Reference no: EM133118768 , Length: word count:3000

MG 5556 Financial Resources Management - Brunel University London

Objective: The main objective of this assignment is to examine the ability of the students to analyse and interpret the financial statements of the companies. In addition, assignment examines the understanding of the students on how businesses make capital budgeting decisions. This assignment also examines the ability of the students to value the company using a valuation method.

Description of the Assessment

This assignment has three parts.

1. First part is based on companies listed on the London Stock Exchange (LSE). You are required to prepare a report comparing two companies from the same sector for the most recent two years (for detail see below under the heading part one.

2. In the second part you are required to discuss how businesses make capital budgeting decisions (for detail see below under the heading part two)

3. In the third part, you are required to value a company using one of the two methods (for detail see below under the heading part three)

Part One:
(1) In the first part, you are required to calculate and analyse the ratios of two companies from the same sector (see below) for the most recent two years. For a good report you are expected to use some industry data and information from various sources to support your analysis. Based on your analysis recommend the company which would be a good investment for prospective investor. Your report should cover following ratios:

• Profitability ratios (such as gross profit margin, operating profit margin, net profit margin).
• Financing management ratios (such as debt to equity, interest cover, liquidity ratios)
• Efficiency ratios (such as inventory turnover, trade receivable turnover, trade payable turnover)
• Overall profitability (such as ROA, ROE, EPS)
• Shareholders' Investment ratios (such as dividend cover, dividend yield, P/E ratio) Please select two companies from the list of FTSE 350 companies from the following sectors:
(a) Mining and Quarrying (for more information see section B on SIC code)
(b) Construction (for more information see section F on SIC code)
(c) Information and Communication (for more information see section J on SIC code)

You can get UK industry classification from the following:

You can get list of FTSE 350 companies from the London Stock Exchange website.

Annual reports are available to download from the company's website and as a scanned copy from FAME. It is also expected that you will collect information from the narrative section of the annual reports and accounts of companies. In addition, some industry data is expected in a good report.

Part two:

(2) Giving references to the academic literature discuss how capital budgeting decisions are made by smaller businesses. In this part you should cite academic papers to support your discussion.

Part three:

(3) In this part, you are required to prepare a valuation of a company using one of the following two methods:

1. Prospective price-earnings ratio analysis based on forecast normalised earnings.

2. Forecast dividend growth model.

You are required to compare your valuation with the actual market value of the company. In preparing valuation, you should state all your assumptions clearly in the report. Also you are required to show your calculations clearly either in the main report or in appendix.

Target length 3000 words including calculations. Any report shorter or longer than 10% of 3 000 words will be penalised. Please use Harvard style referencing.

Attachment:- Capital budgeting and valuation.rar