ECON42915 Financial Statement Analysis 2019/2020 Masters Programmes SUMMATIVE ASSIGNMENT
ANSWER EITHER QUESTION 1 OR QUESTION 2
QUESTION 1
Using an appropriate research criteria (such as industry, geographical location or a combination) create a report that provides a comparative analysis of the financial performance and risk of a group of firms, using the techniques you have undertaken in the seminars of your course. Your report should include the following elements, with appropriate discussion and analysis for each:
i. Background on the analysis you have chosen to undertake and a review of the selection criteria and its motivation. (20 marks)
ii. Balance sheet and income statement analysis via vertical, horizontal methods, plus the use of appropriate financial ratios. (30 marks)
iii. A comparative analysis of credit risk using an appropriate credit risk model.
(10 marks)
iv. A comparative evaluation of the projected growth of the firm, using free cash flow and the current cost of capital. (10 marks)
v. Illustrate your analysis with appropriate graphics and tables. (10 marks)
vi. In addition to an appropriate conclusion, you are required to include an appendix with
the computer codes used to create your analysis. (20 marks)
The objective of your analysis is to provide a ranking on investment potential for the firms in your sample and provide some assessment on the relative level of risk of each firm in the group. You may use information other than the API databases provided, but this should supplement your analysis and not replace any of the core elements.
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Durham University Business School
ECON42915 Financial Statement Analysis 2019/2020 Masters Programmes
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You should use at least five years of accounting for the group overall, but firms within the group may individually have less financial information. Indicatively, you should have at least 10 firms in your group; if you intend to use fewer then 10 then this should be agreed with your class tutor and you should not use more than 50 to ensure the analysis is feasible. In the appendix of the assignment there must be a table with a full list of the firms in your sample in addition to your computer code.
The length of each section does not necessarily need to be in proportion to the marks, but this should serve as a guideline.
QUESTION 2
Write an equity research report on a listed company. The report should cover the following analyses:
i. Strategy analysis: analyze the company’s business strategies, and its industrial competitive forces; comment on the firm’s social, environmental, governance strategies/activities (15 marks)
ii. Accounting analysis: reformulate the company’s balance sheet and income statement, and assess the company’s accounting quality. (20 marks)
iii. Financial analysis: conduct the trend and comparative analysis of the company’s sales, and the trend analysis of the company’s financial ratios. (20 marks)
iv. Prospective analysis: forecast the company’s future residual operating income, based on your analysis in items (i), (ii), and (iii). You should detail and justify all your forecasting assumptions. (20 marks)
v. Apply the residual operating income model or the free cash flow valuation model to estimate the fundamental value of the equity capital of the company. You should include WACC calculation and sensitivity analysis. (20 marks)
vi. Stock recommendation and conclusion remarks. (5 marks)
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Durham University Business School
ECON42915 Financial Statement Analysis 2019/2020 Masters Programmes
Resources: Annual reports of your chosen company (if listed in UK) can be downloaded at www.northcote.co.uk or the company’s website. You should use the latest published annual report.
Overall word limit: 2500 words at maximum
The word count should:
Include all the text, including title, preface, introduction, in-text citations, quotations,
footnotes and any other item not specifically excluded below.
Exclude diagrams, tables (including tables/lists of contents and figures), equations,
executive summary/abstract, acknowledgements, declaration, bibliography/list of references and appendices. However, it is not appropriate to use diagrams or tables merely as a way of circumventing the word limit. If a student uses a table or figure as a means of presenting his/her own words, then this is included in the word count.
Examiners will stop reading once the word limit has been reached, and work beyond this point will not be assessed. Checks of word counts will be carried out on submitted work, including any assignments or dissertations/business projects that appear to be clearly over- length. Checks may take place manually and/or with the aid of the word count provided via an electronic submission. Where a student has intentionally misrepresented their word count, the School may treat this as an offence under Section IV of the General Regulations of the University. Extreme cases may be viewed as dishonest practice under Section IV, 5 (a) (x) of the General Regulations.
Very occasionally it may be appropriate to present, in an appendix, material which does not properly belong in the main body of the assessment but which some students wish to provide for the sake of completeness. Any appendices will not have a role in the assessment – examiners are under no obligation to read appendices and they do not form part of the word count. Material that students wish to be assessed should always be included in the main body of the text.
YOUR COMPLETED ASSIGNMENT MUST BE SUBMITTED TO DUO NO LATER THAN 11:59 on 5 MAY 2020.
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Durham University Business School
ECON42915 Financial Statement Analysis 2019/2020 Masters Programmes
MARKING GUIDELINES
Performance in the summative assessment for this module is judged against the following criteria:
Relevance to question
Organisation, structure and presentation
Depth of understanding
Analysis and discussion
Use of sources and referencing
Overall conclusions
The word count should include all the text (plus endnotes and footnotes), but exclude diagrams, tables, bibliography, references and appendices. Guidance on referencing can be found in your Assessment handbook under ‘Things you Need to Know’ on DUO.
The electronic version of the assignment which you submit on-line should INCLUDE all appendices.
PLAGIARISM and COLLUSION
Students are required to work independently on their assignments. Students suspected of plagiarism, either of published work or work from unpublished sources, including the work of other students, or of collusion will be dealt with according to Business School and University guidelines.
Your assignment will be put through the plagiarism detection service
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Durham University Business School