MG5556 - Financial Analysis and Valuation of Companies - Brunel University London

Assignment Task

Objective

The main objective of this assignment is to examine the ability of the students to analyse and interpret the financial statements of the companies. In addition, assignment examines the understanding of the students on how businesses make capital budgeting decisions. This assignment also examines the students’ understanding on how shares are valued.

Description

This assignment has three parts.

1. First part is based on company listed on the London Stock Exchange (LSE). You are required to prepare a report on financial analysis of a company from the given sector for the last FIVE years (for detail see below under the heading part one. 

2. In the second part you are required to discuss how businesses make capital budgeting decisions (for detail see below under the heading part two)

3. In the third part, you are required to discuss the main methods used to value the shares of a company (for detail see below under the heading part three)

Part 

1. As an analyst in a consultancy firm in this part, you are required to evaluate and analyse the ratios of a company over a period of FIVE years. You can choose any company from the given sector (see below for sector to choose a company). For a good report you are expected to use some industry/competitor data and information from various sources to support your analysis. Based on your analysis provide your recommendation to prospective investor whether investment in this company would be a good investment or not. Your report should cover following ratios:

• Profitability ratios (such as gross profit margin, operating profit margin, net profit margin).
• Financing management ratios (such as debt to equity, interest cover, liquidity ratios)
• Efficiency ratios (such as inventory turnover, trade receivable turnover, trade payable turnover)
• Overall profitability (such as ROA, ROE, EPS)
• Shareholders’ Investment ratios (such as dividend cover, dividend yield, P/E ratio)

Please select a company from the list of FTSE 350 companies from the following sectors:

(a) Electricity, gas, steam and air conditioning supply (for more information see section D on SIC code)

(b) Transportation and storage (for more information see section H on SIC code)

(c) Accommodation and food service activities (for more information see section I on SIC code)

2. Block et al. in their book states below on capital budgeting

The net present value and internal rate of return are generally the preferred methods of capital budgeting analysis’’ (p 380)

Where appropriate providing examples and references to the academic literature discuss the above statement.

3. Giving examples where relevant discuss the main methods used to value the shares of a company

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