ACCT7101: Business Decision Making & Financial Report- Analysis Assignment Help

Internal Code: MAS7728

Analysis Assignment Help:

Task: Aims of this assignment: This assignment aims to develop your a) ability to understand and analyse financial reports, b) skills to compare financial information of two listed companies, and c) capacity to evaluate financial information and synthesise financial and non-financial information to make business decisions. This assignment is to be completed on an individual basis. Your submitted assignment must be entirely your own work. You may seek guidance from lecturers, tutors or fellow students to clarify concepts or the application of concepts to company financial statements in general. In addition, please look at the "Frequently Asked Questions (FAQs)" document uploaded on Blackboard, which may have the clarifications you need. Advice that is clearly associated with the assignment tasks cannot be sought or provided. Plagiarism is the submission of work or ideas which are not your own but for which academic credit is claimed. It is important that you review the University’s policy on plagiarism. The originality of your assignment will be assessed by the Turn-it- in system. Information from the course profile relating to plagiarism is reproduced below. Assignment overview You have been randomly assigned two ASX listed companies that operate in the same industry (Company A and Company B). See the file “Companies allocated to students” under the Assessment tab on Blackboard to find your companies. Obtain each of your company’s annual reports for the 2016 and 2017 financial years from the company’s website or www.asx.com.au. The annual reports contain the chairperson’s report, directors’ report and financial statements (Balance Sheet, Income Statement, Statement of Changes in Equity, Statement of Cash Flows and notes to the accounts). The financial statements include comparative figures from the prior year, therefore, you will have data for three financial years: 2015, 2016 and 2017. Research the financial press and other sources of available information to familiarise yourself with the industry in which your allocated companies operate and with company specific factors that may have or will affect either company’s performance. Two business scenarios Company are described below. Scenario 1 relates to Company A only and Scenario 2 involves Company A and Company B. Knowledge of the industry, company specific context and their financial data will be important inputs that inform the decision that you recommend in relation to each scenario. Scenario 1 Company A has submitted an application to the Brisbane Bank for a loan. The amount of the loan is equal to 30% of total shareholders’ equity at the end of the 2017 financial year. The purpose of the loan is to fund expansion of Company A’s operating capacity. The loan term sought is 10 years and the loan would be secured against company property. Assume you are a branch Brisbane Bank lending officer who assesses loan applications. The lending officer must make a recommendation to the head office lending manager advising whether the loan application from Company A should be accepted or rejected. Scenario 2 Both Company A and Company B have offered Capital Investments Limited, a listed investment company (LIC), a private placement of ordinary shares. The amount of share offer is equal to 20% of total shareholders’ equity of each company at the end of the 2017 financial year. Capital Investments can afford either of the two private placements. The purpose of an increase in equity for each company is to raise funds to finance an expansion of operating capacity. Assume you are an investment manager at Capital Investments who evaluates private equity placements. Capital Investments has limited funds available for investing decisions. The manager must make a recommendation to the board of directors advising whether to accept Company A’s offer to sell to Capital Investments a new issue of ordinary shares and reject Company B’s offer, or accept Company B’s offer to sell to Capital Investments a new issue of ordinary shares and reject Company A’s offer or alternatively reject both offers. Assignment tasks Before commencing work on the tasks below refer to the marking rubric for the criteria and standards that will be applied in the assessment of your assignment. See Blackboard. 1. Company background research Review Company A’s and Company B’s annual reports, articles in the financial press and other sources of information. Write a short response to each item below to build background knowledge of each company and their industry. a) Describe the operating activities of each company noting similarities and differences between Company A and Company B. b) Identify two economy wide factors, two industry factors, and two specific factors that could impact on the financial performance and position of Company A and two specific factors that could impact on the financial performance and position of Company B. 2. Financial ratio analysis Calculate financial statement ratios for the 2017, 2016 and 2015 years for Company A and Company B. Use the Excel template provided on Blackboard under the Assessment tab to present the analysis in a table. Obtain data for the ratios from the financial statements and notes to the accounts. You may add to this template (calculate additional ratios). See further instruction in the template. 3. Lending decision Write a business memorandum to the Brisbane Bank head office loan manager from the branch bank lending officer in Scenario 1. The memorandum must address the following points below. a) Evaluate and discuss your assessment of the ability of Company A to repay the loan and interest. Make a recommendation to accept or reject the loan application from Company A and justify that recommendation. Use knowledge that you have acquired in your company research from Q1 and refer to relevant ratios calculated in Q2. b) Briefly discuss Company A’s net cash flows from operating, investing and financing activities and the trends evident over the last three years. Explain how this analysis is consistent with your accept or reject recommendation. c) Choose one ratio that relates information from the Statement of Cash Flows with the Balance Sheet or Income Statement. Discuss the conceptual interpretation of this ratio with reference to literature (accounting texts excluding Carlon et al. or journal articles). Describe trends in this ratio for Company A and how this information supports your recommendation to accept or reject the loan application. 4. Investment decision Write a business memorandum to Capital Investments Limited’s board of directors from the investment manager in Scenario 2. The memorandum must address the points below. a) Use the most relevant financial ratios to analyse and compare trends in profitability and risk of Company A and Company B for the 2017, 2016 and 2015 years. Discuss your assessment of relative profitability and risk of both companies. b) Recommend whether Capital Investments should invest in Company A or Company B or alternatively reject both offers. Justify the recommendation based on the evaluation of risk and profitability of each company and other relevant background information obtained from the annual reports and other sources. Use knowledge that you have acquired in your company research from Q1 and refer to the relevant ratios calculated in Q2. c) Explain with reference to literature (accounting texts other than Carlon et al. or journal articles) the meaning of the price earnings (PER) ratio and EPS. Describe three year trends in these ratios for Company A and discuss its relevance to the investment decision.