MG5556-Financial Resources Management

Main Objective of the reassessment

The main objective of this assignment is to examine the ability of the students to critically evaluate the performance and position of a company and their ability to value the company using a valuation method. This objective will be achieved through the preparation of financial and valuation report of a large listed company in the London Stock Exchange. In the preparation of the report student must demonstrate a critical understanding of the theories and concepts pertaining to the creation of shareholder value and the evaluation of the performance of a company. In this assignment students should use appropriate concepts and rational arguments to interpret strategic and financial data in order to produce suitably critical, well-considered report.

Description of the reassessment

This assignment is based on a company listed on the London Stock Exchange (LSE).  You are required to prepare a report comparing the financial performance and position of the following two companies making extensive use of ratio analysis. In addition, you have to prepare a valuation report for one company using one valuation method.
You should prepare your report in two parts:

(a) In the first part, you are expected to obtain financial information for a minimum period of 2 years for your two companies listed above. You are expected to use some industry data to support your analysis. Your report should cover the following areas:  

An evaluation of profitability.

An evaluation of financial position from both a short-term (liquidity) and a long-term (gearing) perspective.

An evaluation of performance from an equity shareholders perspective.

An evaluation of the overall performance and position of the business.

Based on your analysis and discussion above recommend the best company for investment.

(b) In the second part, you are required to prepare a valuation for a company using one of the following two methods:

1. Prospective price-earnings ratio analysis based on forecast normalised earnings.

2. Forecast dividend growth model.

You are required to compare your valuation with the actual market value of the company. You should discuss the advantages and disadvantages of the valuation method you have chosen and the problems that may arise in arriving at valuation to illustrate your points.

Notes:

1. You should show the calculation of your ratios in sufficient detail to enable your workings to be followed. Your report should include an interpretation of the ratios as well as calculations of the ratios themselves. You should refer to other information in the financial statements (and information available from elsewhere), as necessary, to assist in the interpretation.

2. In preparing valuation, you should state all of your assumptions clearly in your report.

3. Use of research papers are encouraged in your report.

4. Show all your workings clearly for both parts. Avoid copying information from internet sites or other sources. If unacknowledged, this constitutes plagiarism.