Financial statement analysis and report Essay
Financial statement analysis and report
1. Obtain the most recent annual report for two companies in any of the industries on the Australian Stock Market (for example, mining, retail, manufacturing, construction, service, transport). The reports should contain at least three years of income statement data and two years of balance sheet data. Use one of the chosen companies as your ‘base company’ and the other as your ‘comparison company”.
2. Analyze at least 3 (three) items on the income statement (statement of financial performance) for the base company that would be important to an investor, and discuss whether your company’s performance related to these items appeared to be improving, deteriorating, or remaining stable. Justify your answer.
3. Analyze at least 3 (three) items on the balance sheet (statement of financial position) for your base company that would be important to an investor, and discuss whether your company’s performance related to these items appeared to be improving, deteriorating, or remaining stable. Justify your answer.
4. Analyze your base company’s investing, operating and financing activities for the most recent year as identified in the statement of cash flows, specifically identifying the two largest investing activities, the two largest operating activities and the two largest financing activities. Discuss whether you agree or disagree with the investing and financing strategies that your company appears to be employing.
5. Identify 2 (two) items not included in (or derived from) the financial statements that you think would be important to someone considering whether to invest in your base company. Discuss your reasons for believing that these two items would be important in making an investment decision.
6. If you were making a decision to invest in one of the two companies, which company would you choose? Why? (Note: your answer in this section must include some financial issues, but your answer need not be limited to a discussion of financial issues.)
1. You must refer to the entire annual report for each company being discussed.
2. Your analysis must include as an appendix page with the ‘relevant portions’ of the annual reports, and the relevant portions of the annual reports must be highlighted. Your report must also contain appropriate quotation marks for quoted material and appropriate citations for material taken from sources outside the financial statements. Refer to the course outline for information on referencing
3. Your analysis is limited to 4 (four) pages, and must be typed, double-spaced using Arial 11-point font.
The written projects are worth 15 marks and will be graded in two phases:
First, the projects will be reviewed for compliance with the basic requirements and for composition. Projects submitted must: (i) contain the appropriate pages from the annual reports for both companies being discussed, (ii) include appropriate in-text references to the relevant portions of the annual reports and (iii) have appropriate citations for material taken from sources outside the annual reports. Projects that do not meet these criteria will be given a fail mark (less than 50%).
Second, the projects will be reviewed for content and will be graded using the following rubric:
12.75 – 15 marks: The paper is well written, free of grammatical and other writing errors, and well organized. The report addresses each of the issues specified in the requirements, uses appropriate examples to illustrate concepts discussed, and integrates the annual report data with the narrative. The report focuses on important items, demonstrates a thorough understanding of the relationships among financial statement data, and is cohesive.
11.25 – 12.75 marks: The paper generally is well written but may have minor grammatical or other writing errors or lack smooth transitions. The report addresses the issues specified in the requirements, demonstrates understanding, and focuses mainly on important items, but does not fully synthesize the material being discussed, and/or does not integrate the annual report data with the narrative.
9.75 – 11.25 marks: The paper does not have excessive grammatical or other writing errors. The report addresses the issues specified in the requirements, but demonstrates only moderate understanding, and/or lacks integration.
7.5 – 9.75 marks: The paper does not have excessive grammatical or other writing errors. The report addresses the issues specified in the requirements but demonstrates only minimal understanding of one or more of the issues.
0 – 7.5 marks: The paper fails to meet the basic requirements, has excessive composition errors, and/or fails to demonstrate understanding of the requirements.
Guide to understand and find annual report of companies:
Most public companies have made their annual reports available at company websites.
A company’s annual reports are often located under the Investor Information section at the company website.
You can use the Company Search http://www.asx.com.au/research/company-research.htm function to find the Internet addresses and other details of Australian companies listed on the Australian Stock Exchange (ASX).
Use an internet search engine to search on a company name to access companies online or use the following company directories to locate the internet address for companies in Australia and overseas.
ASX audio presentation: Annual Report http://asx.com.au/programs/vignettes/lesson2part2.html
You can refer to the following books on Report writing:
‘Communication Skills Handbook, 3rd Edition’, Summers J and Smith B., Milton: John Wiley &
Sons, Inc.: 2010
‘ Schaum’s quick guide to writing a great research papers, 2nd Edition’, Rozakis, Laurie, McGraw-Hill: 2007
‘College writing skills with readings’, Langan, John, McGraw-Hill: 2001
‘The writing process: a concise rhetoric, reader and handbook’, Lannon, John,
‘Essay writing for students: a practical guide’, Clanchy, John, Longman: 1996