Reference no: EM133124954

Introduction to Real-World Annual Reports

Overview:

Assessment Task - Financial analysis essayis an assessment item worth a total of 30% of the final grade for this subject.

Note; this assessment is NOT ahurdle assessment; however, students are required to attempt all assessments in order to pass the subject.
The questions in this workbook have been designed to introduce and prompt students to answer questions based on the concepts and principles learned the topic content throughout the study period. The workbook consists of;
» Part 1 -develop a background of the company and an overview of the company's corporate governance principles.
» Part 2 - familiarise students with the published annual reports and identify differences between results over a period of time.
» Part 3 - conduct ratio analysis on the company annual report.
» Part 4 -prepare a financial analysis essayof your assigned company, summarise the findings and present a financial analysis essay with supporting appendix to the investor.
In your first tutorial class, your tutor will assign you a company for this assessment task. You will work as an individual on the assignment completing all of questions for parts 1, 2 and 3 in this workbook. Once census date has passed, students will work with peers to discuss their answers to the workbook questions, this will provide confirmation they are on the correct path, or raise discussion for further investigation.

Part 1 - Introduction to Company Annual Report and Financial Statements
The purpose of part 1 is to begin your exploration of your company's annual report and corporate governance structure.

Part 1 - Question 1: (related content - topic 2)
Write a background summary of your assigned company including the following:
• When and why did your company first commence operation?
• What is the main or core business of the company?
• Some companies are diversified and have investments in other industries, for example, Wesfarmers has diverse business operations that cover supermarkets, department stores, home improvement and office supplies; coal production and export; chemicals, energy and fertilisers; and industrial and safety products. Is your assigned company diversified? What industries does the company operate in?
• Does your assigned company operate solely within Australia, other countries or does it operate internationally? Identify the operational locations.
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Part 1 - Question 2: (related content - topic 2)
What are the headings and sub-headings of the discussion on corporate governance? Note, if not presented in the Company Annual Report, review the Company website.
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Part 1 - Question 3: (related content - topic 2)
What are the page references for the discussion on corporate governance? (Hint - try the table of contents at the beginning of the annual report or review the Company website.) Briefly list the information included in the company's corporate governance report. Does this information differ from the corporate governance information covered in the content and required reading for topic 2?
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Part 1 - Question 4: (related content - topic 2)
What position was held and what was the composition and total remuneration of the highest paid board member? (Hint - try the Directors' Report.)
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Part 1 - Question 5: (related content - topic 2)
How many "subsidiary companies" or "controlled entities" are in the group? (Hint; try looking towards the end of the financial statements, near the end of the report). Are the subsidiaries/controlled entities located domestically and or internationally? Identify where they are located. This will give insight into how widespread the company's operations are and may assist you with your background information.
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Part 2 - Financial Statements
The purpose of part 2 is to not only introduce students to an actual set of financial statements of a publicly listed company, but to also identify information that may be significant for ratio analysis which will be conducted in Part 3. The financial statements are presented in the financial report section of the company's annual report. For this section you may find it easier to refer to the Excel spreadsheets to obtain the financial data. The Excel spreadsheet will contain the financial information for the past 10years; however, you will only need to refer the data for the past four years in your spreadsheet, (the past three years and the fourth may be required to create averages for some of the ratios in part 3). This will make it easier to refer to the financial data for several years in one excel worksheet.
Part 2 - Question 1 (Statement of Financial Position): (related content - topic 4)
What is the amount invested by the company in net assets for the current year? (Hint use total assets minus total liabilities). How does this amount differ from the value of net assets for each of the previous three years? Can you identify any reason for the changes? (Hint: look at the individual amounts that make up both the total assets and total liabilities, are there any changes to individual items over this three-year period? Alternatively, you could perhaps look at the notes to the financial statements in the annual report to see if there are any changes in the breakdown of individual items in the reports.) Discuss.
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Part 2 - Question 2 (Statement of Financial Position): (related content - topic 4)
How much was the total equity for the current year? How does this differ from the total equity in each of the previous three years? Can you identify any reason if there are any changes? Discuss.
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Part 2 - Question 3 (Statement of Financial Position): (related content - topic 4)
How much was the total current assets for the current year and what are the components classified under this heading? Is there any difference in the value of total current assets for each of the previous three years? Can you identify any reason if there are any changes? Discuss. (Hint: you may need to refer to the notes to the financial statements in the annual report to review more detailed information.)
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Part 2 - Question 4 (Statement of Financial Position): (related content - topic 4)
What are the items listed under non-current liabilities? Are there any new non-current liabilities in the current year that were not there in the previous three years? (Hint: you will need to look in the notes to the accounts to see the breakdown of non-current liabilities).
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Part 2 - Question 5 (Statement of Profit or Loss): (related content - topic 5)
How much was net profit for the current year? How does this compare to the net profit for each of the previous three years? Can you identify any particular revenues or expenses that may have led to changes in the profit figures over the three-year period? Discuss.
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Part 2- Question 6 (Statement of Profit or Loss) (related content - topic 5)
Is the total revenue in the current year greater or less than the total annual revenue recorded in each of the previous three years? Discuss.
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Part 2 - Question 7 (Statement of Cash Flow): (related content - topic 6)
How much was the cash flows from operating activities for the current year? What was the largest inflow item and the largest outflow item in the operating activities section? Does this differ from the previous three years? Discuss.
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Part 2 - Question 8 (Statement of Cash Flow): (related content - topic 6)
How much was the cash flow from investing activities in the current year? Has the company had any new investing cash flows in the current year compared to the previous three years? If they did, list the activities (Hint: it may be necessary to look in the notes to the accounts).
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Part 2 - Question 9 (Statement of Cash Flow): (related content - topic 6)
What was the net change in cash flows in the current year? How does this change compare to the previous three years? Discuss.
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Part 3 - Financial Statement Analysis Tools
The purpose of part 3 is to introduce students to using financial statement analysis tools covered in topic 7.Hopefully your answers to questions in part 2 may have flagged monetary differences that you can now compare based on percentages using ratio analysis. Ensure you include your calculations in your answer and more importantly, try and identify why percentage changes may have occurred. It is this analysis that is most important in this exercise, trying to identify "why" changes have occurred. The more analysis provided in the answers to the questions in this workbook, the more information you will have to draw on when preparing your financial analysis essay.
Prepare the ratio calculations first and then attempt to analyse the results. When performing ratio analysis, you should analyse each of the ratios on the basis of:
1. Describe the change
2. Explain the change
3. Suggest a cause
The pre-recorded lecture recordings present each ratio calculation. The supporting demonstration recordings provide a step-by-step process to complete the ratio calculations and the analysis of the exemplar company presents an approach to analyse and explain the ratio results. These recordings may assist you with the analysis of your assigned company.

Part 3 - Question 1 (Horizontal Analysis):
Conduct a horizontal analysis of the Statement of Profit or Loss (Income Statement) for the past 3 years. Comment on any trends.
Perform horizontal analysis on the Statement of Profit or Loss to identify changes to support your ratio analysis
Part 3 - Question 2 (Horizontal Analysis):
Conduct a horizontal analysis of the Statement of Financial Position (Balance Sheet) for the past 3 years. Comment on any trends.
Perform horizontal analysis on the Statement of Financial Position to identify changes to support your ratio analysis
Part 3 - Question 3 (Vertical Analysis):
Conduct a vertical analysis of the Statement of Profit or Loss (Income Statement) for the past 3 years. Comment on any trends.
Perform vertical analysis on the Statement of Profit or Loss to identify changes to support your ratio analysis
Part 3 - Question 4 (Vertical Analysis):
Conduct a vertical analysis of the Statement of Financial Position (Balance Sheet) for the past 3 years. Comment on any trends.
Perform vertical analysis on the Statement of Financial Position to identify changes to support your ratio analysis

Note: Horizontal and vertical analysis can be used as a point of reference to assist in identifying percentage changes of individual items that appear in the financial statements. When conducting ratio analysis, over a period of time, you may find it easier to not only identify the change in the numerator and denominator of the formula, but to also use horizontal and vertical analysis to identify the individual components that make up the numerator and denominator of the formula.
Part 3 - Question 5 (Trend Analysis):
Conduct a trend analysis of the Statement of Profit or Loss (Income Statement) for the past 3 years. Comment on any trends.
Perform trend analysis on the Statement of Profit or Loss to identify changes to support your ratio analysis
Part 3 - Question 6 (Trend Analysis):
Conduct a trend analysis of the Statement of Financial Position (Balance Sheet) for the past 3 years. Comment on any trends.
Perform trend analysis on the Statement of Financial Position to identify changes to support your ratio analysis

From the lecture PowerPoint slides and in the exemplar company information, when performing ratio analysis,you should analyse each of the ratios on the basis of:
4. Describe the change
5. Explain the change
6. Suggest a cause

Part 3 - Question 7 (Profitability):
Can you identify a trend in the return on equity ratio over the past three years? Comment on the trend. Briefly discuss possible reasons for this trend.
Describe the change:
Explain the change:
Suggest a cause:
Part 3 - Question 8 (Profitability):
Has the Return on Assets changed over the past 3 years? What may have caused the change?
Describe the change:
Explain the change:
Suggest a cause:

Part 3 - Question 9 (Profitability):
Has the profit margin and gross profit margin, if applicable, changed over the past three years? Is this a good result for the company? Briefly discuss what the change indicates. (Hint:as mentioned above, refer to your horizontal and vertical analysis of the Statement of Profit or Loss and Statement of Financial Position to assist in your analysis of this ratio.)
Describe the change:
Explain the change:
Suggest a cause:
Part 3 - Question 10 (Asset efficiency):
Identify if the asset turnover ratio increased or decreased over the past three years? Is this a good result for the company? Briefly discuss what the change indicates.
Describe the change:
Explain the change:
Suggest a cause:
Part 3 - Question 11 (Asset efficiency):
The inventory turnover ratio is only applicable to retail businesses. If your assigned company is a retail business, has the Inventory turnover changed over the past three years?Is this a good result for the company? Briefly discuss what the change indicates. Note you might find it useful to also convert to the number of days.
Describe the change:
Explain the change:
Suggest a cause:
Part 3 - Question 12 (Asset efficiency):
Has the receivables turnover changed over the past threeyears?Is this a good result for the company? Briefly discuss what the change indicates. Note you might find it useful to also convert to the number of days.
Describe the change:
Explain the change:
Suggest a cause:
Part 3 - Question 13 (Liquidity):
Has the current ratio increased or decreased over the past three years? Is this a good result for the company? Briefly discuss what the change indicates.
Describe the change:
Explain the change:
Suggest a cause:
Part 3 - Question 14 (Liquidity):
Has the quick ratio increased or decreased over the past three years? Is this a good result for the company? Briefly discuss what the change indicates.
Describe the change:
Explain the change:
Suggest a cause:
Part 3 - Question 15 (Capital structure/Gearing):
Has the debt-to-equity ratio increased or decreased over the past three years? Is this a good result for the company? Briefly discuss what the change indicates.
Describe the change:
Explain the change:
Suggest a cause:
Part 3 - Question 16 (Capital structure/Gearing):
Has the debt ratio increased or decreased over the past three years? Is this a good result for the company? Briefly discuss what the change indicates.
Describe the change:
Explain the change:
Suggest a cause:

Part 4 -Financial analysis essay

Task:You are required to write an essay of no more than 1page(approx. 500 - 600words)analysing the company you have been assigned for this assessment task. You will also need to provide a recommendation on whether you recommend the company for a potential investment by the investor.

To do this, you will need to complete the workbook questions for your assigned company. The financial analysis essay will be prepared by drawing information from the workbook for your assigned company.

Question:
An investor is contemplating a potential investment opportunity in several companies. The investor has asked you to provide a one-page financial analysis reviewing the profitability, liquidity, asset efficiency and capital structure of your assigned company. As part of your analysis, you will need to advise the investor if the company is a worthwhile investment and provide support for your recommendation.
Structure - Financial analysis essay
Your essay should be structured as follows

1. Introduction- approx. 50 - 70words
Introduce the aim (task) of the paper in one sentence. Next briefly introduce your assigned company and the purpose of the essay.

2. Body
In the body you should provide a brief comparative analysis of the key factors of your assigned company in separate paragraphs. This is an overall summary based on your own analysis you have drawn from your workbook calculations and answers.
Paragraph 1: Overall Profitability Analysis - approx. 50- 70words
Discuss the overall profitability of your assigned company, do not discuss individual profitability ratios unless they are standout results.
Paragraph 2: Overall Asset Efficiency Analysis - approx. 50 - 70 words
Discuss the overall asset efficiency of your assigned company, do not discuss individual asset efficiency ratios unless they are standout results.
Paragraph 3: Overall Liquidity Analysis - approx. 50- 70 words
Discuss the overall liquidity of your assigned company, do not discuss individual asset efficiency ratios unless they are standout results.
Paragraph 4: Overall Capital Structure Analysis - approx. 50 - 70 words
Discuss the overall capital structure of your assigned company, do not discuss individual asset efficiency ratios unless they are standout results.
Paragraph 5: Limitations of Analysis - approx. 50 - 75 words
Identify any limitations encountered in conducting the financial analysis. This may include things like insufficient or old data sources and so on.

3. Conclusion - approx. 50 - 75 words
State the main findings/analysis of your essay in summary format. Clearly explain the status of your assigned company.

4. Recommendations - approx. 50 words
Make a very clear recommendation for the investor. Uses the findings you have presented in the body of your essay to support your recommendation.
Page 2: References
Include the bibliographic details of any references you have used. You must use APA 7th format.

Attachment:- Real-World Annual Reports.rar