FNCE5006 Financial Statement Analysis Assignment

This assessment requires students to conduct financial statement analysis, valuation, and investment recommendation for a publicly listed company. Students are required to work in groups for this assignment.

An important element of this project is the requirement of identifying and obtaining relevant, publicly available information. Therefore, you should ensure that you are able to access sufficient information for your selected company. Annual reports of the companies are uploaded under assessment tab of the Blackboard.

Written Section (35%)

This project requires you to conduct financial statement analysis of a publicly listed company for the year 2022. By now, one of the following companies should be allocated by your lecturer (if not, please contact your lecturer asap).

• Wesfarmers Limited (Stock Code: WES)
• Woolworths (Stock Code: WOW)

An important element of this project is the requirement of identifying and obtaining relevant, publicly available information. Therefore, you should ensure that you are able to access sufficient information for your selected company. I have uploaded the relevant annual reports in the Blackboard for your convenience.

1. What is the name of the company that you/your group members were assigned to complete this project? What is the industry in which your company belongs to? What is the view of the management of the company about the future outlook and performance of the company? [0+1+2 = 3 Marks]
2. Identify two (2) pieces of information not included in the principle financial statements (but still in the annual report) that you think would be important to someone considering whether to invest the company. Discuss your reasons for believing that this information would be important in making an investment decision. [2+2= 4 Marks]
3. Analyse your allocated companys investing and financing activities for the year 2022 as identified in the statement of cash flows, specifically identifying the two largest investing activities and the two largest financing activities. Evaluate the cash flow from operating activities of the firm (specifically analyse whether the company is performing better over the years, discuss whether cash flow from operating activities appears to be satisfactory given the current business environment and firms stage in life cycle). [1+1+2=4marks]
4. Assume that, as a credit analyst, you are evaluating your allocated company. Only use the most appropriate ratios for the year 2022 from the annual report and evaluate whether one should provide loan to this company [Use at least 4 ratios]. [2+2=4 marks]
5. Assume that you want to buy stock of this company. Use the most appropriate efficiency and profitability ratios from the annual report and use these data to evaluate whether this company is a suitable candidate for investment purpose [Use at least 4 ratios for efficiency and 4 ratios for profitability]. [2+2+2 =6 marks]
6. Assume that you are also considering to invest in the stock of CSL. You have limited fund to invest and therefore, you can invest in either of the company (CSL or your allocated company). Compare your companys financial statements, and performance, with those of the CSL. If you were making a decision to invest in one of the two companies, which company would you choose? Discuss. [In evaluating and comparing the companies, use appropriate ratios and other analysis. Provide clear justification as to why you believe your approach to evaluation is appropriate for investment decision purpose]. [8 marks]
7. Perform a valuation of your allocated company using an appropriate discounted cash flow model. Carefully explain the assumptions used to select inputs for your model. On the basis of your work make an investment recommendation. [6 marks]

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