ACC10707 Session 2 Business Analysis and Interpretation
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ACC10707 Session 2 Business Analysis and Interpretation
ACC10707 Session 2, 2019 Assessment 2
Business Analysis and Interpretation. Due 19 August 2019 via Turnitin.
You are required to calculate key financial ratios for an ASX listed company and its competitor and interpret this information in the context of your allocated competitor company over time.
You will be allocated two ASX listed companies to study for this assessment. You must do your allocated companies in the order they are allocated to you. You can look up your allocated companies under ‘You/Competitor’ in MyGrades in week 1.
Imagine you work for the FIRST of these companies. The second is one of your company’s competitor.
Your boss has asked you to calculate and assess the company’s key (your boss’s opinion) ratios relative to that of its competitor and provide recommendations for improvement if required.
The key ratios you need to calculate for your company and your competitor are net profit margin, asset turnover, current ratio, quick ratio and debt ratio. Your boss also wants you to calculate the cash cycles. All workings for ratios and the cash cycles are required.
You focus your analysis on the companies’ 2016, 2017 and 2018 ratios mentioned above firstly in terms of their trend changes and also in comparison to your competitors ratios and benchmarks wherever possible.
In making your assessment consider potential differences between your company and its competitor that could explain divergent results. Where relevant, these should be noted. (For example, although the companies may compete in some of the same markets, they may also have different areas of business).
Chapter 8 of your textbook (http://www.wileydirect.com.au/buy/accounting-business-reporting-decision-making-6th-edition/) will give you a background explanation on these ratios and you should in your own words explain a) the issues involved and relevance of using ratios, b) benchmarking and c) the relevance of your particular identified ratios as part of your discussion.
To undertake this task you will need to get some background information on the companies and collect some data to create ratios. Information required is available from DatAnalysis found by following the links from the SCU homepage to the ‘Library’ and ‘Databases’. For the calculation of ratios aspect of this assessment use the ‘Financial Data icon and then across the top, Profit and Loss and also Balance Sheet as necessary.
Since your boss is a busy person and has little time to read lengthy reports, your submission for this task preferably should not exceed 1,000 words. Of course it can be shorter than 1,000 words. Structure your submission as a short report that excludes title and contents pages. Refer to note 1 for further advice on report structure. Ensure you fully reference any non-text book or non DatAnalysis sources of data and information you use in this assessment.
Marks for this task are in accord with the separately provided marking guide.
In essence students should carefully study chapter 8 of the textbook and then calculate ratios and the cash cycle for their company and its competitor. Next describe the meaningfulness of these calculations firstly theoretically (text book chapter 8) and then actually and relate the findings to their company and in contrast to their competitor company. Wherever possible industry or accepted standards might assist your contrast as well. Then outline possible company improvements highlighted by the ratios and cash cycle and any weaknesses in using ratios.
Note also as follows –
- The report should be presented as follows. At the very beginning of your report should be a Table with headings as depicted below. You should place (complete) each of your ratio outcomes in the table below using the relevant headings in Table form so the reader/marker can initially see the actual ratio numbers you have arrived at. See also the marking guide where we demonstrate a similarly headed table.
Your Company Ratio
Write your company name here
Competitor Company Ratio
Write Competitor company name here
Ratio Name 2016 2017 2018 2016 2017 2018
(Net) Profit margin Asset turnover Current ratio Quick ratio Debt (to assets) ratio Days Inventory Days Debtors Days Creditors Cash Cycle Result
At the end in the appendix (not counted in word count) there should be another table which demonstrates formulas, completed workings and ratio outcome for each ratio for both companies.
Your Appendix table could use the same headings this time with the ratio name including the formula and the years 2016, 2017, 2018 having the calculated formula numbers used and the final ratio.
Returning to the body of the report you should then have headings (with subsequent discussion) as follows –
- Financial Analysis of Ratios – Begin with sub – heading for each ratio. Here is where you demonstrate an understanding of ratios by describing the meaningfulness of these ratio calculations firstly theoretically (text book chapter 8 helps here) and then actually. Next relate the ratio findings to their company and in contrast to their competitor company. Wherever possible industry or accepted standards might assist your contrast as well. This demonstrates an ability to assess and apply knowledge to calculated outcomes.
- Recommendations – outline possible company improvements highlighted by the ratio outcomes and cash cycle calculations and comment on any weaknesses in using ratios.
It is essential that you set your report up as prescribed by note 1 above.
- The Cash Cycle can be a little confusing and some text books use different methodologies for calculating the three elements of the Cash Cycle. For your convenience the formulas are a) Inventory being Current Inventory / Operating Revenue * 365 = ???? b) Accounts Receivables being Debtors / Operating Revenue * 365 = ???? c) Accounts Payables being Creditors / Operating Revenue * 365 = ??? Note that you still need to work out the cash cycle from these calculations.
- For the net profit margin ratio use Net profit after tax before abnormals as the numerator.
- This is a Turnitin assessment so while we acknowledge that some Turnitin score will relate to the cover page and calculations which may be common to some other students you need to take due care with the actual original (yours) commentary of the report. This includes putting into your own words some theoretical discussion of the ratios which you may originally derive from the text book. If concerned then by all means use Harvard referencing.
- Use the Discussion Board forum to raise any issues you may have with this assessment. This method ensures that students and tutors can get an idea of any questions that students may have. Try not to publish answers to your assessment if at all possible.
- Note that your assessment will not be marked if you do not do your allocated companies and in the order they are given to you.
QUALITY OF RESPONSE NO RESPONSE POOR / UNSATISFACTORY SATISFACTORY GOOD EXCELLENT Content (worth a maximum of 50% of the total points) Zero points: Student failed to submit the final paper. 20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. 30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. Elements of the required response may also be lacking. 40 points out of 50: The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples. The answer is complete. 50 points: The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples. No aspects of the required answer are missing. Use of Sources (worth a maximum of 20% of the total points). Zero points: Student failed to include citations and/or references. Or the student failed to submit a final paper. 5 out 20 points: Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. 10 out 20 points: References to scholarly sources are occasionally given; many statements seem unsubstantiated. Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. 15 out 20 points: Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented. APA 6th Edition is used with only a few minor errors. There are minor errors in reference and/or citations. And/or there is some use of questionable sources. 20 points: Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented. APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. Grammar (worth maximum of 20% of total points) Zero points: Student failed to submit the final paper. 5 points out of 20: The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors 10 points out 20: The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors 15 points out of 20: The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. 20 points: The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. Structure of the Paper (worth 10% of total points) Zero points: Student failed to submit the final paper. 3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. 5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. They can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements. The student also significantly writes too large or too short of and paper 7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. 10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper.
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