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Guidelines - Assignment 2

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13 views

Guidelines - Assignment 2

ASSIGNMNEnt

Uploaded by

2023406688
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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Course Code: INV536

Course Name: Financial Statement Analysis and Equity Valuation


Semester: October 2024 – January 2025
Group Project: Financial Position & Financial Performance Analysis

1. Objective of this project:


To develop the skills in analyzing company’s financial position & financial
Performance, cash flow variability or stability and survival of the listed companies.
2. Guidelines in selecting the companies:
o Choose ONE (1) industry or sector in Malaysian market.
o Select TWO (2) companies within the same industry or sector that are Public Listed
Companies in Bursa Malaysia (should be different from other groups).
o The companies selected must have more or less the same size (total assets)
and market capitalization.
o For each company, download the Statement of Financial Position and
Statement of Financial Performance and the Statement of Cash Flow for the
latest FIVE (5) years i.e. from 2019 to 2023.

3. Guidelines in conducting the analysis:


Task 1: Vertical Analysis – Financial Position and Financial Performance

o Convert the following items into

Financial Position:

1) Account receivable 2) Inventories 3) Net fixed assets 4) Total long term debts 5)
Total common equities

Financial Performance

1) Cost of goods sold or cost of sales 2) gross profit 3) total operating expenses 4)
operating profit 5) net profit

o Then make a comparison for the changes of each item for the five years period for each
company. Justify any possible reasons/assumptions for the changes.
Hint: Company A for 2019 to 2023
Company B for 2019 to 2023
o Next, conduct an overall comparative analysis – analyze overall com[any’s financial position
and financial performance. Focus on the significant items (large %)
Hint: Compare Company A and Company B for the 5 years

o Draw some conclusions which company performs the best and the worst overall
in terms of financial position and financial performance.

Task 2: Horizontal Analysis – Cash Flow Variability/Stability

o List/Summarize the following items in a table each company for each year of the five years
period: 1) Net cash flow from operating activities; 2) net cash flow from investing
activities; 3) net cash flow from financing activities; 4) net change in cash.

o Prepare the index numbers trend in a table form and chart for each company by taking
the earliest year as the base year i,e, 2019.

o Analyze the cash flow variability and stability of each company.


Hint: Compare the trend of the cash flow for each activity.

o State any possible reasons/assumptions for the changes in trend.

o Conclude which company performs better or worse in terms of cash flow variability and
stability, overall.

Task 3: Company Analysis: To assess the company survival

o Calculate the following ratios for each year (2019 to 2023) of the respective companies:
1) Working capital / Total assets (X1)
2) Retained earnings / Total Assets (X2)
3) EBIT / Total Assets (X3)
4) Total Equity / Total Liabilities (X4)
o Next calculate the Emerging Market Score (EMS) for every year of the respective company
by putting in the ratio into the following equation:
EMS = 3.25 + 6.56X1 + 3.26X2 + 6.72X3 + 1.05X4
o Then identify the respective companies’ survival based on the discrimination zones below:
Safe Zone: EMS > 5.85 (High Survival)
Grey Zone: > 4.15 EMS < 5.85 EMS (Moderate Survival)
Distress Zone: <4.15 EMS (Low Survival)
o Compare the survivability of both companies.
o Recommend which company that you are confident with to invest in based on the pattern of
survivability.
4. Presentations
o Students (in a group of FOUR) are required to deliver either oral or video
presentations (at lecturer’s discretion).
o Duration of presentation is within 15 - 20 minutes only.
o Time to present will be discussed later with respective lecturer.

5. Assignment Format
INV536
Cover Sheet/Page Title of Project, Student Name & ID, Course Code & Name,
Class Group, Semester
Font Type Arial, 1.15 spacing
Font Size 11
References Minimum 5 sources (reports, articles, news, website)
References Format American Psychological Association (APA) Format
Pages Between 15 to 20 pages (excluding the Appendix)

6. Deadline
o Written report should be submitted during the Week 11 (or at lecturer’s discretion).

7. Assignment Content Guidelines


o Table of Contents
o Chapter 1:
1.1 Introduction to Project Assignment
1.2 Background of companies (briefly)
o Chapter 2: Vertical Analysis – Financial Position and Financial Performance
o 2.1 Company A Analysis
o 2.2 Company B Analysis
o 2.3 Overall Comparative Analysis
o 2.4 Conclusion
o Chapter 3: Horizontal Analysis – Cash Flow Variability / Stability
o 3.1 Analysis of Company A
o 3.2 Analysis of Company B
o 3.3 Overall Comparative Analysis
o 3.4 Conclusion
o Chapter 4: The company analysis – Assessing the company’s survival
o 4.1 Analysis of Company A
o 4.2 Analysis of Company B
o 4.3 Overall Comparative Analysis
o 4.4 Conclusion
o Chapter 5: Recommendation to Improve the Weakness of Each Company (if
any)
o References (APA format)
o Appendix (the copies of companies’ financial statements, formulas & calculation)

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