Financial Analysis Report of Loreal

Part One: Economic Context

Company selected: Loreal Overview You are required to prepare a financial analysis report which provides a critical evaluation for a specific non-financial company using the most recent five years of annual reports/data available. As part of the report, you should compare your company to the most recent annual report/data of an appropriate competitor company in the same industry or the industry’s averages (if available). The selected annual reports/data must: 1. Be written in English. 2. Use accounting rules and standards (IFRS/US GAAP) consistent to the ones used for the competitor company used as your benchmark. 3. Be obtained from a credible source such as Datastream, Bloomberg, Thomson One, the company’s website, etc. 4. You can use any type of additional data to support your analysis, taking into consideration its credibility and appropriate referencing. Part One: Economic Context: The report should contain a broad economic analysis including:  Macroeconomic contextual factors for the industry of your selected company and the different economic issues that might affect your company’s business and performance. Microeconomic factors related to the company you have selected including; company’s history and background, market(s), competition, products and services, governance structure, management style, etc. 2 Part Two: Short Term Analysis: The report should contain a full ratio analysis including: Liquidity of short-term assets and related debt-paying ability ratios, measuring the company’s ability to meet its current obligations and the efficiency of the use of current assets and current liabilities Long term debt paying ability ratios to measure the company’s borrowing capacity (leverage) and the degree of protection of suppliers of long-term funds. Profitability ratios, measuring the earning ability of the company and the efficiency of asset management. Investment decision ratios (liquidity, debt, and profitability ratios). Cash flow ratios indicating the company’s liquidity, borrowing capacity, and profitability. Working Capital Evaluation. The report must include two dimensions of trend analysis:  Vertical analysis.  Horizontal analysis. Part Three: Long Term Analysis: You should include: A discussion of the different available strategic investment opportunities and the best technique and methods to evaluate these opportunities. A discussion of the predictions and forecasts of the company’s performance and an assessment of its sustainability.  An analysis of the company’s capital structure identifying whether there have been any changes in the financing mix over the past four years and why this might have been. Discuss what the current capital structure implies for shareholders from a risk perspective. An analysis of the different types of systematic and unsystematic risks the company is facing and the risk management strategies the company is accommodating to mitigate risk and their impact on the company’s sustainability. Your report must be organised as follows: Introduction Part One: Economic Context Part Two: Short Term analysis Part Three: Long Term Planning Conclusion Appendices References Important Notes: 1. You will choose your company via DUO on a first-come first-served basis and you cannot select the same company as another student. You do not need to register your choice of a competitor company. 2. You must fully check the accessibility of annual reports and data before choosing your company. 3. Calculations for the different ratios and vertical/horizontal analysis are required to be done using the FINSAS software. The output of FINSAS should be attached to your report in the appendices section. However, you are not required to prepare the competitor company’s ratios but you can depend on their disclosed ratios or you can use some one of your colleague’s ratio calculations as your benchmark or competitor company. 4. You must not depend on the disclosed ratios in the annual reports. You are required to prepare these ratios on your own with the assistance of FINSAS. 5. Graphical presentation of your findings can help in your evaluation. Tables in the body of the work should present key information that you refer to in the text and be clearly set out.