BFA 503 PRINCIPLES OF FINANCIAL MANAGEMENT
BFA 503 PRINCIPLES OF FINANCIAL MANAGEMENT
SEMESTER 2 2023
ASSESSMENT TASK 2 GROUP ASSIGNMENT AND ORAL PRESENTATION
INFORMATION SHEET
OBJECTIVE: The objective of this assignment is to apply the knowledge you have learned in this unit in assessing the financial activities of a for-profit company. The assessment task requires you to analyse the capital structure of a company, advise on the use of debt and equity in financing capital projects, critique the dividend policy of a company, and conduct risk analysis including the ESG and climate-related risks.
OUTCOMES: By completing this assignment, students will be able to:
Discuss the practical design of the capital structure and critique the use of debt (short-term and long-term) and equity in financing different capital projects.
Identify the sources of debt and the shareholding structure and its implication to the agency conflicts in the company.
Understand the nature of the cost of debt and cost of equity and its contribution to the weighted average cost of capital.
Critique the choice of dividend policy of a company and explain the changes in the dividend policy in response to the change in the business environment.
Conduct financial risk analysis including the ESG and climate-related risks.
WHAT IS REQUIRED-
Select ONE company from the list provided below in the Appendix section and answer all questions below.
Assuming that the CFO of the company that your group has selected has asked you to prepare a valuation report to assess the companys capital structure and policies and provide recommendations about whether the current policies are appropriate or not. Your analysis must include the trend analysis (over three years from 2019 2022) to reflect how the company responded to the COVID-19 pandemic in its financing activities. Your answer should be presented in the form of a report.
Questions to be addressed in the assignment:
For the written report:
Each Team will write a report analysing the financial activities of a listed company (select from the list below) to assess the fundraising practice, the allocation of funds, and the dividend policy over the last three years from 2019 to 2022. The analysis should be based on the companys annual reports and a review of academic literature on capital structure and dividend policy. The report should aim to answer the following questions:
PART A CAPITAL STRUCTURE
Using different measures, briefly discuss the capital structure of the company, in particular the use of different sources of finance. Referring to the companys business and the business environment (macroeconomic conditions and industry factors), explain why the company adopts that capital structure.
Is there any change in the ratio of debt and equity in the capital over the last three years? Explain why the company decided to make such a change.
What is the structure of short-term and long-term debt? What are the different sources of debt being used? Briefly describe the cost of debt and the capacity of the company to service the debt. How sustainable/safe is the company in using debt in the capital?
What is the equity structure (preference shares and ordinary shares)? Briefly discuss the ownership structure of the company. Based on the shareholding and debt structure, discuss if the agency conflict in the company is significant or not and why.
How are the raising funds allocated in investment projects? Describe how the company alters its investment policy in response to the COVID-19 pandemic.
PART B DIVIDEND POLICY
Discuss the dividend policy of the company and identify the type of policy adopted. Referring to the nature of the companys life cycle and business operation, critique the relevance of the dividend policy and the companys business.
Identify if the company uses share buyback as a tool in its policy? What are the implications of the share buyback on the shareholders expectations and wealth?
Use your own search and identify how the share price changed in response to the latest dividend-related announcement. Explain the price behavior in the event.
PART C SUSTAINABLE INVESTMENT
Critique the sustainable investment of the company and identify factors that force the company to move toward sustainability.
Discuss the structure of funds allocation between traditional and green investment projects? How does the company recognize the benefits of green projects in its annual reports?
For the oral presentation:
Given the nature of the companys business and its industry, prepare a presentation to analyze the climate-related risks (including identifying the type of financial and non-financial risk and implications to the companys performance) that the company is exposed to. You can refer to the companys climate change reports or use the information provided in the annual reports for the presentation but you also need to do a review of news, articles, and other sources from the internet to prepare for the presentation.
GROUP FORMATION
All students must form a group and there should be no more than THREE members in a group. Each group needs to register its members on Mylo by self-enrolling in a group under the Group tab/ Group assignment section. The self-enrolment needs to be completed by ALL group members. The group registration will be closed by 11.59 pm on 3rd September 2023
SUBMISSION INSTRUCTIONS
How to submit
The written reports and the video recordings must be submitted through the assignment submission folder on the units MyLo site. Each group has been set up on Mylo with a submission link and a discussion box for in-group communication. You may only submit your assignment once. No need for the TSBE assignment coversheet to be included in the submission. The date stamp on the electronic submission will determine if your assignment has been submitted on time. Late work will be penalized unless you have been granted an extension by the unit coordinator.
The written report should be no more than 1,500 words while the oral presentation should be no more than 10 minutes for each group.
Due Date
The submissions due date for both the written report and video recording is 11.59 pm on 23rd September 2023 (End of week 10). Penalties for late submission apply according to the university policy.
Assignment Weighting:
This assignment will be marked out of 40. The written report is worth 25 marks and the video presentations are 15 marks. This assessment task comprises 40% of the overall grade of the unit.
Appendix:
LIST OF COMPANIES- Select one company from the list below.
FMG Fortescue Metals Group Ltd
NCM Newcrest Mining Ltd
WDS Woodside energy ltd
BHP BHP Group
STO Santos Ltd
RIO Rio Tinto Group Ltd
ORG Origin energy Ltd
RIC Ridley Corporation Ltd
WOW Woolworths Group Ltd
