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  • BAE

Analysis of financial strengths and weaknesses

Business Accounting As can be seen, the assignment is a generic one asking for an operational analysis of a selected company through the medium of its latest published financial statements together with a review of the investor ‘history’ of the company as reflected in the stock market and wider investor community comment. As such, while the tasks set remain constant the content of the response will always be different and we cannot therefore be too prescriptive as to the form, content and style of the completed submissions. There are, however, one or two guidance tips for markers as to what they should be expecting and what to look out for.

Task 1 – analysis of financial strengths and weaknesses (80% weighting) This is the real meat of the assignment and students are warned to focus on providing a financial rather than strategic or marketing analysis and against padding out with too much unnecessary ‘background’ information about the company. With UK cohorts, when the company is to be listed on the UK Stock Exchange, students are also steered towards the use of the FAME database to assist in capturing historic data and identifying an appropriate comparator ‘peer group’. This is not necessarily appropriate when the listing is on another international exchange – but there are similar databases and students will have been encouraged to investigate these. You should expect:

• A basic set of ratios – either self-calculated or taken from FAME (or another similar source) – the students should identify where they get the figures.

• Organisation of the data into the four basic operational categories discussed on the module: profitability; efficiency (productivity/activity); liquidity; stability (long-term solvency) – principally gearing.

• Positive or negative comment on the strengths/weaknesses in performance and position revealed by this analysis.

• Proper comparison, both across time to identify trends and with the outside comparator group or companies You should look out for clear demonstration that students have grasped the significance and implications of the features they have identified and just what is meant by the various points – liquidity, profitability etc. that they are investigating and examining.

Task 2 – review of the position in the financial market(s) (20% weighting) Students are pointed towards share price and analysts comments as appropriate material for this section. You should expect:

• Calculation of and comment on the ‘investor’ ratios: EPS; P/E; dividend yield

• Plotting of the share price movements (they are told to use a graph whose source should be noted)

• Quotation from financial press or other source of analyst comment Students are given guidance in the assignment brief about content and presentational issues – in particular provision of an ‘executive’ or ‘key point’ summary at the beginning of the report and the provision of graphic illustration throughout via the judicious use of graphs, charts and tables, so be on the lookout for these. Graphs and charts are NOT included in the word count. Extensive tables of e.g. ratios etc., should be placed as an appendix – but look out for spurious tables in the appendix which are being used as a device to circumvent the word count! Beware, also, of reports which look fantastic on the page but are devoid of content!!

This is not the sort of submission for which you should expect a great amount of technical/academic referencing – so don’t penalise students for the slenderness of the bibliography – it’s more a question of encouraging them into good referencing habits. DO look out, though, for proper acknowledgement of sources for such things as graphs, charts, tables etc. where, as well as compiling their own, they often ‘pinch’ ready made ones from the web. Ensure that they are sticking, more or less, to the word count and penalise for significant overspill here. The word count is tight, and they have to be pretty economical in their ‘chat’ and good at picking out the key things that really matter – which is no bad thing. It is usually easy to identify where students have done a thorough investigation, selected and focussed on the material issues, understand what they are doing and talking about and able to express it well on the page. Sorting submissions into inadequate, adequate, very good, exceptional and outstanding is also not too hard with this assignment.

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