Financial analysis report

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ASSESSMENT 2: FINANCIAL ANALYSIS REPORT

35%
2200 words ± 10%
Modules 2-3
Learning outcomes 1-3
Electronically through MyLO Assignment submission folder

Submission:
Before attempting this assignment:

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Ensure the ‘Assessment’ section in this Unit Outline is read and understood. If you have any questions, please do not hesitate to contact the lecturer.

Students should refer to the ‘Guide to Assessment’ file under the Content tab on the unitMyLO site for guidelines on assignment presentation.

Ensure you understand the assignment question(s) and/or tasks. Once again, consult your lecturer should you be unsure of any matters.

Note: All students are required to submit this assignment to be eligible to undertake the final unit examination.

Task description & requirements

There are TWO questions in this assignment, including the preparation of a company’sincome statement and balance sheet and undertaking the financial statement analysis for two global companies operating port and terminal business.

Note there is NO requirement for presenting an abstract, table of contents, introduction and conclusion in the assignment. Answer the questions directly, clearly indicating the question number. Source of information used for this assignment should be acknowledged.

Question 1

The following data relates to the financial information of Chen Marine and Port Group as at 30 June 2018. Complete the following tasks for the company. The company tax rate is 30%.

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  1. (1) Prepare an income statement for the year ended 30 June 2018.
  2. (2) Prepare a balance sheet as at 30 June 2018 in a vertical format.

[2 Marks]

[4 Marks]

JNB518 Finance for Decision-Making Page 9

Account

$’000

Account

$’000

Revenue

300,000

Accounts receivable

32,000

Asset maintenance

32,400

Inventory

3,000

Depreciation expense

13,420

Insurance expense

10,900

Land

80,000

Electricity and telephone expenses

5,600

Property, plant and equipment

488,000

Prepayments

8,000

Accumulated depreciation

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40,000

Ordinary shares

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50,000

Port operations expenses

30,000

Long-term loan

283,000

Interest expense

14,400

Wages expense

38,000

Cash

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38,000

Deferred tax assets

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28,000

Current tax liability

1,300

Marine expenses

9,000

90-day bank bill payable

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2,000

Retained earnings 2017

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?

Accounts payable

24,000

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Retained earnings 2018

?

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Bank overdraft

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1,000

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Question 2

Suppose you are working in a financial institution as a financial advisor. Recently you receive a request from a client who is interested in investing in shares of two international container terminal operators, DP World and PSA International. You have to provide a written reportto the client on the companies’ financial performance and recommended actions for investment. The two companies’ consolidated financial reports for 2017 are available in the following links. Use the two-year data, i.e. 2016 and 2017 in the reports for the analysis.

DP World Annual Report 2017:http://web.dpworld.com/wp-content/uploads/2014/05/DPWORLD_AR.pdf, where the Consolidated Statement of Profit and Loss and Consolidated Statement of Financial Position are available on pages 76 and 78 respectively. Notes to financial statements are also available in the report, which provides further information for your analysis.

PSA International Annual Report 2017:https://www.globalpsa.com/assets/uploads/AR2017.pdf, where the Statements of Financial Position and Consolidated Income Statement are available on pages 39 and 40 respectively. Notes to financial statements are also available in the report, which provides further information for your analysis.

Both annual reports are also available in MyLO (in the ‘Assessment Information’ file underthe Content Tab).

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JNB518 Finance for Decision-Making Page 10

Your report should consist of the following:

(1) Calculations of the ten (10) financial ratios below using relevant data in the reports for the two companies for the two years (i.e. 2016 and 2017).

a. Current ratio

f. Times interest earned ratio

b. Quick ratio

g. Total asset turnover

c. Debt ratio

h. Fixed assets turnover

d. Average collection period (days)

i. Net profit margin

e. Return on equity

j. Return on total assets (ROA)

[8 Marks]

(2) Analyses of financial performance of the two companies based on short term solvency, financial stability (gearing), efficiency of asset management, and profitability over the two year period.

(3) A cross sectional analysis using 2017 ratios.

[12 Marks]

[3 Marks]

(4) Investment recommendations based on your analysis results. You should research relevant information to help you make recommendations, such as current market environment of the container shipping and port industry and the companies’ businessnature and strategies.

Note:

  •  Question 2 is a report. The information on the format of report writing is includedin module 3; it is also available in MyLO (in the ‘Assessment Information’ file underthe Content Tab).
  •  Keep the report concise. Present only the results of ratio calculations in tables in the report itself. However, the details of ratio calculations should be provided as an appendix to the report. Set out your ratio calculations clearly using Excel spreadsheets or Word tables. If the working process is not shown, NO mark will be allocated regardless of whether the answer is correct or not.

See the Essay/report assessment criteria sheet on the following page for information about the criteria and the standards by which your work will be judged.

JNB518 Finance for Decision-Making Page 11

[6 Marks]

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Assessment rubric for financial statement preparation and analysis report

Assessment Criteria*

HD (High distinction) 80%-100%

DN (Distinction) 70%-79%

CR (Credit) 60%-69%

PP (Pass) 50%-59%

NN (Fail) 0%-49%

Financial statement preparation

All or almost financial data accurately presented

Most financial data accurately presented

Many financial data accurately presented

Around half the financial data accurately presented

More than half the financial inaccurately presented

Ratio calculations

80%-100% of ratios calculated correctly

70%-79% of ratios calculated correctly

60%-69% of ratios calculated correctly

50%-59% of ratios calculated correctly

0%-49% of ratios calculated correctly

Financial statement analysis

All financial information accurately interpreted

Effectively apply theory and concepts to analyse financial data with precision

Most financial information accurately interpreted

Most theory and concepts applied proficiently to analyse financial data with precision

Many financial information accurately interpreted

Some theory and concepts applied to analyse financial data but with some mistakes

Around half the financial information accurately interpreted

Some important theory and concepts not applied; many mistakes in analysing the financial data

More than half the financial information inaccurately interpreted

Little attempt to apply theory and concepts for analysing the financial data

Demonstrate ability to articulate and defend analysis and recommendations

Relate all relevant factors to the decision making with logical and persuasive justification

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Relate most relevant factors to decision with plausible justification

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Relate some factors to the decision making with reasonable justification

Relate few factors to the decision with reasonable justification

No or very limited factors considered for decision making, and justification is unclear

Evidence of wide researching extra information taken into consideration

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A range of extra information taken into consideration

Limit use of extra information taken into consideration

No evidence of using extra information taken into consideration

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Quality of Communication

Effective use of formulae, tables and spreadsheets

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Use formulae, tables and spreadsheets competently

Use formulae, tables and spreadsheets satisfactorily

Poor use of formulae, tables and spreadsheets

Professionally write a report to the financial information user

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Competently write a report to the financial information user

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Fair report writing to the financial information user

Poor report writing to the financial information user

Logical structure with coherent, concise well developed argument

Acknowledged all sources professionally

Professionally and apply referencing style faultlessly

Well organised structure with argument, mostly logical, concise and coherent

Acknowledge main sources Mostly accurate referencing

General organised structure and argument, generally logical, concise and coherent

Acknowledge some sources

Reasonably accurate referencing

Ineffective organised structure and in some areas argument illogical and unclear

Significant lapses in appropriately acknowledging sources

Significantly inconsistent referencing

Poor organised structure and argument generally illogical and unclear

Sources poorly acknowledged Incorrect referencing style

* Please note that the criteria listed above are not necessarily of equal weighting, nor are they all-inclusive; they give an indication of your performance

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