Reference no: EM132310638
Assignment Questions - Analysis of Financial Information
Learning Outcome(s) - On successful completion of this course the student will be able to:
Analyse and interpret financial information to inform decision-making for a business entity.
- Profitability
- Liquidity
- Asset utilisation
- Stability
- Investor
Formulate recommendations.
Effectively communicate conclusions.
Instructions - Prepare a written assignment in pairs and present this to the class.
SECTION ONE -
WRITTEN ASSIGNMENT - You are one of two financial analysts employed by New Zealand's Investment Research Group. A client with $20,000 has recently approached the group seeking advice on whether to invest in the share market. You and your colleague have been asked to prepare an analysis for two (2) companies currently listed on the N Z Stock Exchange recommending whether to invest in either of these companies. The companies you can choose to analyse for this assignment are:
NOTE: Highlighted are the two chosen companies:
- Briscoes Group Limited (BGP)
• Comvita Limited (CVT)
• Restaurant Brands N Z Limited (RBD)
You have perused the last three years financial statements for each company and calculated relevant ratios and percentages. These and other key figures are recorded in the tables below.
Comvita Limited Schedule of Ratios, Percentages and Key Figures For the years ending 30 June 2016-2018
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*2016
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2017
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2018
|
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(i)
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Increase in operating revenue
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51.11%
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(32.44%)
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14.51%
|
|
(ii)
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Gross profit margin
|
50.84%
|
39.86%
|
41.01%
|
|
(iii)
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Net profit (before tax) %
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11.40%
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6.00%
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6.24%
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(iv)
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Return on average assets %
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13.91%
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5.19%
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4.55%
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|
(v)
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Return on equity %
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14.75%
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6.64%
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4.64%
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|
(vi)
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Net profit after tax
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$18,477,000
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$9,822,000
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$8,211,000
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|
(vii)
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Current ratio
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6.33:1
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6.00:1
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6.29:1
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(viii)
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Liquidity ratio
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1.89:1
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2.62:1
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2.62:1
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(ix)
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Debt ratio
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0.46:1
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0.36:1
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0.40:1
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(x)
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Age of Accounts Receivable (days)
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34.63 days
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73.53 days
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102.07 days
|
|
(xi)
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Inventory turnover (times)
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1.62 times
|
1.02 times
|
1.03 times
|
|
(xii)
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Total assets
|
$243,268,000
|
$256,692,000
|
$318,567,000
|
|
(xiii)
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Basic earnings per share
|
46.91 cents
|
23.74 cents
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18.25 cents
|
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(xiv)
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Dividends cents per share (CPS)
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18 CPS
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2 CPS
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6 CPS
|
*The financial statements for the 2016 year cover 15 months from 1 April 2015 to 30 June 2016.
Restaurant Brands N Z Limited Schedule of Ratios, Percentages and Key Figures For the 52 weeks ending February 2016-2018
|
|
2016
|
2017
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2018
|
|
(i)
|
Increase in operating revenue
|
8.45%
|
28.08%
|
48.06%
|
|
(ii)
|
Gross profit margin
|
19.12%
|
19.24%
|
18.84%
|
|
(iii)
|
Net profit (before tax) %
|
8.53%
|
7.46%
|
7.04%
|
|
(iv)
|
Return on average assets %
|
23.96%
|
17.81%
|
15.30%
|
|
(v)
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Return on equity %
|
32.79%
|
19.39%
|
18.02%
|
|
(vi)
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Net profit after tax
|
$24,070,000
|
$25,955,000
|
$35,466,000
|
|
(vii)
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Current ratio
|
0.28:1
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1.44:1
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0.46:1
|
|
(viii)
|
Liquidity ratio
|
0.09:1
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1.29:1
|
0.26:1
|
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(ix)
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Debt ratio
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0.46:1
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0.36:1
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0.55:1
|
|
(x)
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Age of Accounts Receivable (days)
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4.81 days
|
2.65 days
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3.23 days
|
|
(xi)
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Inventory turnover (times)
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36.58 times
|
48.99 times
|
58.86 times
|
|
(xii)
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Total assets
|
$139,797,000
|
$302,387,000
|
$452,440,000
|
|
(xiii)
|
Basic earnings per share
|
24.59 cents
|
24.08 cents
|
28.83 cents
|
|
(xiv)
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Dividends cents per share (CPS)
|
20 CPS
|
22 CPS
|
23.5 CPS
|
To complete your analysis you are required to:
1 Access the NZX website and collect the share price for each of your two (2) companies at the close of each of the following days:
NOTE: these are the answers for question number 1. Proceed to question number 2.
Share prices of each companies below:
|
Date
|
Restaurant Brands NZ Limited
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Comvita Limited
|
|
29 August 2018
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$7.72
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$5.70
|
|
26 September 2018
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$7.78
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$6.40
|
|
31 October 2018
|
$8.58
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$5.70
|
|
28 November 2018
|
$8.53
|
$5.80
|
|
19 December 2018
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$8.40
|
$5.10
|
|
30 January 2019
|
$8.54
|
$4.61
|
|
27 February 2019
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$8.60
|
$4.09
|
|
20 March 2019
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$9.16
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$4.30
|
|
10 April 2019
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$8.77
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$4.13
|
|
1 May 2019
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$8.48
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$4.24
|
2 Comment on the change in share price over the period you have tracked for RESTAURANT BRANDS NZ LIMITED. Your commentary should include factors in the business environment / industry characteristics that may have resulted in a change in share price. Include research from information that has appeared in the media that might have relevance to how the shares have traded. This information does not have to be directly related to the particular company and should include the current economic environment and information about the particular industry the company trades in.
NOTE: Use the table on number 1 (Restaurant Brand Share price) to answer this question.
3 Collect the current data (ie: Choose only one current date) from the NZX website showing the following investment ratios:
These are the current data as of 9 May 2019 at 12:54 pm:
|
Restaurants Brands NZ Limited
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Comvita Limited
|
|
Dividend yield (gross)
|
2.793%
|
0.817%
|
|
Price/earnings (PE) ratio
|
0.0
|
0.0
|
|
Net tangible asset backing per share (NTA)
|
-$0.196
|
$3.260
|
|
Earnings per share (EPS)
|
$0.0
|
-$0.695
|
4 Using the current data you have collected from the NZX website compare and comment on the following ratios for each company. Comment on how each ratio is calculated, what each ratio measures and what this means for investing in each company.
NOTE: Use the information from number 3 to answer this question. Use both companies.
- Dividend yield (gross)
- Price/earnings (PE) ratio
- Net tangible asset backing per share (NTA)
- Earnings per share (EPS)
5. Using the share price on 1 May 2019 calculate how many shares your client could buy in each of your two companies and the dividends they could expect based on the number of shares bought on this day.
6. Choose some profitability, financial stability and asset utilisation ratios for RESTAURANT BRANDS NZ LIMITED that are important to advise your client about. Comment on what each of these indicates about the profitability, financial stability or asset utilisation of this company. Reasons for changes in ratios from one year to the next are not required.
These are the chosen profitability, financial stability and asset utilisation:
Note: Answer is for RESTAURANTS BRANDS NZ LIMITED ONLY. Use the highlighted data from the table.
|
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Restaurant Brands NZ Limited
|
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Profitability: Increase in operating revenue
|
|
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Financial Stability: Liquidity Ratio
|
|
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Asset Utilisation: Age of Accounts Receivables(days)
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7. Explain what diversification means and advise your client about how diversification could reduce risk when investing in shares.
8. Recommend whether your client should invest in these companies. Consider both short term and long term investing. Justify your recommendations considering the current business environment, return on the investment, profitability, financial stability and asset utilisation of each company.
SECTION TWO -
PRESENTATION - You are required to:
1. Choose one (1) company that you has investigated and recommend whether the client should invest in this company. Present your findings to the class. Note: Restaurant Brands NZ Limited is the chosen company to present.
2. The presentation should be a maximum of 8-10 minutes long and use suitable presentation aids for presenting financial information.
3. Your presentation should be relevant and informative.
4. In addition to the material researched in Section One your presentation should incorporate background information about your chosen company including:
- Brief history about the company
- The business activities it is involved in
Note: In this part, you are not required to do in PowerPoint. Do this as word document.
Attachment:- Assignment File.rar