HI5002-Finance for Business

Description

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

Required:

This assessment task is a written report and analysis of the financial performance of a selected company in order to provide financial advice to a wealthy investor. It needs to be completed individually. It will be based on financial reports of a listed company on the ASX (chosen by the lecturer). This assignment requires students to undertake a comprehensive examination of a firm’s financial performance and must be submitted by Week 11 of Trimester Three. Further details will be given later in the semester. Key elements or milestones will need to be completed in stages throughout the semester as per the schedule provided below. Discussions will be conducted and suggestions will be provided for each stage so that you can then amend subsequent sections if needed. MARKS will be subtracted for LATE SUBMISSIONS.

You are required to do the following tasks:

1. Prepare a brief description of the company, outlining the core activities, the market(s) in which it operates within and any factors in the companies’ history which you consider help present a “picture” of your company. 4 marks

2. Specify ownership-governance structure of the company:

i) Name the main substantial shareholders:

ii)With higher than 20.00% of shareholdings. Based on this argument you should classify a firm as a family or non-family company, and ? With higher than 5.00% of shareholdings. 3 marks ii) Name the main people involved in the firm governance:

iii)The Chairman ? Board members

Iv)CEO. o Whether any of these people have the same surname as any of substantial shareholders (>20% share capital). If yes- you could use this as an argument for the presence of an owner or family member(s) in the firm’s governance. o Whether any of shareholders with more than 5% share capital are involved in firm governance. 

3.Explain what phenomenon is being “captured” by the variable TA/OE, and how it is impacting on the relationship between Return on Assets and Return on Owners Equity.  Explain why the ROE (EBIT) is significantly greater than or less than the ROA

4. Using the information from the ASX website:

i) Prepare a graph / chart for movements in the monthly share price over the last two years for the company that you are investigating. Plot them against movements in the All Ordinaries Index.

ii) Write a report which compares movements in the companies’ share price index to the All Ords Index. For instance, how closely correlated is the line with the All Ords Index. Above or below? More or less volatile? 

5. Research via the internet or financial/business publications: From research via the internet (using credible sources) or financial/business publications, note any significant announcements which may have influenced the share price of your company. These factors could include merger activities, divestitures, changes in management’s earnings forecasts, changes in analysts’ forecasts, unusual write-offs or abnormal items, macroeconomic factors, industry wide factors, significant management changes, changes in the focus of the company,

6. Weighted Average Cost of Capital (WACC)\

i) Using information from the latest company report for the company (i.e. interest rate on their major source of long-term loans) and the estimated cost of equity capital calculated (in part 6ii above), calculate the WACC for your company. 6 marks

ii) Explain the implications that a higher WACC has on management’s evaluation on prospective investment projects.

7. Consider the debt ratio for your company over the past two years:

i) Does it appear to be working towards the maintenance of a preferred optimal capital structure? (i.e., does it appear to be “stable”?). Explain your answer.

ii) What have they done to adjust/amend their gearing ratio? Increase or repay borrowings? Issue or buy back shares? Has the Director’s Report given any information as to why they have made any adjustments?

8.Dividend policy Discuss what dividend policy of the management of the company appears to be implemented. Explain any reason related to that particular dividend policy. 7 marks

9. Based on your analysis above, write a letter of recommendation to your client, providing an explanation as why you would like to include this company 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.