FBL5030 Fundamentals of Value Creation

Task:

For the latest 5-year period, analyse the following aspects of the companies:

Note: Each ratio does not sit in a vacuum. One ratio interlinks with other ratios of different categories. Therefore, you need to draw in more than 2 ratios in each category to provide substantive reasons and discussions. Industry average and competitors’ data also form a good platform to put your discussion into perspective. For example, a large difference between current ratio and quick ratio can be explained by inventory build-up. This can be confirmed by looking at inventory turnover (in days) which is longer compared to its competitors or the industry average. In that case, it could mean the company has difficulties to attract customers, which can also explain why it provides a longer credit term (receivable turnover).
In some cases, you will need to manually calculate other ratios to provide substantive reasons and discussions for the trend captured in a published ratio. For example, a steady increase in revenue over a 5-year period can be explained by a rapid expansion of the company. However, revenue per store indicates a negative growth which can be detrimental for the company (see Dick Smith case here). This revenue per store is a ratio that is not readily available and will need to be calculated manually.

Present your analyses in a form of a professional report for a manager of a company. Charts and tables are encouraged. Your report should have the following sections (maximum possible marks are in the parentheses). The total possible marks are 35.

Cover sheet which clearly identify all group members, class/campus, and your teaching lecturer.

Executive summary

Introduction

Profitability analysis

Liquidity analysis

Solvency analysis

Conclusion