosh, T. (2017). Cognitive skills and leadership performance: The nine critical skills. The Leadership Quarterly, 28(1), pp.24-39.

Nagle, L. (2016). Leadership, Loss and What We Wore. Canadian Journal of Nursing Leadership, 29(2), pp.1-3.

Quigley, J. and Langton, S. (2012). Developing the language of collective leadership. Leader to Leader, 2012(64), pp.7-13.

Stech, E. (2008). Leadership Education, Training, and Development. Journal of Leadership Education, 7(1), pp.43-46.

Wilson, A. (2007). Rising to the challenge: How to develop responsible leaders. Leadership in Action, 27(1), pp.7-11.

Young, M. (2015). Effective Leadership Preparation. Journal of Research on Leadership Education, 10(1), pp.3-10.