What are the main weaknesses associated with ratio analysis

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Reference no: EM131043457

Task 1: Selection of Company

You have been asked to report upon the financial performance/investment potential of a company of your choice. From their annual report or other suitable financial databases (such as Financial Analysis Made Easy-FAME: Morning Star; Osiris; etc.) obtain relevant financial information for your chosen company for the last 5 years

Task 2: Extraction of ratios

From the financial platforms, extract the following financial ratios (or the necessary information) or variables to calculate the ratios) for the company over a period of 5 years as

- Profitability
- Liquidity
- Working capital management
- Capital structure
- Stock market performance

Task 3: Discussion of ratios

Critically examine the performance of the company using the ratios extracted over the period under consideration (use graphs/other forms of presentation of the ratios extracted to support your analysis). Conclude by deciding, with reasons, whether (assuming your personal resources permit) you should sell or hold your existing shares or you should buy more.

Task 4: Weaknesses of Ratios

What are the main weaknesses associated with ratio analysis?

Assessment Presentation Requirements:

The submission of your work assessment should be organized and clearly structured in a report format. Maximum word length allowed is 3000 words, excluding words in Charts & Tables and in the Appendices section of your assignment. Student is required to submit a typed-written document in Microsoft Word format with Times New Roman; Anal; Calibri of Size 12' for the body text and automatic table of contents for using the relevant headers. The line spacing 1.5. This assignment is worth 50% of the final assessment of the module

Indicate the sources of information and literature review by Including all the necessary citations and references adopting the Harvard Referencing System. Students who have been found to commit acts of Plagiarism are automatically considered to have failed the entire module.

1. Introduction:

This should clearly set the purpose of the assignment to include the financial objectives of the firm; address the methodology and source of information; the company chosen

2. Rationale for the choice of the Company

Provide the necessary justification for choosing the company and its financial objectives. (Should be critical in nature).

3. Performance Analysis [1500 words]

This should be carried out using the ratios extracted for

Profitability

Liquidity

Working capital management

Capital structure

Stock market performance

Comparative management commentaries; overall assessment and viewpoint based on your own analysis; graphical analysis etc. Note that the discussion should be supported with the relevant literature. It should be critical in nature.

4. Summary of analysis: [to help provide relevant recommendations] Provide a summary for the analysis carried out in the form of table with comments within the table.

5. Limitations of the method used to perform the analysis: [500 words]

This may be draw on the weaknesses associated with the use of ratio analysis

6. Conclusions & Recommendation: [500 words]

Ensure your conclusions and recommendations are justified and supported by facts. This should be logical and based on the evidence contained in the main body of the report.
Reference List

Reference no: EM131043457

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