HI5002 Assess the Financial Position and Financial Performance of the
The group is required to study, undertake research, analyze and conduct academic work within the areas of business finance covered in learning materials 1 to 10 inclusive. The assignment should examine the main issues, including underlying theories, implement performance measures used and explain the firm financial performance. Your group is strongly advised to reference professional websites, journal articles and text books in this
assignment (case study).
This assessment task is a written report and analysis of the financial performance of a selected company “WOOLWORTHS” in order to provide financial advice to a wealthy investor. It will be based on financial reports of a listed company on the ASX . This assignment requires your group to undertake a comprehensive examination of a firm’s financial performance and must be submitted by Week 10
STAGES TO BE COMPLETED
Create your group’s “business name” under which your group will be providing the
financial advisory services.
Choose a company that your group will investigate/analyse for the purposes of possible
recommendation to your client. The group should obtain all information about the selected company from this web site:
Please note: Each group can only choose 1 company and once the company has been chosen, the other group can not choose the same company (in other words, the latter group has to choose another company that hasn’t been chosen by other groups). First come first served rule applies here, it means let your lecturer knows asap which companies your group want to discuss, your lecturer can check whether your chosen companies are still available or not and finally register your chosen company with your Lecturer
Your group MUST:
Ø Obtain a copy of the last Financial Statements including Income Statements, Balance Sheets, Statement of Changes in Equity, Cash Flows Statements and Notes. Your group can downloaded these documents from the suggested web site using the firm’s code (example, BHP- for BHP Billiton Company, etc).
(Part 1 to 10)
A description of the company
Identify your company (in terms of the ownership-governance structure)
(Part 2 i & ii)
Calculation of Performance Ratios
(Part 3 i, ii and iii)
Two graphs from
(Part 4 i & ii)
Identify any significant factors which may have influenced the share price of your
Calculation of ’ beta values and expected Rates of Return using the CAPM
(Part 6 i, ii & iii)
Weighted Average Cost of Capital (WACC)
(Part 7 i & ii)
Using the debt ratios for your company over the past two years, emphasise any improvement
towards the maintenance of a preferred optimal capital structure.
(Part 8 i & ii)
(Part 1 to 11)
Final Submission of Complete Assignment on Blackboard
Your group is an investment adviser, working to build a foundation of wealth for your clients. One of your wealthiest clients already has a diversified portfolio, which includes managed funds, property; cash/fixed interest and a few direct share investments in Australia and around the world.
The assignment is a written comprehensive report and analysis of the firms’ financial
performance (including referencing).
Your group is required to do the following tasks:
- Prepare a brief description of the company, outlining the core activities, the market(s) in which it operates within and any factors in the companies’ history which you consider help present a “picture” of your company.
- Specify ownership-governance structure of the company:
- i) Name the main substantial shareholders:
Ø With higher than 20.00% of shareholdings. Based on this argument you should classify a firm as a family or non-family company, and Ø With higher than 5.00% of shareholdings.
- ii) Name the main people involved in the firm governance:
Ø The Chairman Ø Board members Ø CEO. 3 marks
o Whether any of these people have the same surname as any of substantial shareholders (>20% share capital). If yes- you could use this as an argument for the presence of an owner or family member(s) in the firm’s governance. o Whether any of shareholders with more than 5% share capital are involved in firm governance. 3 marks
- Calculate the following Fundamental Ratios for your selected company for the past 2 years. Annual reports are accessible via company websites:
- Short term solvency (Liquidity ratios)
- Long term solvency (Financial Leverage ratios)
- Asset utilization (efficiency or turnover ratios)
- Profitability ratios
- Market value ratios 20 marks
- Using the information from the ASX website:must complete the following tasks:
- i) Prepare a graph / chart for movements in the monthly share price over the last two years for the company that you are investigating. Plot them against movements in the All Ordinaries Index. 6 marks
- ii) Write a report which compares movements in the companies’ share price index to the All Ords Index. For instance, how closely correlated is the line with the All Ords Index. Above or below? More or less volatile?
- Research via the internet or financial/business publications: 6 marks
From research via the internet (using credible sources) or financial/business publications, note any significant announcements which may have influenced the share price of your company. These factors could include merger activities, divestitures, changes in management’s earnings forecasts, changes in analysts’ forecasts, unusual write-offs or abnormal items, macroeconomic factors, industry wide factors, significant management changes, changes in the focus of the company, impact of competitors or law suits etc. (Restrict the number of announcements to 5). 10 marks
- Go online to type in the code for your company into the Search Stocks field and click on the magnifying glass button.
- i) What is their calculated beta (β) for your company?
2 marks ii) If the risk free rate is 4% and the market risk premium is 6%, use the Capital Asset Pricing Model (CAPM) to calculate the required rate of return for the companies’ shares. 4 marks
iii) Is the company you have chosen a “conservative” investment? Explain your
2 marks 7. Weighted Average Cost of Capital (WACC)
- i) Using information from the latest company report for the company (i.e. interest rate on their major source of long-term loans) and the estimated cost of equity capital calculated (in part 6ii above), calculate the WACC for your company.
6 marks ii) Explain the implications that a higher WACC has on management’s evaluation on prospective investment projects.
- Consider the debt ratio for your company over the past two years:
- i) Does it appear to be working towards the maintenance of a preferred optimal capital structure? (i.e., does it appear to be “stable”?). Explain your answe
4 marks ii) What have they done to adjust/amend their gearing ratio? Increase or repay
borrowings? Issue or buy back shares? Has the Director’s Report given any
information as to why they have made any adjustments?
4 marks 9.
Discuss what dividend policy of the management of the company appears to be implemented. Explain any reason related to that particular dividend policy.7 marks
- Based on your analysis above, write a letter of recommendation to your client, providing an explanation as why you would like to include this company in his/her investment portfolio. Please refer to the ratio results calculated earlier and any other trends or factors that you believe to be important.
- Formal structure and referencing. 10 marks
Total = 100 Marks
- The report must have an academic written structure including an introduction, body and conclusion.
- This assignment must be completed IN Group.
- Use numbers in the body of the report (e.g., “5. Research via the internet”).
- Provide an explanation on each of these issues (points) and explain how they confirm the underlying theory, particularly related to the ownership, financial measures, risk-return, capital structure and dividend policy.
- You are required to submit the assignment on Blackboard
- Please ensure the final submission self check (plagiarism check is not over 30%)
Presentation of written work
- Please submit your group assignment on time (Week 10).
- Please make sure that your group member’s name and surname (student ID), subject name, and code and lecture’s name are written on the cover sheet of the submitted assignment.
- You are required to use Times New Roman font, size 12 with 1.5 line spacing.
- Please insert page numbers into your assignment.
- Please use 3 cm margins.
- Submitted work should be your original work showing your creativity.
- Always keep an electronic copy until you have received the final grade for the
A high standard of work is always expected, so poorly presented work may be returned unmarked with a request to re-submit.
Rules apply for electronic submission. When you submit your assignment
electronically, please save the file as ‘Assessment Task 1.doc’.
When writing your assignments, a reference must be included every time you use someone else’s ideas or information. In-text referencing of ALL sources, whether academic books, journal articles, newspaper articles, material from the Internet etc., must be cited in the main text of the assignment itself. Harvard Style referencing is required for this assignment.
A reference must be included when you:
- Paraphrase (express someone else’s idea in your own words).
- Quote (express someone else’s idea in their exact words).
- Copy (financial statement, reproduce a diagram, graph or table from
someone else’s work).
Titman, S., Martin, T., Keown, A.J., Martin, J.D, Financial Management: principles and applications, 7th Edition, Pearson Education, Melbourne, 2016, Australia.
Halili, E, Saleh, A and Zeitun, R (2015), 'Governance and Long-Term Operating Performance of Family and Non-Family Firms in Australia', Studies in Economics and Finance, vol.32, no.4, pp.398-421.
Plagiarism, collusion and cheating
Holmes Institute regards most seriously any act of dishonesty in assessments such as plagiarism, collusion, cheating, re-submission of previously marked work in different units, examination misconduct and theft of other students’ work.
‘Plagiarism’ means to take and use another person’s ideas and pass these off as your own by failing to give appropriate acknowledgement, that is, not indicating by referencing that the ideas expressed are not your own.
‘Collusion’ (or unauthorised collaboration) means joint effort in preparing material submitted for assessment, between students or others, except where this has not been approved by the lecturer in charge of the unit.
‘Cheating’ means to obtain an unfair advantage in an examination or in other written or practical work required to be submitted or completed by a student for assessment. If the passing off was done intentionally, you have cheated; if it was unintentional, the offence you have committed is the academic misdemeanour of failing to reference a source correctly.
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