Accounting and Finance

Personal Assignment
Day 5
 Assignment

Deadline for submission is : Full Time Students              - 16/10/2022, 09.00 am (QT)

Deadline for submission is : Part Time Students            - 23/10/2022, 09.00 am (QT )
Assignment
The assignment is: to undertake an analysis of a large
corporate business from published information
 Description of the business and its operating segments
 Description of the state of the industry
 Ratio analysis of the business with consequent commentary
on performance
 Comparison with other similar businesses in the same
sector
 Sensitivity & Risk analysis
 Assessment of evident strategy and prospects
 DO NOT PICK QATAR AIRWAYS AS YOUR MAIN ANALYTIC
Financial Analysis
What to find out….
Revenue : scale and trend?
Profitability?
Cash generation?
Returns to Investment?
To all funds invested
To Shareholders’ Funds (Equity)
To Individual Shareholders
Asset Management?
Non Current Assets
Working Capital Management
Liquidity?

Company Performance
Analyser
Pick a Company

 Any Country
 English Information
 Currencies

 Conventional Financial Statements

 Large
 Competitor Analysis
 Compare Key Measures
 Compare other significant items
 Read executives’ commentaries & Notes
 Any other web commentaries
Pick a Company
 Airline
 Automotive
 Aerospace
 Retail
 Clothing
 Coffee Shop Chain
 Football
 Tourism and Leisure
 Pharmaceutical
 Energy Utility
 Power Generation
 Energy Industry Manufacture
 Oil / Gas Extraction / Processing
 Gold Mining
Pick a Company : Tips

 Careful with Groups / Multi Division Companies

 Careful with companies operating in different countries
 Accessible and comparable competitors
 Pick a subject you know about or can intuitively understand
 Pick something you’re interested in
 Pick something on which there is good information
The Analysis
The Form of Your Analyst’s
Report
The Analytic Report
Title Page (Subject and Your Name)

Executive Summary

Contents

1. Introduction
2. Background to the Industry
3. Background to the Company
5. Sensitivity and Risk
6. Discussion
7. Conclusion

Bibliography
Appendices
The Analytic Report
Title Page (Subject and Your Name)
Executive Summary
Contents
1. Introduction
2. Background to the Industry
3. Background to the Company
3.1 Background
3.2 Critical Success Factors
4. The Financial Statements
4.1 Overview
4.2 Revenue and Profitability
4.3 Returns to Investment
4.4 Asset Management
4.5 Liquidity
4.6 Solvency
4.7 Cash Flow
5. Sensitivity and Risk
6. Discussion
7. Conclusion
Bibliography
Appendices
Scheme for Company Analysis

Executive Summary
 Short : third to half a page
 Subject of Report
 Summary of Main Conclusions
Scheme for Company Analysis

1. Introduction
 Purpose of the report
 Overview of subject
 Comments on Methodology
 Main Sources of Information
 Any Limitations
Scheme for Company Analysis

2. Background to the Industry

 History
 Characteristics

Can refer to Porter’s Five Forces:

 Competition in the Industry
 Potential of New Entrants
 Power of Suppliers
 Power of Customers
 Threat of Substitute Products.
Scheme for Company Analysis

3. Background to the Company

3,1 Background
 History
 Key Facts
 Ownership
 Group Structure
 Main Product Groups
 Geographic Spread
 Significant Events
Scheme for Company Analysis
3.2 Critical Success Factors : Qatar Airways
 Strategy
 Strong Leadership
 Clear strategic vision and intentions
 People
 High quality staff
 Excellent training
 Recruiting industry best
 Operations
 Premium Routes and Good Coverage
 Managing and maintaining the the Fleet
 High Quality Aircraft
 High Aircraft Utilisation
 Achieving High Revenue per Seat
 Marketing
 Attracting Customers
 Building the Brand
 Encouraging Customer Returns
 Achieving Optimum Price Per Seat
 Managing Finances
 Managing Costs
 Maintaining Solvency
 Funding for Growth
Scheme for Company Analysis

4. Financial Statements
4.1 Overview
 Consolidated?
 Year End Date?
 Inclusions?
Analysis Scheme
4.2. Revenue and Profitability

 How total revenue and profitability has changed over the last few
years?
 Significant acquisition or sale of subsidiary businesses or divisions?
 Use an appropriate comparator / Industry measures
 Net and Gross profit margins : EBITDA margin if your comparison
company(s) is based in a different country.
Analysis Scheme

4.3. Returns to Investment

 Earnings per Share?
 Dividend policy?
 How does the company perform in terms of key ratios such as ROCE and
ROE? Competitor?
Analysis Scheme

4.4. Asset Management

 Non Current Assets / Other Investments?

 How efficiently are Non Current Assets Managed? : Competitor?
 How well is Working Capital being managed? : Competitor?
Analysis Scheme

4.5. Liquidity
 How does the current ratio look?
 Acid test?
 Comparisons with competitors?
Analysis Scheme

4.6. Debt & Solvency

Trends in debt level?
What is current debt leverage? : Competitor?
Is interest cover sufficient?
Does the company face a big cash outflow in
a future year?
Does it have the capacity to take on more
debt?
Are there other Long Term Liabilities?
Analysis Scheme

4.7. Cash Flow

 Net Cash Flow from Operations?
 Net Cash Flow for the year?
 Free Cash Flow to Equity (FCFE)?
 Any Equity Funding Flows?
 Investment Flows?
Analysis Scheme

5. Sensitivity & Risk

This section comments on the financial risks which the business faces, and it’s
sensitivity to these risks. The directors, in the annual report, are required to
comment on these risks and how they are trying to mitigate them.

 What might impact on revenue?

 Are there key costs which might increase?
 Are there supply chain or distribution risks?
 Are there risks associated with cash collection or bad debt?
 Are there specifically financial risks, eg interest rate, exchange rate changes?
 How sensitive is profit to these risks?
 How sensitive is cash collection to these risks?
Analysis Scheme

6. Discussion

How do you interpret the company, it’s performance and likely futures on
the basis of your analysis?

 How the company is performing overall,

 what it’s core strategies seem to be,
 how it is performing in comparison with it’s competitors,
 any key issues which should keep it’s directors ‘awake at night’,
 What are the key strengths and ‘core competences’ of the company?
 What are its areas of potential weakness or risks that could impact on its
capacity to grow in the future?
Analysis Scheme

7. Conclusion
 Your final summary and conclusion
 Not Overlong
 Future Prospects
 Comparisons with competitor?