Business
Analysis and Interpretation. Due 19 August 2019 via Turnitin.
You are required to calculate key financial
ratios for an ASX listed company and its competitor and interpret this information
in the context of your allocated competitor company over time.
You will be allocated two ASX listed
companies to study for this assessment. You must do your allocated companies in
the order they are allocated to you. You
can look up your allocated companies under ‘You/Competitor’ in MyGrades in week
1.
Imagine
you work for the FIRST of these companies. The
second is one of your company’s competitor.
Your boss has asked you to calculate and assess the company’s key (your boss’s
opinion) ratios relative to that of its competitor and provide
recommendations for improvement if required.
The key ratios you need to calculate for
your company and your competitor are net profit margin, asset turnover, current ratio, quick ratio and debt
ratio. Your boss also wants you to calculate the cash cycles. All workings for ratios and the cash
cycles are required.
You focus your analysis on the companies’
2016, 2017 and 2018 ratios mentioned above firstly in terms of their trend
changes and also in comparison to your competitors ratios and benchmarks
wherever possible.
In making your assessment consider
potential differences between your company and its competitor that could
explain divergent results. Where relevant, these
should be noted. (For example, although the companies may compete in some of
thesame markets, they may also have
different areas of business).
Chapter 8 of your textbook (http://www.wileydirect.com.au/buy/accounting-business-reporting-decision-making-6th-edition/)
will give you a background explanation on these ratios and you should in your
own words explain a) the issues involved and relevance
of using ratios, b) benchmarking and c) the relevance of your particular identified
ratios as part of your discussion.
To undertake this task you will need to get
some background information on the companies and collect some data to create
ratios. Information required is available from DatAnalysis found by following the links from the SCU homepage to
the ‘Library’ and ‘Databases’. For the calculation of ratios aspect of this
assessment use the ‘Financial Data icon and then across the top, Profit and
Loss and also Balance Sheet as necessary.
Since your boss is a busy person and has
little time to read lengthy reports, your submission for this task preferably
should not exceed 1,000 words. Of course it can be shorter than 1,000 words. Structure
your submission as a short report that excludes title and contents pages. Refer to note 1 for further
advice on report structure. Ensure you fully reference any non-text book or non
DatAnalysis sources of data and information you use in this assessment.
Marks
for this task are in accord with the separately provided marking guide.
In essence students
should carefully study chapter 8 of the textbook and then calculate ratios and
the cash cycle for their company and its competitor. Next describe the
meaningfulness of these calculations firstly theoretically (text book chapter
8) and then actually and relate the findings to their company and in contrast
to their competitor company. Wherever possible industry or accepted standards
might assist your contrast as well. Then outline possible company improvements
highlighted by the ratios and cash cycle and any weaknesses in using ratios.
Note
also as follows –
1. The
report should be presented as follows. At
the very beginning of your report should be a Table with headings as depicted
below. You should place (complete) each of your ratio outcomes in the table
below using the relevant headings in Table form so the reader/marker can
initially see the actual ratio numbers you have arrived at. See also the
marking guide where we demonstrate a similarly headed table.
Your Company Ratio Write your company name here |
Competitor Company Ratio Write Competitor company name here |
|||||
Ratio Name |
2016 | 2017 | 2018 | 2016 | 2017 | 2018 |
(Net) Profit margin |
Asset turnover |
Current ratio |
Quick ratio |
Debt (to assets) ratio |
Days Inventory |
Days Debtors |
Days Creditors |
Cash Cycle Result |
At
the end in the appendix (not counted in word count) there should be another
table which demonstrates formulas, completed workings and ratio outcome for
each ratio for both companies.
Your
Appendix table could use the same headings this time with the ratio name
including the formula and the years 2016, 2017, 2018 having the calculated
formula numbers used and the final ratio.
Returning
to the body of the report you should then have headings (with subsequent
discussion) as follows –
• Introduction
• Financial Analysis of Ratios – Begin with sub – heading
for each ratio. Here is where you demonstrate an understanding of ratios by describing
the meaningfulness of these ratio calculations firstly theoretically (text book
chapter 8 helps here) and then actually. Next relate the ratio findings to
their company and in contrast to their competitor company. Wherever possible
industry or accepted standards might assist your contrast as well. This
demonstrates an ability to assess and apply knowledge to calculated
outcomes.
• Recommendations – outline possible company improvements
highlighted by the ratio outcomes and cash cycle calculations and comment on
any weaknesses in using ratios.
• Conclusion.
It
is essential that you set your report up as prescribed by note 1 above.
2. The Cash Cycle can be a little
confusing and some text books use different methodologies for calculating the
three elements of the Cash Cycle. For your convenience the formulas are a)
Inventory being Current Inventory / Operating Revenue * 365 = ???? b) Accounts
Receivables being Debtors / Operating Revenue * 365 = ???? c) Accounts Payables being Creditors /
Operating Revenue * 365 = ??? Note that you still need to work out the cash
cycle from these calculations.
3. For the net profit margin ratio use
Net profit after tax before abnormals as the numerator.
4. This is a Turnitin assessment so
while we acknowledge that some Turnitin score will relate to the cover page and
calculations which may be common to some other students you need to take due
care with the actual original (yours) commentary of the report. This includes
putting into your own words some theoretical discussion of the ratios which you
may originally derive from the text book. If concerned then by all means use
Harvard referencing.
5. Use the Discussion Board forum to
raise any issues you may have with this assessment. This method ensures that
students and tutors can get an idea of any questions that students may have.
Try not to publish answers to your assessment if at all possible.
6. Note that your assessment will not
be marked if you do not do your allocated companies and in the order they are
given to you.
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