Capital Investments Limited Case Study - Analyse Financial Reports - Accounting Assignment Help

Assignment Task :

Aims of this assignment 

This assignment aims to develop your

a) ability to understand and analyse financial reports,

b) skills and knowledge 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. 

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 2017, 2018, and 2019 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 (Statement of Financial Position, Statement of Profit or Loss, Statement of Changes in Equity, Statement of Cash Flows and Notes to the Financial Statements). The financial statements include comparative figures from the prior year, therefore, you will have data for three financial years: 2017, 2018 and 2019. 

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 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 40% of total shareholders’ equity at the end of the 2019 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 lending officer of Brisbane Bank 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 30% of total shareholders’ equity of each company at the end of the 2019 financial year. Capital Investments Ltd 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. 

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 and two industry factors that could impact on the financial performance and position of two companies and two specific factors which could impact on the financial performance and position of company A and B, respectively. (In total, you should identify and analyse, at least, eight factors.) 

2. Financial ratio analysis 

Calculate financial statement ratios for the 2019, 2018 and 2017 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. 

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