Comparative Analysis of Profitability and Investment Decision with Focus on COVID19 Impact

Comparative analysis of profitability of firms and investment decision with a focus on the impact of COVID19.

What you are required to do?

You are a financial analyst. A person with minimum or no financial knowledge approaches you to get some help regarding his/her investment plan. He selects two firms and wants to know which firm he should invest in. As a financial analyst your responsibility is to advise the person as to which firm s/he should invest.

How to proceeds?

(a)Download Balance Sheets and Income Statements of two companies for at least 10 years.[ Data download guidelines will be posted on LMS] Companies may be from the same or different industries.

(b)You will need to conduct a comparative analysis of the following performance indicators of the companies:
(1)Liquidity ratios
(2)Profitability ratios
Return on assets
Return on equity
Return on sales

(3)Cash flow ((from statement of cash flow))
(c)Your comparative analysis should include at least the following statistical tools:[ You will need to apply your statistical/mathematical knowledge that you gained in previous units, such as, BUS140/BUS130]

(1)Descriptive statistics
(2)Time series plots of the above indicators

(d)Clearly compare and contrast the performances of two firms in terms of the above indicators using statistical methods/tools as mentioned in (c) above.

(e)Discuss the performances of the firms during COVID19 outbreak (i.e., are there any changes in the firms’ liquidity, profitability and cash flow in 2019 and 2020 [and in 2021 if data available]?)

(f)If your selected firms are from the same companies then discuss the possible reasons for the differences in their performances. If the firms are from different industries then relate the nature of the businesses to explain the differences in their performances.

Format of the assignment

Word limit of the assignment is 2500 (with 10%+/-). The assignment should have the following sections:
(1)Cover page: Assignment must have a cover page that can be downloaded from the following link (copy the link below and past in your browser to download the cover sheet):
goto.murdoch.edu.au/AssignmentCoversheet  

(2)Executive summary: Summarise the whole report to reflect the problem and findings of the report.

(3)Introduction: In this section briefly discuss the importance/significance of financial statement analysis for investment purpose and introduce the case.

(4)Identification of the issues: This section should include the problem in hand, that is, what the report is going to do/analyse and why. In doing so you must discuss the nature of the businesses of the selected firms. This will help comparing the ratios/performance indicators of the selected firms.

(5)Financial analysis: This section should cover (c) – (f) of “How to proceed” above. 

(6)Conclusion: In this summarise the findings and make recommendation for prospective investors.