Calculation and comparison of performance ratios

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Reference no: EM132114918 , Length: word count:3200

INSTRUCTIONS

Students are required to form a group to study, undertake research, analyse and conduct academic work within the areas of business finance covered in learning materials Topics 1 to 10 inclusive. The assignment should examine the main issues, including underlying theories, implement performance measures used and explain the corporate financial performance. Your group is strongly advised to reference professional websites, journal articles and text books in this assignment (case study).

Tasks
This assessment task is a written report and analysis of the financial performance of two selected listed companies on the ASX in order to provide financial and investment advice to a wealthy investor. This assignment requires your group to undertake a comprehensive examination of corporate financial performance based on update financial statements of the chosen companies.

BACKGROUND
You're a group of investment analysts who work for a large investment consulting firm based in Australia. There's one big institutional investor from overseas that is interested in investing in the Australian market. You've been asked to choose two large companies operating under the same industry in Australia (the industry you think will have the most promising future for investment) then evaluate and compare them. Finally make a recommendation through your Report to the investor which one is more superior fundamentally.

Create your group's "business name" under which your group will be providing the financial advisory services. Choose two listed companies that your group will investigate/analyse for the purposes of possible recommendation to your client. The group should obtain all information about the selected companies from this web site: www.asx.com.au.

Required:

Obtain copies of Financial Statements including Income Statements, Balance Sheets, and Statement of Changes in Equity, Cash Flows Statements and Notes for three (3) financial year 2014-2015, 2015-2016 and 2016-2017. Your group can download these documents from the suggested web site using the firm's code (example, BHP- for BHP Billiton Company, etc.). The assignment should cover the contents described in Part 1 to 7 bellows.

STAGES TO BE COMPLETED

1 Description of operation and comparative advantages of the two chosen companies.
2 Calculation and comparison of performance ratios of the two companies
3 Analysis of monthly share prices movements of the two companies within 3 years
4 Identify any significant factors which may have influenced the share price of your chosen companies during the time frame.
5 Calculation of Beta values and expected Rates of Return using the CAPM of the two chosen companies
6 Identify and compare dividend policy of the two chosen companies
7 Letter Recommendation

Details of financial analysis tasks:

1. Description of operation and comparative advantages of the two chosen companies: Prepare a brief description of the chosen companies, outlining the core activities, the market(s) in which they operate within and any factors in the companies' history which you consider help present the pictures of your companies. Identify and compare their comparative advantages.

2. Calculation and comparison of performance ratios: using financial data obtained from current financial statements of your selected companies for the past 3 years. Annual reports are accessible via company websites or ASX website. Your client is strongly interested in the three groups of ratios:
- Liquidity ratios;
- Profitability ratios
- Capital structure (leverage) ratios
You need to provide charts and/or tables for analysis and justification.

3. Analysis of monthly share prices movements: Using the information from the ASX website, complete the following tasks:
- Prepare graphs for movements in the monthly share price over the last three years for the companies that you are investigating. Plot them against movements in the All Ordinaries Index.
- Write a report which compares movements in the two selected companies' share prices to each other and to the All Ords Index. For instance, how are the prices of the two selected moving? In the same trend or diverse trends? How closely are they correlated with the All Ords Index. Above or below? More or less volatile?

4. Significant factors which may have influenced the share price: Research via the internet or financial/business publications:
From research via the internet (using credible sources) or financial/business publications, identify at least 2 significant announcements which may have influenced the share price of your selected companies within 3 years. These factors could include merger or acquisitions, positive or negative earnings forecasts, unusual write-offs or abnormal items, macroeconomic factors, industry wide factors, significant management changes, changes in the focus of the companies, impact of competitors or law suits etc.

5. Calculation of beta values and expected Rates of Return using the CAPM: Go online to https://www.reuters.com/finance/stocks/ and type in the code for your companies into the Search Stocks field and click on the magnifying glass button.
- What is their calculated beta (β) for your companies?
- If the risk free rate is 5% and the market risk premium is 6%, use the Capital Asset Pricing Model (CAPM) to calculate the required rate of return for the companies' shares.

6. Dividend policies:
Discuss what dividend policies appear to be implemented by the companies' management boards. Explain any reason related to that particular dividend policies.

7. Recommendation letter: Based on your analysis above, write a letter of recommendation to your client, providing an explanation as why you would like to include one of selected the companies in his/her investment portfolio. Please refer to the ratio results calculated earlier and any other trends or factors that you believe to be important.

8. Presentation, structure and academic writing

Attachment:- Assignment.rar

Reference no: EM132114918

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Reviews

len2114918

9/17/2018 5:11:09 AM

2 and 5 Calculations are not demonstrated for the required financial ratios Proving no explanation of implications of the variables; Providing no comparison of financial ratios Single year analysis. Calculations are limitedly demonstrated; Financial ratios are provided inadequately; Providing limited analysis and comparison of the ratios; Inconsistent time period of analysis. Adequate demonstration of calculations; Financial ratios are derived with relevant implications and explanation; Comparison, analysis and Justification and assumptions are clear; Consistent 3 year analysis. Calculation and presentation are demonstrated clearly; Financial ratios are derived, compared and justified with exemplary analysis that based on current issues and key factors; Comparison, Implications and explanation are provided convincingly Consistent 3 year analysis and properly

len2114918

9/17/2018 5:11:01 AM

Content Unsatisfactory (0-49% marks given) Limited Demonstration (50-60% marks given) Proficient (61-79% marks given) Exemplary (80%-full marks given) 1 and 4 No specific data and information provided to answer the questions; No research basis for analysis; Merely relying on secondary data from internet; No reference. Limited data and information provided to answer the questions; Limited research conducted; Limited references; Adequate data and information provided to answer the questions; Reasonable research conducted; Issues are discussed based on sufficient research and in relation to each other; Adequate references in proper referencing style; Outstanding data and information provided to answer the questions; Independent and deep analysis, based on wide research; Issues and factors are presented and analyzed in a logical interconnectedness; Broad and credible sources of references in proper referencing style.

len2114918

9/17/2018 5:10:46 AM

Submitted work should be your original work showing your creativity. Please ensure the self-check for plagiarism to be done before final submission in accordance with SafeAssign Student Guide in Black Board. As a guide, a similarity score of over 30% is considered as excessive except in the cases where the similarity is caused by the use of template provided by the lecturer, references or sources of data. Please note that it takes 48 hours for the self-check report to be available for your viewing. Always keep an electronic copy until you have received the final grade for the Unit. Please make sure that you submit the correct file. Any appeal relating to submitting wrong files after the deadline will not be considered.

len2114918

9/17/2018 5:10:38 AM

Please make sure that your group member’s name and surname, student ID, subject name, and code and lecture’s name are written on the cover sheet of the submitted assignment. When you submit your assignment electronically, please save the file as ‘Group Assignment- your group name .doc’. You are required to submit the assignment at Group Assignment Final Submission, which is under Group Assignment and Due Dates on Black Board.

len2114918

9/17/2018 5:10:28 AM

Students are required to form a group to study, undertake research, analyse and conduct academic work within the areas of business finance covered in learning materials Topics 1 to 10 inclusive. The assignment should examine the main issues, including underlying theories, implement performance measures used and explain the corporate financial performance. Your group is strongly advised to reference professional websites, journal articles and text books in this assignment (case study).

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