Description
Students are required to form a group consisting of 4 students (max). 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).
Required:
This assessment task is a written report and analysis of the financial performance of a
selected company 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
HI5002: Finance for Business, Assignment, 2018
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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: www.asx.com.au
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:
? 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)
1 A description of the company
(Part 1)
2 Identify your company (in terms of the ownership-governance structure)
(Part 2 i & ii)
3 Calculation of Performance Ratios
(Part 3 i, ii and iii)
4 Two graphs from www.asx.com.au with the description of results
(Part 4 i & ii)
5 Identify any significant factors which may have influenced the share price of your
company.
(Part 5)
6 Calculation of ’ beta values and expected Rates of Return using the CAPM
(Part 6 i, ii & iii)
7 Weighted Average Cost of Capital (WACC)
(Part 7 i & ii)
8
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)
9 Dividend Policy
(Part 9)
10 Letter Recommendation
(Part 10)
11 Formal structure
(Part 1 to 11)
Final Submission of Complete Assignment on Blackboard
(Week 11)
HI5002: Finance for Business, Assignment, 2018
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QUESTIONS
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).
100 marks
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.
4 marks - Specify ownership-governance structure of the company:
i) Name the main substantial shareholders:
? With higher than 20.00% of shareholdings. Based on this argument you
should classify a firm as a family or non-family company, and ? With
higher than 5.00% of shareholdings.
3 marks
ii) Name the main people involved in the firm governance:
? The Chairman ?
Board members ?
CEO.
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
HI5002: Finance for Business, Assignment, 2018
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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?
6 marks
- Research via the internet or financial/business publications:
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 http://www.reuters.com/finance/stocks/ and 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 (ß) 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
answer.
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.
4 marks - 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 answer.
4 marks
ii) What have they done to adjust/amend their gearing ratio? Increase or repay
HI5002: Finance for Business, Assignment, 2018
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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.
Dividend policy
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.
10 marks - Formal structure and referencing.
5 marks
Total = 100 Marks
?
GENERAL REQUIREMENTS
• 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
Sample Solution
