FIN1FSA Group Assignment Guidelines
1. Introduction
2. Risk and profit potential of your assigned company—Topic 1
2.1 Industry analysis
Here, perform an Industry analysis. That means, analyse the relevance of Porter’s five forces
for your company. (Please analyse all five forces and highlight if there are factors not closely
relevant)
2.2 competitive strategy analysis
Analyse competitive strategy for your company company. In doing so, analyse two competitive
strategies: differentiation and cost leadership.
[Refer to week 2 lecture and tutorial materials)
3. Examination of financial health for your company
Common size analysis of key financial statements:
Prepare common size income statement that is, calculate all income statement
items as percentages of SALES/REVENUES.
Prepare common size balance sheet that is, calculate all balance sheet items as
percentages of TOTAL ASSETS.
Profitability analysis: Calculate ROE and ROA for 5 years
Operating management evaluation: Calculate Gross profit margin and EBIT margin for
5 years
Investment management evaluation: Calculate net working capital to sales ratio and
accounts receivable turnover ratio for 5 years
Financial management evaluation: Calculate current ratio and net debt to capital ratio
for 5 years
Please calculate in an excel file and briefly analyse each part in one or two sentences.
4. Prospective Analysis-Forecasting and Valuation
4.1 Prospective Analysis-Forecasting
First step: Calculate following 7 items for the last 5 years (say 2014-2018)
Sales growth rate
NOPAT margin
Beginning net working capital to sales
Beginning net long-term assets to sales
Debt to Capital ratio
After tax cost of debt and Dividend rate (%)
Second step: Calculate 5 years average for each of the above items.
Third step: Complete first section of forecasting (forecasting assumption) based on your 5
years’ average estimates. Use the same percentage estimate for the next ten years (2019-2028).
Fourth step: Complete other 4 sections in the same excel file.
4.2 Prospective Analysis -Valuation
Follow Lecture 7 excel file to calculate valuation of your company. You may use 4.50% as
the cost of capital for these calculations. You are very welcome to calculate cost of capital for
your company. You are advised to do all calculations in an excel file and submit the excel file.
5. Credit analysis and distress prediction
Use the Altman Z-score model and comment on the probability of distress for your assigned
company. Calculate the Z-score for 5 years to examine the robustness of your result.
6. Conclusion
7. References: APA6
Note:
You are required to submit a word document via Turnitin including cover page (Group
members’ name, Student ID) and peer evaluation form.
You are also required to submit an excel file showing all calculations.