Requirement:
Your task is to analyse the historical (for the last three years) performance of a listed company and present your findings in the form of a report, which will cover both qualitative and quantitative performance elements in a logical cohesive format.
Please note: If you are working for a company listed on the stock exchange, use this opportunity to complete the exercise on that company. Otherwise, feel free to value a competitor or a company that interests you. However, note that the company you select must be listed on a stock exchange and have a history of paying dividends.
The qualitative component of your discussion should include brief background information on the company including how they are placed within the industry, and a brief overview of the recent stock price movements for the company. The quantitative component should include an analysis of the following important ratios measuring liquidity, profitability, capital structure and market-value aspects of the company performance:
• liquidity: current ratio
• profitability: net profit margin ratio and Return on total assets
• capital structure: debt ratio and Interest cover ratio
• market value: price-earning (P/E) ratio.
Your analysis should highlight the important changes within these ratios over this period and identify the reasons for significant changes. Since these financial ratios are limited to the particular organisation, it is also useful to compare these ratios to other businesses in the same industry or by using industry averages.
You are also required to calculate the value of a stock (share) of the listed company selected above, using the Constant Dividend Growth Rate model. Go to your relevant stock exchange site (e.g. www.asx.com.au if using an Australian listed company) and find the latest share price. Assume the company chosen above has a 6% dividend growth rate and the required rate of return is 10%. Compare that stock value with the current stock market price. Are there any differences? You are required to explain these differences.
©Australian Institute of Business. 23JUN17_TMKM:2016:7ed 8
712FMGT Financial Management Subject Outline
Analyse and interpret the ratios and the other data with reference to the theoretical concepts introduced in this subject to evaluate the company’s operations and performance. Discuss limitations of this analysis if any. Taking into account the quantitative and qualitative analysis, you are then required to make a recommendation on whether to:
• Invest in the company.
• Do not invest in the company.
Please note: In order to start this assignment you will need to extract the financial statements (comprising three years information) of your chosen publicly listed company.
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