Reference no: EM132297863
Analysis of Financial Information
Learning Outcome 1: Calculate ratios and analyse financial performance for a business entity.
Learning Outcome 2: Analyse and interpret financial information to inform decision-making for a business entity.
Instructions for assessment:
1 This is an individual assignment.
2 The assignment should be presented using Arial 11-point font or Times New Roman 12-point font with 1.5-line spacing.
3 This is a formal report to an external user, you must ensure that your report meets the external user's needs and is of a high quality in terms of spelling, grammar, sentence construction and paragraphs. Ensure the language used is appropriate.
4 Start each section on a new page. Use an appropriate headings, subheadings and a suitable numbering system.
5 The assignment must be referenced using the APA 6th style. Only use textbooks as a reference where needed.
6 Include a Title page, and one-page Executive Summary.
7 Print on one side only and staple in the top left corner.
8 Late submissions will be subject to the late assignment procedures outlined on the coversheet of this assignment.
9 Do not hand in this whole document with your report.
10 You are required to attach the cover sheet provided as the front cover to your report.
THE REPORT
The report should be in the following order:
1 Title page containing
• Suitable heading
• Who asked for the report
• Who was asked to prepare it
• When is it due
2 Executive Summary (250-300 words maximum ie: one page) containing
• The purpose of the report
• Key findings of the report
• Recommendations
3 Introduction
3.1 Background - Outline brief background about the business that will help the reader understand the context in which it is written.
3.2 Scope of the report - Describe thescope of the report including the number of years analysed and the types of information used to support the report.
3.3 Limitations of Financial Analysis - Outline any three (3) relevant limitations of the analysis.
3.4 Purposes of Financial Analysis- Outline any three (3) key purposes of financial analysis.
3.5 Structure of the report - Outline the main sections of the report and what each section contains.
4 Findings/Discussion
4.1 Profitability
Choose four (4)of the profitability calculations that you feel are most relevant toan analysis of the business.You must choose:
• Growth in Sales %
• EitherAverage mark-up % orGross Profit %
• One (1) of the expense categories, and;
• One (1) of Net Profit (before tax) %, Return on average assets orReturn on equity%.
For each of these:
• Describewhat the calculation shows is happening for this business. Use the numbersprovided.
• Suggest two (2) possible reasons for why the calculation has changed.Use information from the financial statements provided where possible.
• Discussthe implications of the change for the future.
4.2 Asset Utilisation
Using both of the asset utilisation calculations, complete the following for the business:
• Describewhat each calculationshows is happening forthis business. Use the numbersprovided.
• Suggest two (2) possible reasons for why the calculation has changed.Use information from the financial statements provided where possible.
• Discuss the implications of the change for the future.
4.3 Financial Stability
Choose any three (3) of the financial stability calculation that you feel are mostrelevant to an analysis of the business (Note: You cannot choose both Current and Liquidity Ratios). For each of the calculations you choose:
• Describewhat the calculation shows is happening forthisbusiness. Use the numbersprovided.(2 marks each)
• Suggest possible reasonsfor why the calculation has changed.Use information from the financial statements and other calculations where possible.(4 markseach)
• Discuss the implications of the change for the future.(2 marks each)
(24marks)
Note: For the purpose of clarity the 15 different ratios, percentages etc and the horizontal trends that you have calculated will collectively be called calculations where appropriate.
4.4 Horizontal Trends
Explain what the horizontal trends for profitability, asset utilisation and financial stability show happening for this business over the past 3 years. A short paragraph on each area is required.
4.5 Non-financial factors
Explainthree (3) non-financial factors that could have impacted on the profitability, asset utilisation and financial stability of the business. A short paragraph on each factor is required.
4.6 Industry standards
Industry standards are attached below
Choose three (3) industry standards from those outlined in the table above, one for profitability, one for asset utilisation and one for financial stability. You should select a calculation that you have analysed in questions 4.1 - 4.3.
• Comment on the performanceof this business against industry standards in each area over the three year period.
• Explain two (2)limitations of using industry standards.
Important Notes for Question Four:
• You should relate your answers to this business.Do not just providea general explanation. Your reason for choosing a particular calculationcan be either because itshows a good, or a bad result.
• Do not provide suggestions for improvement in this section.(Recommendations are required in Question Six.)
• The analysis of each calculationin questions 4.1 - 4.3 should take no more than a ½ page.
5 Conclusions
Outline the conclusions you have drawn about the profitability, asset utilisation, short term and long term financial stability of this business. Incorporate both positive and negative aspects of the business.Don't repeat your findings - a short paragraph summarising each key areais required.
6 Recommendations
6.1 Use the analysis that you have just conducted with regard to profitability, assetutilisation and financial stability to identify four(4) areas of the business that require improvement or development. The four (4) areas could bepotentialproblem areas or opportunities.
6.2 Provide practical recommendations to Sam, explaining how the business might improve performance in each of these four (4) areas.You should provide and explaintwo (2) practical recommendations for each of the four (4) areas you have identified.
6.3 Finally recommend whether Sam should increase his investment in this business. Justifyyour recommendation with financial and non-financial reasons.
Note: Question Sixshould take no more than 1.5 pages.
7 Presentation
Marks will be awarded for presentation of your report in each of the following areas:
• Structure including a headings and subheadings, page numbers and appropriate length.
• A well written report using appropriate business language, accurate spelling and grammar.
Attachment:- Analysis of Financial Information.rar