Main Objective of the assessment

The main objective of this assignment is to examine the ability of the students to critically evaluate the financial performance and position of a company and their ability to value the company using a valuation method. This objective will be achieved through the preparation of financial and valuation report of a large listed company in the London Stock Exchange. In the preparation of the report student must demonstrate a critical understanding of the theories and concepts pertaining to the creation of shareholder value and the evaluation of the performance of a company. In this assignment students should use appropriate concepts and rational arguments to interpret strategic and financial data in order to produce suitably critical, well-considered report.

Description of the Assessment

This assignment is based on companies listed on the London Stock Exchange (LSE). You are required to prepare a report comparing the financial performance and position of two companies over the last five years and also required to prepare a valuation report using one valuation method. Please select two companies from the list of FTSE 350 companies from the following sectors:

(a) Construction

(b) Information and Communication

(c) Mining and Quarrying

You can get list of FTSE 350 companies from the London Stock Exchange website.

http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/indices/constituents-indices.html?index=MCX

You can get UK industry classification from the following:

https://www.gov.uk/government/publications/standard-industrial-classification-of-economic-activities-sic

(UK SIC code information)

https://fame4.bvdinfo.com/version-20181219/fame/Companies

for FAME Database

Annual reports are available to download from the company’s website and as a scanned copy from FAME. It is also expected that you will collect information from the narrative section of the annual reports and accounts of companies. In addition, some industry data is expected in a good report.

Required:

You should prepare your report in two parts:

(a) In the first part, you are required to evaluate and analyse the performance and position of two companies using the ratio analysis and the vertical/horizontal analysis over the last five years. You are expected to use some industry data and information from various sources to support your analysis. Based on your analysis recommend the company which would be a good investment for prospective investor. Your report should cover the following areas:

• An evaluation of profitability.

• An evaluation of financial position from both a short-term (liquidity) and a long-term (gearing) perspective.

• An evaluation of performance from an equity shareholders perspective.

• An evaluation of the overall performance and position of the business.

(b) In the second part, you are required to prepare a valuation for a company using one of the following two methods:

  1. Prospective price-earnings ratio analysis based on forecast normalised earnings.
  2. Forecast dividend growth model.

You are required to compare your valuation with the actual market value of the company. You should discuss the advantages and disadvantages of the valuation method you have chosen and the problems that may arise in arriving at valuation to illustrate your points.

Notes:

  1. You should show the calculation of your ratios in sufficient detail to enable your workings to be followed. You should refer to other information in the financial statements (and information available from elsewhere), as necessary, to assist in the interpretation.
  2. In preparing valuation, you should state all of your assumptions clearly in your report.
  3. Use of research papers/journal articles are encouraged in your report to support your analysis/discussion.
  4. Show all your workings clearly for both parts. Avoid copying information from internet sites or other sources. If unacknowledged, this constitutes plagiarism. Please see below ‘Academic Misconduct, Plagiarism and Collusion’ for more detail.

Target length 3 000 words including calculations. Any report shorter or longer than 10% of 3 000 words will be penalised. Please use Harvard style referencing.

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