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Report Writing Guidelines

The document provides guidelines for structuring a financial performance evaluation report of a company. It outlines the three main parts of the report: front matter, body, and back matter. The body should include an introduction, findings and discussion, and conclusions. The findings and discussion section involves quantitative analysis including horizontal analysis, vertical analysis, common-size statements, ratio analysis, and Edward I. Altman's Z-score model. Appendices with the company's financial statements for the past 5 years should also be included.

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Taz Uddin
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92 views7 pages

Report Writing Guidelines

The document provides guidelines for structuring a financial performance evaluation report of a company. It outlines the three main parts of the report: front matter, body, and back matter. The body should include an introduction, findings and discussion, and conclusions. The findings and discussion section involves quantitative analysis including horizontal analysis, vertical analysis, common-size statements, ratio analysis, and Edward I. Altman's Z-score model. Appendices with the company's financial statements for the past 5 years should also be included.

Uploaded by

Taz Uddin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Report Writing Guidelines of: “Financial Performance Evaluation of XYZ Company Ltd.

Section: A [Structuring the Report]

In terms of the elements of a formal report (that uses an indirect approach) there are three basic parts:

1. Front Matter  Cover.


 Title Page.
 Executive Summary.
 Table of Contents.
 List of Figures.

2. Body of the Report  Introduction.


 Findings & Discussion.
 Conclusions.
 Recommendation.

3. Back Matter  Appendices.


 References.
 Glossary (if required)

Additional Requirements:

1. Font Type Times New Roman OR Arial OR Cambria OR Calibri.


2. Font Size  Headings: Times New Roman (14).
 Sub-Headings: Times New Roman (13).
 Regular Literature: Times New Roman (12)
3. Line Spacing 1.5 lines.
4. Alignment Left & Right Justified.
5. Margin Top Margin: 1”; Left: 1.25”; Right: 1.25”; Bottom: 1”
6. Indent 2 pints.
7. Tables, Diagrams, Charts & Properly numbered separately. Graphs, Charts & Diagram should be colored.
Graphs
8. Paper Quality A-4 Size paper, weight: 120gm.
9. Binding Ring Binding.

Section: B [Contents, Requirements & Strategy of preparing the Report]

1. Each Group will collect 5-years Financial Statements of a Public Limited Company enlisted in Dhaka Stock
Exchange (DSE). The duration of the data will be 2009 to 2013.
2. In the Introduction section, give a short descriptions about the following things about your selected Company:

a) Brief History of the Company.


b) Objectives, Mission, Vision of the Company.
c) Board of Directors.
d) The Product Lines & Services offered by the Company.
e) It’s Domestic & International (if any) Markets.
f) Current & Future Strategy.
g) Goodwill of the Company.

3. In Findings & Discussion sections which are purely the quantitative analysis based on the Company’s last 5 years
of financial performance. It will include the followings:

a) Horizontal or Time Series Analysis. (Income Statement & Balance Sheet ; 2009 VS 2010; 2010 VS 2011;
2011 VS 2012; 2012 VS 2013).
b) Vertical Analysis. (Income Statement & Balance Sheet, each year from 2009 to 2013).

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c) Common-Size Statements. (Income Statement & Balance Sheet, each year from 2009 to 2013)
d) Ratio Analysis (From 2009 to 2013).
e) Ratio-Trends Analysis (From 2009 to 2013).
f) Edward I. Altman ‘s Z-Score Model [ From 2009 to 2013].
g) Prepare a Pro-Forma Balance Sheet for the year 2014 assuming sales will grow by 15% in the up coming
year.
h) Calculate the ‘External Financing Needed (EFN)’ for the year 2014 by using simple formula.
i) Calculate the ‘Sustainable Growth Rate’. [From 2009 to 2013].
j) Interpretation of your findings.

4. Use (as many as possible) relevant Graphs & Charts to depict your findings.
5. In the Appendix section, don’t forget to include the five years of financial statements of your selected Company as
documentation. There could be multiple appendices in your report numbering Appendix A, Appendix B,
Appendix C etc.

Section: C [ Some useful Hints & Formulae]

A. Horizontal Analysis or Time-Series Analysis.

Comparative balance sheet with horizontal analysis:

Comparative schedule of current assets:


2
Comparative income statement with horizontal analysis:

Comparative retained earnings statement with horizontal analysis:

3
B. Vertical Analysis

Comparative balance sheet with vertical analysis:

Current assets:
2008: (550,000 / 1,139,500) × 100 = 48.3%
2007: (530,000 / 1,230,500) × 100 = 43.3%
Comparative income statement with vertical analysis:

4
C. Common-Size Statements

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D. Ratio Analysis

1) Liquidity Ratios: 1. Current ratio or working capital ratio


2. Quick ratio or acid test ratio
3. Absolute liquid ratio
4. Current cash debt coverage ratio

2) Profitability Ratios: 1. Net profit ratio


2. Gross profit ratio (GP ratio)
3. Price earnings ratio (P/E ratio)
4. Operating ratio
5. Expense ratio
6. Dividend yield ratio
7. Dividend payout ratio
8. Return on capital employed ratio
9. Earnings per share (EPS) ratio
10. Return on shareholder’s investment/Return on equity
11. Return on common stockholders’ equity ratio

3) Turnover or Activity Ratios: 1. Inventory turnover ratio


2. Receivables turnover ratio
3. Average collection period
4. Accounts payable turnover ratio
5. Average payment period
6. Asset turnover ratio
7. Working capital turnover ratio
8. Fixed assets turnover ratio

4) Solvency or Debt-Management Ratios 1. Debt to equity ratio


2. Times interest earned ratio
3. Proprietary ratio
4. Fixed assets to equity ratio
5. Current assets to equity ratio
6. Capital gearing ratio

5) Market Ratios: 1. Earnings Per Share.


2. Dividend Per Share.
3. Dividend Payout Ratio.
4. P/E Ratio.
5. Dividend Yield.
6. Cash Flow Ratio.
7. Price to Book-Value Ratio.
8. Price/Sales Ratio.
9. PEG Ratio.
10. EV/EBITDA.
11. EV/Sales.

E. Ratio-Trends Analysis

Ratios 2009 2010 2011 2012 2013

Current ratio or working capital ratio


Quick ratio or acid test ratio
Absolute liquid ratio
Current cash debt coverage ratio
Net profit ratio
Gross profit ratio (GP ratio)
Price earnings ratio (P/E ratio)

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Operating ratio
Expense ratio
Dividend yield ratio
Dividend payout ratio
Return on capital employed ratio
Earnings per share (EPS) ratio
Return on shareholder’s
investment/Return on equity
Return on common stockholders’
equity ratio
Inventory turnover ratio
Receivables turnover ratio
Average collection period
Accounts payable turnover ratio
Average payment period
Asset turnover ratio
Working capital turnover ratio
Fixed assets turnover ratio
Debt to equity ratio
Times interest earned ratio
Proprietary ratio
Fixed assets to equity ratio
Current assets to equity ratio
Capital gearing ratio
Earnings Per Share.
Dividend Per Share.
Dividend Payout Ratio.
P/E Ratio.
Dividend Yield.
Cash Flow Ratio.
Price to Book-Value Ratio.
Price/Sales Ratio.
PEG Ratio.
EV/EBITDA.
EV/Sales.

F. Edward I. Altman’s Z Score:

One example of the various models that have been devised to predict defaults is Edward I. Altman’s Z-Score model,
which takes the following form:

Z = 1.2x1 + 1.4x2 + 3.3x3 + 0.6x4 + 0.99x5

Where:

x1 = Working capital/Total assets (%, e.g., .20, or 20%)


x2 = Retained earnings/Total assets (%)
x3 = Earnings before interest and taxes/Total assets (%)
x4 = Market value of equity/Total liabilities (%)
x5 = Sales/Total assets (number of times, e.g., 2.0 times)

In this model, scores below 1.81 signify serious credit problems, scores within the range of 1.82 to 3.00 indicates
shadow, whereas a score above 3.0 indicates a healthy firm.

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