December 6, 2022 admin
COURSEWORK (50%)
(2,500 WORDS, excluding list of references)
All submissions must be presented in typescript (Word format), 12pt, 1.5 line spacing.
Deadline for submission to FASER:
Note that late submissions will not be accepted unless full details of extenuating circumstances are provided. For details of extenuating circumstances please see Moodle.
AIM:
This assessment aims to provide you with an opportunity to reflect on the concepts you have learnt during the course of Accounting and Finance for Managers lectures and seminars. It will Help you in developing your ability to apply concepts to practice in the light of your experience while qualifying for the master’s degree.
You are required to write a report analysing the financial performance of a selected publicly listed company (please refer to submission guidelines for the choice of the company) for the latest THREE consecutive years, as a minimum. The report should include the following:
REQUIREMENTS:
a) Provide an introduction with a background of the business in question (e.g. strategy, prospects, competitor analysis, SWOT analysis). (20 marks)
b) Calculate at least three profitability ratios of your choice to support your analysis. Critically evaluate the profitability position of the company. (20 marks)
c) Calculate at least three efficiency ratios of your choice to support your analysis. Critically evaluate how the resources of the business are managed. (20 marks)
d) Calculate at least three investment ratios of your choice to support your analysis. Critically evaluate the investment position and potential opportunities of the company. (20 marks)
Profitability ratios are financial metrics that measure a company’s ability to generate profits. These ratios are used to assess the performance of a company and its management, and can be used to compare the profitability of different companies within the same industry. Some common profitability ratios include:
Return on assets (ROA): This ratio measures the profitability of a company’s assets. It is calculated by dividing net income by total assets.
Return on equity (ROE): This ratio measures the profitability of a company’s equity. It is calculated by dividing net income by shareholder equity.
Gross margin: This ratio measures the profitability of a company’s products or services. It is calculated by dividing gross profit by total revenue.
Efficiency ratios are financial metrics that measure a company’s ability to use its resources effectively. These ratios are used to assess how well a company is managing its operations and whether it is using its resources efficiently. Some common efficiency ratios include:
Asset turnover: This ratio measures how effectively a company is using its assets to generate revenue. It is calculated by dividing total revenue by total assets.
Inventory turnover: This ratio measures how quickly a company is selling its inventory. It is calculated by dividing the cost of goods sold by average inventory.
Days sales outstanding (DSO): This ratio measures how long it takes a company to collect payment from its customers. It is calculated by dividing accounts receivable by average daily sales.
Investment ratios are financial metrics that measure a company’s financial health and its ability to generate returns for investors. These ratios are used by investors to assess the risk and potential return of an investment in a company. Some common investment ratios include:
Price-to-earnings ratio (P/E ratio): This ratio measures the relationship between a company’s stock price and its earnings per share. It is calculated by dividing the stock price by the earnings per share.
Dividend yield: This ratio measures the amount of dividends paid by a company as a percentage of its stock price. It is calculated by dividing the annual dividend per share by the stock price.
Price-to-book ratio (P/B ratio): This ratio measures the relationship between a company’s stock price and its book value. It is calculated by dividing the stock price by the book value per share.
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e) “Although ratios offer a quick and useful method of analysing the position and performance of a business, they suffer from problems and limitations” (Atrill and McLaney, 2019, p. 234). Do you agree with this statement? Discuss with examples from the above analysis to support your argument. Briefly indicate the alternative approaches to overcome limitations of ratio analysis.
(20 marks) [TOTAL: 100 MARKS]
