BAO5734-Financial Analysis

Task

On the basis of official company sources and external literature, evaluate and report on the most recent annual report of a company, as if you were security analysts making a recommendation on whether or not your clients should invest in it. 

Please select one company from the list in Companies for group assignment file. 

Your report should include:

1. Business and Strategic Analysis

Analysis of the economy: 

1.Discuss briefly (2-3 paragraphs) which macroeconomic factors (political, economic, social and/or technological factors – PEST analysis) may affect the industry that your company belongs to and your company performance. 

2.Discuss the industry’s growth potential. You must include this section and refer to it in your prospective analysis (further)

Company’s competitive and corporate strategy:

3.Discuss company’s competitive strategy, key success factors (core competencies) and risk drivers. Identify the company’s growth potential.  

4.Discuss the company corporate strategy: not all companies have a well-defined corporate strategy.

5.Download a copy of the company’s annual report for current year and last 3 years.

6.Download a copy of the competitor’s annual report for current year and last 3 years.

7.Convert financial statements for your company (Balance Sheet, Income Statement, Statement of Cash Flows) into Excel. It is not recommended to download the data from the available databases as databases use their own format for financial statements that is very abridged.

2. Accounting Analysis

Your report should include:

1.Using financial statements for your company and their competitor and your previous analysis (industry analysis and competitive/corporate strategy analysis) and identify 3 key accounts in their balance sheet/income statement. You must show a link to your previous discussion of the industry analysis and competitive/corporate strategy analysis.

2.Evaluate the quality of the disclosure of your company (accounting analysis step 4). You can use comparison to the competitor.

3.Identify 3 potential red flags for your company: use your company’s financial statements and notes. Red flags are potential source of earnings management for your company’s management

Cross-sectional analysis

1.Use the ratios you calculated in your Excel file and provide cross-sectional analysis of your company’s performance across each area of financial analysis: discuss major trends and relate them to changes in the macroeconomic factors, industry/business strategy, accounting analysis.

Time series analysis 

1.Use the ratios you calculated in your Excel file to conduct time series analysis of company’s performance over last years. Use your competitor’s figures to uncover major trends. Discuss major trends and relate them to changes in the macroeconomic factors/industry/business strategy

3. Financial Analysis

Your report should include:

1.ROE and its decomposition (DuPont analysis): you need to identify components that are strong and weak for your company. This is done using the time-series analysis and comparison with a competitor.

Use your previous analysis to identify and calculate 4 ratios per each area of financial analysis, i.e. operating management, investment management, and financial leverage ratios for your company and their competitor. These ratios are used further in the cross-sectional and time-series analysis.

Cross-sectional analysis

1.Use the ratios you calculated in your Excel file and provide cross-sectional analysis of your company’s performance across each area of financial analysis: discuss major trends and relate them to changes in the macroeconomic factors, industry/business strategy, accounting analysis.

Time series analysis 

Use the ratios you calculated in your Excel file to conduct time series analysis of company’s performance over last years. Use your competitor’s figures to uncover major trends. Discuss major trends an