MG 5556 Financial Resources Management - Brunel University London

Financial analysis and valuation

Objective: The main objective of this assignment is to examine the ability of the students to critically evaluate the performance and position of large companies and their ability to value the company using a valuation method.

Description of the reassessment

You are required to prepare a report comparing the financial performance and position of the following two companies (see below) making extensive use of ratio analysis. In addition, you have to prepare a valuation report for one company using one valuation method

First part:

(a) First part is based on companies listed on the London Stock Exchange (LSE). You are required to prepare a report comparing two companies listed below for the most recent two years. Use of journal articles are encouraged in your report to support your analysis/discussion. You are required to show all workings clearly for both parts either in the main report or in appendix.

For good report 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 following ratios:

• Profitability ratios (such as gross profit margin, operating profit margin, net profit margin).
• Financing management ratios (such as debt to equity, interest cover, liquidity ratios)
• Efficiency ratios (such as inventory turnover, trade receivable turnover, trade payable turnover)
• Overall profitability (such as ROA, ROE, EPS)
• Shareholders' Investment ratios (such as dividend cover, dividend yield, P/E ratio)

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.

(b) In the second part, you are required to prepare a valuation of 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. In preparing valuation, you should state all your assumptions clearly in your report. 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.

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.

Additional information:

Please structure the report as follows (report template):
1. Coursework coversheet (see submission instructions section below)
2. Title page
3. Executive summary
4. Contents page
5. Introduction - (provide a brief introduction of the companies and industry analysed in the report)
6. Objective of the report
7. Methodology
8. Analysis and discussion (you are required to show all workings either in in the body of the report or in appendix)
9. Conclusion
10. References
11. Appendix (attach the income statement and statement of financial position of your companies) PG mark bands and grade point bands and marking scheme relevant for the coursework