Reference no: EM133106337 , Length: word count:3000

IB7010 Accounting and Financial Management - University of Waterloo

Question:

The assignment considers an analysis of Britvic plc versus AG Barr plc. You are required to submit 2 separate reports: Case A examining the performance and sustainability of both companies AND Case B dealing with risk and return on equity of both companies. The two separate reports could be uploaded in one pdf file with a joint table of content.

Case A: Performance and sustainability

Freshly armed with your new Warwick MBA, you have recently joined an executive recruitment firm that specialises in advising and placing senior managers in the soft drinks industry. One of your clients is currently considering an offer of a senior post at Britvic plc when a similar post comes up at AG Barr Plc.

Your client has some time to respond to Britvic plc so is interested to learn more about both companies. She has commissioned you to write a report advising her on the past financial position and financial strength of AG Barr plc in comparison to Britvic plc. Your client, given the current circumstances of Covid- 19, is particularly interested in how the two companies compare in terms of financial performance, financial stability and job security post- Covid-19.

Required

Write the requested report comparing the financial performance and position of both companies as well as commenting on their future sustainability. Ensure that you make clear conclusions.

Note that your client is a busy executive with a strong marketing background but has limited experience of accounting. She will expect a clear and concise report. Some general guidance on acceptable report style follows:
• Use the most recent full year accounts of Britvic plc and AG Barr plc.
• Give your report a title & provide an Executive Summary,
• Give a brief introduction to cover the issues to be analysed and the approach you will consider.
• Within the report don't just show lots of calculations, explain what you infer from the numbers and ratios and how they support your conclusions and recommendations.
• Make use of the appendices to show details eg calculations.
• Cite sources, state assumptions made, mention other information that might be useful or further investigations you would have liked to conduct. Fully consider both financial and non-financial factors.

• Reach a conclusion and give any appropriate advice clearly. Make your report "as concise as is consistent with clarity".

• Make use of supportive diagrams - especially those that emphasise the comparisons between companies.

Case B: Risk and return on equity of Britvic plc and AG Barr plc

Intrigued by the analysis you have done for your client in Case A, you are interested in comparing the two companies in terms of equity risk and return. Using monthly prices between 1 December 2015 and 01 December 2021, you compute the historical return and volatility of the two stocks. In order to round up your analysis, you also estimate the two stock's betas based on their correlation with the FTSE All Share index.

Required

Using the stock return analysis and knowledge you gained while writing the report in Case A, write a separate report that summarizes your thoughts concerning which company is a better investment opportunity when considering the risk-return trade-off. Consider the following issues:

(a) Pay attention to differences between volatility and betas when considering the risk return trade- off. Describe what type of risk they measure.

(b) Can you provide interpretation for the estimated betas given the two firms operate in the same industry? Why could the two betas differ?

(c) Compute the rate of return you would require for investing in these two stocks. As ‘ingredients' for computing the required rate of return, use the risk-free rate of 0.7% and the expected market risk premium of 5.6%. Which stock has higher required rate of return and why? How is the required rate of return related to the average return computed based on the historical monthly returns? How does this relate to your decision to invest in the two stocks?

(d) Are historical data suitable for judging future performance for these two stocks?

Your clear and concise report should consider the overall assignment word limit. Notes on the data, your analysis and your submission.

• Use adjusted monthly closing prices that are provided with the assignment. The tickers are BVIC for Britvic plc and BAG for AG Barr plc.
• The ticker for the FTSE All Share index is FTAS.
• Please do not forget to calculate monthly returns from the prices before running further analysis.
• You can use functions built into Microsoft Excel (like ‘average', ‘stdev.p', and ‘covariance.p'). Before using them, make sure that you understand what these functions do. It is perfectly fine not to rely on these or other functions but to base your analysis on your own calculations in Excel instead.

Attachment:- Accounting and Financial Management.rar