Assignment question:
The assignment is based on the actual results for prescribed selected companies listed on the Australian Stock Exchange (ASX). Students should use the annual reports for the financial years ending 30 June 2014, 2013 and 2012. Students may also review commentaries written by industry analysts that provide critical analysis on various aspects of the selected company’s operating performance, financial position, cash flow and strategies.
For Part A of this assignment, students can choose ONE of the following two companies:
Xero Limited (Industry: Software & Services), or
Orbital Corporation Limited (Industry: Automobiles & Components)
In Part B of this assignment, students are required to undertake a comparative analysis with another company within the same industry as the company chosen in Part A of this assignment. For Part B, choose the appropriate company from the two companies below:
Technology One Limited (Industry: Software & Services)
Advanced Braking Technology Ltd (ABT): (Industry: Automobiles & Components)
Students are not allowed to either directly or indirectly contact any of the companies for which annual reports are used in this assignment. Students are also not allowed to contact analysts directly or indirectly to gather information and/or advice about this assignment. Students must base their analyses purely on the information that is provided on these companies’ websites and/or on the Australian Stock Exchange.
For both parts of the assignment, show all your calculations and support your arguments with absolute figures from the financial statements and/or from your calculations of ratios.
Required:
Part A: Discussions should be based on an analysis of the annual reports and the financial statements including the relevant notes.
1. Stakeholders:
Name five (5) stakeholder groups that are relevant for your selected company and discuss what information in the annual reports each of these five groups may be interested in and/or find useful. Justify your answer by providing reasons as to why you believe these five groups may find the specific information useful.
2. Corporate Governance and Ethics:
Based on the 2014 annual report, evaluate and discuss whether you are convinced that the company is complying with the eight (8) fundamental Principles and Recommendations of the ASX Good Corporate Governance Principles (ASXCGC) 2nd edition. State how the company is applying each of the eight principles of the ASX recommendations. Justify your decision as to what the company does or does not do to comply with the specific recommendation.
Use the financial statements for the three years ending 30 June 2014, 2013 and 2012 to answer questions 3 to 6.
3. Profitability analysis:
Calculate the following four ratios and analyse the trend in each from 2012 to 2014:
(a) Return on equity
(b) Return on assets
(c) Net profit margin, and
(d) Cash flow to sales
For each of the four ratios above, state if the company’s profitability has improved or deteriorated from 2012 to 2014 and state what the causes are/were for the trends. Ensure your analyses include a review of factors related to both revenue and expenses.
4. Analysis of financial position:
Calculate the ratios in the following two areas and analyse the trend in them from 2012 to 2014:
(a) Liquidity, and
(b) Capital structure
For each of the two areas, state if the liquidity and if the capital structure has improved or deteriorated from 2012 to 2014, and state what the causes are/were for these trends.
5. Analysis of cash flow:
For each of the three years, compare the net operating profit with the cash flow from operating activities. Discuss reasons as to why these two figures for each of the three periods are different. Classify these reasons into at least three categories.
6. Funding analysis:
Analyse the financing of the company and discuss the two main sources of finance for the company for each of the three years. Also discuss how the company spent that money during these three years.
Part B:
Students are only required to analyse the financial statements and accompanying notes of the comparative company to do Part B.
1. Download the financial statements and accompanying notes for the three years ending 30 June 2014, 2013 and 2012 of the comparative company in the industry as your selected company in
Part A. Calculate the following ratios from 2012 to 2014 for the comparative company:
(a) Profitability
(b) Liquidity, and
(c) Capital structure.
2. Compare the ratios calculated in 1 above with those you calculated in questions 3 and 4 of Part A for your selected company. Based on the profitability, liquidity and capital structure of these two companies, in which company will you buy shares? Justify your decision.