Financial Analysis and Investment Appraisal Report

Required:

Prepare a report for potential investors which analyses the financial information for both companies and give recommendations which company would be a suitable option for investment.

a) Calculate 10 financial ratios as given below for two years (2018 and 2019) Current ratios P/E ratio

Quick ratios Earnings per share

Net Profit Margin Return on capital employed

Gross Profit margin Average inventories turnover period

Gearing ratios Dividend pay-out ratio

b) Analyse performance, financial position and investment potential of both companies. You should use charts to compare performance of two companies. You will need to look at the audited financial statements and carry out further research to explain the performance of each company for two years.

c) Provide recommendations of how the financial performance of the poorly performing business can be improved

d) Discuss the limitations of relying on financial ratios to interpret a company’s performance

Required:

a) Using appropriate investment appraisal techniques, advise senior management on whether they should opt for project A or project B.

b) Discuss the limitations of using investment appraisal techniques in long term decision making

This item of assessment covers the following learning outcomes. For the full list of learning outcomes

for the module, please refer to the Module Study Guide.

• Understand and evaluate relevant accounting and finance regulatory frameworks.

• Comprehend and critique the key accounting and finance techniques, principles and functions.

• Interpret and analyse financial statements.

• Through a process of analysis and evaluation, identify and recommend sources of finance to an organisation.

• Identify, evaluate and apply investment appraisal techniques.

• Develop financial numeracy.

• Develop problem solving skills.

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