Question-
Financial Investment Pty (FIP) wishes to invest long term in one or more Australian listed companies. As a financial analyst employed by the Investment department of FIP, you have been asked to assess Harvey Norman, JB Hi-Fi, and Good Guys.
Therefore your first step is to examine the three financial statements (cash-flow, Income Statement, and Balance sheet) and develop a spread sheet model that will facilitate analysis of the financial statements of these companies. You would have to consider the five groups of financial ratios in order to rank the proposed investment in these four companies. Your boss has indicated that although this may be the initial list of companies, your spreadsheet model should be developed in such a way that it can easily be utilized for other companies should the need arise. As your boss has had nasty experiences when making decisions using spreadsheet models, she would also like to be able to understand the assumptions built into the model.
The deliverables required therefore are a report containing:
• Assumptions you made in the financial model;
• A spreadsheet or other model that satisfies the above requirements;
• A short group task report of the analysis of the short-listed companies in a chosen industry in Australia, including a reasoned opinion regarding the financial health of each company.
• Given an investment (from general reserve of FIP) budget, calculate the % of capital that should be invested in each firm based on the developed financial model and the financial ratios as criteria.
• Hints: 1) use common size financial statements; 2) assign a weight for each financial ratio and compute the aggregated weight for comparison; 3) you may use the following weights or you own weights for each financial ratio.
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Financial ratio
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Weight
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Total asset Turnover
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0.20
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Profit Margin on Sales
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0.15
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Return on Asset
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0.15
|
|
Earning per share
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0.15
|
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Debt ratio
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0.10
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Price/Cash Flow ratio
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0.05
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Basic Earning Power
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0.05
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Current Ratio
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0.05
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Return on Equity
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0.05
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Market/ Book
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0.05
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Total
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1.00 (i.e. 100%)
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Additional information-
This question belongs to Accounting and it illustrate about preparing a report on the financial analysis of a company.
Word limit- 1600.