Background
Being able to analyse and articulate company financial statements is an invaluable skill that ensures managers have a strong grasp on all facets of the business. Specifically, financial literacy ensures managers are equipped with relevant up-to-date knowledge to make crucial decisions to maximise the wealth of the organisation – a fundamental principle of financial management.
The objective of this assignment is to briefly describe and analyse the financial health of the company using the core concepts and techniques you have learnt in this subject particularly relating to – Ratio analysis and Working Capital Management.
Find a publicly listed manufacturing company in your country or region. If no locally listed company can be found, use a relevant international one. Extract relevant data from their annual report, and other sources (e.g. company websites, stock exchange, and/or from the IBISWorld or Marketline database). Using the information provided in the financial statements, comment on the liquidity and profitability of your selected company.
Select the following ratios from each category for your analysis for last 3-5 years.
Liquidity – Current ratio and Quick Ratio
Profitability – Return on Equity ratio and Return on Assets ratio
(Please note that calculation of ratios are not required as calculated ratios are available on IBISWorld and Marketline. However, if not available, calculate required ratios from the company’s financial statements.)
You are required to analyse and interpret the above ratios using the theoretical concepts introduced in this subject to evaluate the company’s operations and performance. Then, upon collecting observations from the last 3–5 years and industry aggregates, answer the following:
Based on a trend analysis, elaborate on whether the company you have chosen is improving or deteriorating in terms of its liquidity and profitability ratios, highlighting any areas (and appropriate actions) for improvement.
How does the company compare to its peers, i.e. benchmarking? Comparison can be done from the industry- averages (or else, to those from its main competitor)? Would there be any issues of concern and, if so, how to address them?
Is it possible to identify any relationship between liquidity and profitability ratios? Which is more important for the survival of the company in long run as well as short run?
Calculate ‘Operating cycle’ and ‘Cash cycle’ of your selected manufacturing company. How does understanding of all the elements of the operating and cash cycle help in managing working capital efficiently.
REQUIREMENTS:
The required word length for this assessment is 1300 words (plus or minus 10%).
Your report will be marked according to the criteria outlined in the assessment grading criteria outlined in the Subject Outline.
In terms of structure, presentation, and style you are required to use:
standard report format
author-date style referencing – Harvard (which includes in-text citations plus a reference list).
Acknowledge the sources of facts appropriately. Use a minimum of four (4) references.
All references must be from credible sources such as books, industry-related journals, magazines, company documents and recent academic articles.
Also Note: this is a masters level paper it does require some graph, charts, tables etc when presenting or comparing data – or however you intend to produce the work. The graphs/charts/tables etc and the description (eg. Table 4.1 shows the benchmarking difference between company A and B) only account for 1 word in the word count.
