Financial Statement Analysis
Your report should include/consider the following:
You are required to take an in-depth analysis and interpretation of your chosen listed company (as agreed in task 2) via their published financial statements with emphasis on the strengths and adaptability of the business.
This will include an evaluation of internal and external factors on the future prospects for this company.
You must cover the most recent published accounts for the company (and any interim updates) and also to compare performance against the sector(s) in general.
You should demonstrate an in-depth understanding of your analysis, with coherent and reasoned discussion.
Obtain financial statements (full Annual Reports) for this company for the last three years. The Annual Reports may be electronic or hard copies. See the company websites for more details. You will need to read the reports in some detail and refer to these in your submission. (Do not include in appendices)
Remember this is a business report, so it should include an introduction and suitable conclusion. These are included in the word count, but appendices are not. (An executive summary is not required).
Weighting of marks for the report (Task 4):
· A brief introduction setting out the scope of your report, including the background to the company covered and an explanation of their position within the industry sector and the economic environment. (5% weighting)
Your report must include discussion of the performance of the company by reference to your analysis of the following:
· Efficiency, liquidity/solvency, investment, profitability ratio analysis. Your financial statement analysis should also include industry/sector data.
· In addition you should make use of techniques such as common-size financial statements, inter related financial ratios (e.g. Dupont analysis), trend analysis and segmental analysis to tell your story about the company.(20% weighting)
· Cash flow analysis and financing - you should analyse the Cash Flow Statement of the company. The analysis should highlight the nature of cash flow (i.e. where did the bulk of cash flow come from and how did the company deploy its cash flow during the financial year). In short, the analysis should be linked to the various financial ratio analysis, and demonstrate how it impacted on the overall company’s financial performance and financing. (10% weighting)
· Z- scores & other predictive techniques regarding future prospects including general financial data, share price movements and latest news/ views on the company. (20% weighting)
You are expected to make use of reputable on-line resources (such as the London Stock Exchange, Bloomberg, FAME, etc.) to provide some of the ratios used in your analysis - providing that you reference your sources correctly. Any workings to prove your own analysis should be correctly referenced and shown in detail in the appendix.
It is expected that a large proportion of the financial information will be presented graphically or tabular format.
You need to demonstrate an understanding of the reasons why cash-flow, ratios and/or numbers & trends have changed by reference to internal and external factors. This should include a review of economic & environmental external & internal factors. Therefore the director narrative reports and analysis should also be reviewed and form part of your discussion.
Your report should focus on a written analysis of your findings from your financial analysis, contrasting the organisations performance over time, against a competitor and/or the industry they operate in, and against the state of the economy over the three year period as well as the cash-flow analysis. Remember at this stage in your course you are not expected to merely state ‘results improved’ or ‘results worsened’, but WHY you think they did; was this because of a change in management, a corporate disaster, the general economy or something else? You will need to read the full reports, including the board of directors’ reports, analyst sites, general news stories and any other reliable sources you can find to thoroughly research your company. A main element will be the inclusion of an evaluation of internal & external factors influencing the future prospects for each company and making use of forecasting techniques as applicable.
All analysis and discussion requires appropriate correctly referenced literature and sources.(Harvard referencing)
· Well-reasoned conclusions should be included on the strength and adaptability of the business and comment on the future prospects for this organisation. (From the main body of the report) (10% weighting)
· Recommendation regarding investment potential (5% weighting)
Presentation. Good presentation, spelling and grammar. Clear report format and structure. Within word count. The use of graphs and charts may help in your discussion. Accurate, complete and clear referencing of all information sources.