Department of Finance
(07 36334) Financial Statement Analysis and Business Valuation
Individual Assignment 1 - credit analysis report
Assessment Guidance Autumn 2024
Main objectives of this assignment:
a) To encourage students to analyse their chosen firms’ financial performance and position from 2020 to 2023 (for some firms from 2019 to 2022 due to their financial year enddate falls after June) by applying the analysis techniques learned from the modules. They are required to reformulate the financial statements in order to identify accounts related to operating, financing and investing. After that, to calculate the accounting ratios based on the reformulated financial statements. Then to evaluate their sample firms’ financial statement performance and position with referring to qualitative data – managers’ statement, notes to the accounts, external auditor’s reports.
b) Students’ own judgements and arguments based on both qualitative and quantitative data, for supporting evaluation are essential. They are required to provide comment on whether to approve the application of three years bank load from their chosen sample firms as a bank manager.
About the assignment:
1) Students are required to collect copies of chosen firm’s annual reports in the past four years, few copies of FT news in the past four years. The detail of electronic databases is printed on the course outline.
2) Writing an credit analysis report with referring to the three assignment questions.
3) Students must present full references for their assignments.
4) Students must submit copies of past financial statements only (i.e. B/S, income statements, cash flow statement, group statement of comprehensive income), not the whole annual reports, as appendices of their assignments.
5) Tables, figures, graphs, references and appendices are excluded from word limit of 2,000.
Assessment criteria:
Part a: Reformulate the financial statements of your sample firm and a competitor firm you have chosen over the four financial years from 2020 to 2023 (or from 2019 to 2022 in some cases when firms have to publish their annual report in the second half of 2024). (30%)
50%-59% (Marks: 15 – 17):
1) Introduction of the core business activities of the sample firm and competitor firms.
2) Reformulate the selected financial statements of sample firm correctly.
60%-69% (Marks: 18 – 20):
1) Introduction of the core business activities of the sample firm and competitor firms. Identifying the business strategic stage of the sample firm.
2) Reformulate the selected financial statements of both sample firms and control firms correctly.
70% or above (Marks: 21 or above):
1) Introduction of the core business activities of the sample firm and competitor firms. Identifying the business strategic stage of the sample firm with SWOT analysis, Boston Consulting Group, or Lifecycle model.
2) Reformulate the selected financial statements of both sample firms and control firms correctly, with a clear illustration about the operating, financing and investing activities.
Part b: Undertake a credit analysis based on the financial position and performance of the company you have chosen over the four financial years from 2020 to 2023 (or from 2019 to 2022 in some cases). Note: not the mostrecent year. Compare the performance and financial position of your chosen company with the data from a company’s leading competitor. (50%)
50-59% (Marks: 25 – 29):
1) Calculate ratios based on the reformulated statements and/or normal financial statements correctly.
2) Generally illustrate the changes in ratios but without support of qualitative data (like managers or student’s own view based on past news.)
60%-69% (Marks: 30 – 34):
1) Calculate ratios based on the reformulated/normal statements correctly and compare them with those of the competitor firm.
2) Critically discuss the changes in ratios with the support of qualitative data (like managers or analysts’ point of views/reasons, or student’s own view based on past news).
70% or above (Marks: 35 or above):
1) Calculate ratios based on the reformulated and normal statements correctly and compare them with those of the competitor firm.
2) Critically discuss the changes in ratios with the support of qualitative data (like managers or analysts’ point of views/reasons, or student’s own view based on past news). Students’ points of view show their understanding about the sample firm’s financial performance and position, in addition, they can clearly identify the weakness/strength of the financial performance and position of the sample firm. Their analysis is logical without contradiction.
Part c: Based on the above analysis, as a bank manager, you need to make decision on whether you approve the three years bank loan application from your sample firm. (10%)
50%-59% (Marks: 5):
Student provides his/her recommendation.
60%-69% (Marks: 6):
Student provides his/her recommendation with referring to the results of analysis.
70% or above (Marks: 7 or above):
Student provides his/her recommendation with referring to the results of analysis – this part is related to the quality of analysis.
Part d: Presentation (10%)
50%-59% (Marks: 5):
Presentation: formal references are provided, adopting well recognised data sources, and there are some minor English mistakes at illustration.
60%-69% (Marks: 6):
Presentation: formal references are provided, adopting well recognised data sources, and there are some a few English mistakes at illustration.
70% or above (Marks: 7 or above):
Presentation: formal references are provided, adopting well recognised data sources, and there is no English mistake at illustration.
(07 36334) Financial Statement Analysis and Business Valuation
Individual Assignment 2 - equity analysis report
Assessment Guidance Autumn 2024
Main objectives of this assignment:
a) To encourage students to forecast their chosen firms’ financial performance and position in 2023 (2022) by applying financial analysts’ forecast in equity report or statistical methods. Finally, to calculate the fundamental value of the sample firm’sordinary share by the end of the fourth financial year (2023, or for some firms in 2022).
b) Accuracy of the forecasts is not the focus, but students’ own judgements/ arguments/assumptions derived based on both qualitative and quantitative data, for supporting their forecasts and valuations are essential.
About the assignment:
1) Students are required write an equity report with referring to the three assignment questions.
2) Students must present full references for their assignments.
3) Students must submit copies of past financial statements only (i.e. B/S, income statements, cash flow statement, group statement of comprehensive income), not the whole annual reports, and copies of financial analysts’ reports as appendices of their assignments.
4) Tables, figures, graphs, references and appendices are excluded from word limit of 2,000.
Assessment criteria:
Part a: Predict the financial position and performance of the company in the fifth financial year (i.e. 2024 or in some cases 2023) by using methods introduced on lectures. Please state the assumptions used to forecast the company’s financial position and performance in its fourth financial year. Then, compare the predictions with the company’s realised results in the fifth financial year. (Marks: 50%)
50-59% (Marks: 25 – 29):
(1) Adopt common size and trend analysis
(2) Without refer to analysts’ reports but relying on a simple statistic method, like mean, geometric means at deriving sales forecasts, without indication of assumptions. Or simply adopt one analyst’s sales forecasts from his/her report but without discussing his/her reasons. (3) Indication of the difference between the expected and realized results but lack of explanation.
60%-69% (Marks: 30 – 34):
(1) Adopt common size and trend analysis
(2) Adopt two analysts’ sales forecasts. Or adopt one statistics model, such as Holt’smethod, multivariate regression model, or other models with illustration of assumptions.
(3) Students also compare analysts’ reasons and forecasts with their own perception based on their work on Assignment 1.
(4) Compare and explain the difference between the estimated forecasts and the realized financial performance or position.
70% or above (Marks: 35 or above):
(1) Adopt common size and trend analysis
(2) Refer to two analysts’ sales forecasts, and critically evaluate their reasons. Or adopt one statistics model, such as Holt’s method, multivariate regression model, or other models with illustration of assumptions.
(3) Students also compare analysts’ reasons and forecasts with their own perception based on their work on Assignment 1.
(4) Compare and explain the difference between the expected and realized financial performance with referring to qualitative data, such as analysts’ or managers’ explanation, and past news. The forecasts must match with the business strategic position of the sample firm identified at Assignment 1.
Part b: Calculate the company’s forecasted value of equity per share at the end of the fourth financial (i.e. 2023, or in some cases 2022) year by using one equity valuation model. You need to state your assumptions based on the work of part (b). (Mark: 40%)
50-59% (Marks: 20 – 23):
(1) Adopt one equity valuation model and apply it correctly.
(2) Only referring to the analyst’s long term growth rate (of residual income, residual operating income or free cash flows, or free cash flows to equity, or dividend) but without explanation.
(3) Generally compare the fundamental value of ordinary share derived with the realized share price by the end of fourth financial year.
60%-69% (Marks: 24 – 27):
(1) Adopt one equity valuation model and apply it correctly.
(2) The work of valuation model is consistent to the work in Part (a).
(3) Referring to the analyst’s long term growth rate (of one of above variables) with referring to their explanations or assumptions.
(4) Compare and explain the difference between the expected and realized share price with referring to some qualitative information.
70% or above (Marks: 28 or above):
(1) Adopt one equity valuation model and apply it correctly.
(2) The work of valuation model is consistent to the work in Part (a).
(3) Referring to the analyst’s long term growth rate (of one of the above variables) with referring to their explanations or assumptions. Students present their own view on long term growth rate based on his/her perception on the sample firm’s financial performance. (4) Compare and explain the difference between the expected and realized financial performance with referring to qualitative data, such as analysts’ or managers’ explanation, and past news. Provide recommendation on whether the company would be a suitable investment target.
Part c: Presentation (10%)
50%-59% (Marks: 5):
Presentation: formal references are provided, adopting well recognised data sources, and there are some minor English mistakes at illustration.
60%-69% (Marks: 6):
Presentation: formal references are provided, adopting well recognised data sources, and there are some a few English mistakes at illustration.
70% or above (Marks: 7 or above):
Presentation: formal references are provided, adopting well recognised data sources, and there is no English mistake at illustration.