B294 Financial Analysis and Decision Making
You are expected to submit an individual report that analyses the financial performance of a UK listed company of your choice which also analyses the business and growth strategy that that the corporate group has been pursuing in recent years. Using company websites or an internet search, obtain the annual reports for the listed company of your choice (it should be a UK PLC) covering the last few years. You will likely be required to:
Access the websites for your chosen company
Access the online annual reports for the company for the last few years, including the financial statements for the latest full year available.
Print and/or just scan the necessary pages from the company reports to provide evidence for your work but attach these to your coursework.
You should prepare a report for your chosen company, to answer the following: a) State the aims of your report and give a profile for your chosen company. (5 marks) b) b) Make financial comparisons of your chosen company years using ratio analysis for the current and prior year comparatives. Prepare a trend analysis, to show a comparison of its financial performance over five years.
And show the relative performance, trends, etc. of/within the company over those years. It should include an analysis based on ratio and horizontal and/or vertical analysis of the financial statements. Discuss any limitations of the data you are using. The category of ratios employed could include:
• Liquidity/Solvency Ratios
• Asset Efficiency/Activity Ratios.
• Financial Leverage/Debt Ratios.
• Profitability Ratios.
• Market Value/Investor Ratios. For each ratio and in your horizontal/vertical and trend analysis, you should clearly show your calculations and the source(s) for the figures you have used. Typically, the ratios will include:
• Return on Capital Employed (ROCE),
• Operating profit margin (including and excluding exceptional items),
• Net profit (before or after tax) including and excluding exceptional items,
• Basic and Diluted EPS (these are shown on the income statement and will not need to be calculated),
• Asset turnover,
• Current ratio,
• Acid test ratio
• Receivables collection period In all your analysis, you should attempt to explain: - the purpose of the technique/method used for analysis (e.g., the purpose of a chosen ratio) - the rationale for choosing the method of calculation/analysis, for example using profit before or after taxation in a particular ratio.
Using the results of your ratio and trend analysis, discuss the reasons given in the annual report and any additional factors obtained from elsewhere (the web/journal/financial pages) for the year-on-year performance of your chosen company. (65 marks) c) Drawing on your analysis of the performance of the company, critically review the business and growth strategy that the corporate group has been pursuing in recent years. Most of this information should be available from the company report.
However, further information might be obtained from other sources (e.g., comments in the financial pages on the company’s strategies) (20 marks) d) Comment on the general limitations of ratio and trend analysis, with reference to your work in part (b) above. (5 marks) e) Presentation of the report (report structure, including front page, table of contents, sections to the report with section headings and the word count included with a bibliography, plus grammar, spelling, punctuation, use of English, etc.)
You are expected to include your word count (excluding appendices) on the front page of your report. Word limit - 1,500 words, excluding any information supplied in appendices. (5 marks) f) The bibliography should identify all sources and be cross-referenced to/in the report.
Students should try to ensure a balance between sources. Plagiarism (using someone else’s writing, from whatever source, as if it were your own) is a University examination offence, which carries severe penalties.