INTRODUCTION AND GUIDELINES

Your group is a team of research analysts employed by a publicly listed organisation on the Australian Stock Exchange. Your group is responsible for analysing quantitatively and qualitatively the past performance of the organisation with a view to improving for the future. Once the analysis is complete you will then (as a group) be required to write a report that interprets and critically evaluates the analysis and provides recommendations for the business moving forward. Your interpretation and recommendation must be justified.

Required:

1. Visit the website of your chosen and approved company and obtain the annual reports for the previous three years (2014, 2015 & 2016).

Note: Financial statements are contained within the annual reports. Read the Director’s and/or Chairman’s report and locate other qualitative information about your chosen company (for example, a podcast of the most recent AGM). This will give you an idea about the background of the company as well as any highlights. It may also be useful to see if your company has been reported in the media. The financial reports will give you an internal perspective and any media reporting will give you an external perspective from the media’s point of view.

2. Perform a Trend Analysis of the main items from the income statement (statement of financial performance) and balance sheet (statement of financial position) for 2014, 2015 and 2016.
3. Perform a complete ratio analysis for the financial statements for 2014, 2015 and 2016.
4. As a result of your analysis and research on the company write a report in Microsoft Word which brings all of the above analysis together in a professional format. Your analysis should cover both financial and non-financial factors and include benchmarking against a comparable company or industry averages. Your audience is the board of directors of your chosen company.

Your report should include the following:

• Table of Contents 
• Executive Summary 
• Introduction 
• Body of the Report:

– Information about the company and industry and other relevant background information

– Trend Analysis, Interpretation and Recommendations

– Ratio Analysis (profitability, efficiency, liquidity, market performance), Interpretation and Recommendations

– Overall Analysis, Interpretation and Recommendations (Note: Ensure that you  bring the individual parts of the analysis, interpretation and recommendations together as a summary of the business and its performance overall)

– Limitations of your analysis 

• Conclusion 
• References 
• Appendices (all calculations should be included in the appendix)

As a guide you should include (but not be limited to) the following in the body of the report: 

 Discuss the nature and overall strategy of the business.

 Discuss any challenges or opportunities the business faces into the future. As an example there may be external factors such as economic impacts, social trends etc. that may present a challenge or an opportunity moving forward.

 Identify any areas that you consider to be strengths or weaknesses for your company in its operations based on your analysis. Explain why you have identified these areas as strengths or weaknesses and interpret them. Discuss how the company could improve on the weaknesses or build on the strengths by providing a recommendation. You must be specific in your discussion, do not generalise.

For example, a weakness may relate to a growth in debt, an increase in expenses relative to revenues etc. Also look outside the area of accounting as you may find that a strength is in the growth of customers due to a new marketing campaign.  It is the group’s responsibility to look at all aspects of performance and identify what is appropriate for your company. Every company is different and each company will have its own strengths and weaknesses.

 Your analysis needs to be a critical evaluation, rather than a report that merely restates the results of the analysis. The written report and interpretation needs to be justified with reference to the analysis. Your comments should be specific to the company you have chosen, not generalisations.

As an example it would be insufficient to state that the current ratio increased – there also needs to be an interpretation and recommendation associated with the analysis. For example, the current ratio may have increased due to an increase in inventory, and the reason for the increase in inventory may be a slowdown in sales. In this example, the increase in the current ratio does not necessarily mean that liquidity has improved as inventory may not be liquid. You may conclude that, given the reduction in sales, the recommendation to the business should be that it needs to reduce its levels of inventory. Where possible, analyse what is and is not selling, to work out which types of inventory need to be reduced.

 You also need to critically evaluate the limitations of your analysis. The limitations should be discussed with reference to your company, not generally.

 Do not include calculations in the body of the report; they should be included in the appendix by cutting and pasting each part of the analysis (in Microsoft Excel) into the Microsoft Word document.