Corporate Financial Interpretation Analysis

The assignment requires students to conduct a corporate financial analysis of two companies assigned by the lecturer, with a minimum word count of 2,500 words and a maximum word count of 3,200 words. The analysis should be from the perspective of a potential investor and include an introduction and overview of the companies, financing structure and capital & financial risks management, asset and operating performance, cash flow analysis, valuation, and conclusion. Additionally, students are required to apply a finance/economic theory to one or both of the companies, with a minimum word count of 250 words and a maximum word count of 500 words.

Corporate Financial Interpretation
Assignment - Corporate Analysis
1: Marks Available
This assignment accounts for 50% of the available marks on this module
2: Output
This continuous assessment has the following output:
1: a critical analysis of your chosen companies from the perspective of a potential
investor (min 2,500 words - max 3,200 words).
2: an application of a finance/economic theory to one or both of the companies OR
use a finance/economic theory to explain an event/transaction that took place in one
of the companies (min 250 words - max 500 words)
There is no penalty for submitting a report that is below the word count (except that you may
not have enough depth to your report and hence will not achieve a high grade). Where a
candidate submits a report that exceeds the word count then the lecturer has the option to
reduce the final grade by 1% for every 50 words over the limits (max penalty is a reduction of
20%). The word count is based on the body of the report i.e. excluding appendices and
references.
The report is set up so that it can be done in stages as we complete sections of the module.
For example, the section on financing structure and capital & financial risks management can
be completed when the section on equity and liability analysis is completed. YOU ARE
STRONGLY ENCOURAGED TO WORK ON THE REPORT AS WE GO THROUGH
THE SEMESTER; LEAVING IT UNTIL THE END IS A HIGHLY RISKY STRATEGY!
3: Company Selection and Deadline
You will be randomly assigned 2 companies (in the same industry) from the list of pairs
overleaf.
- companies to be assigned next week and submit final report by Friday 28th April.
4: Sources of Information
The key sources of information should be the most recent annual report of the companies and
any detail on Thomson One.
5: Interim Submissions
I will accept interim submissions and provide some feedback. However, this is not an open
ended commitment (in finance the last thing that you give are open ended commitments –
remember the State Guarantee). All interim submissions should be made in hard copy.

The report is set up so that it can be done in stages as we complete sections of the module.
For example, the section on financing structure and capital & financial risks management can
be completed when the section on equity and liability analysis is completed.
Therefore, I will accept partially completed reports up until class on March 21st (unless other
dates are specified in class) – the speed of turn around will depend on the number of interim
submissions that I receive. Feedback may be provided verbally or written. No indication of
grade will be provided. Any feedback will be given with the intention of improving the final
submission. The feedback will concentrate on the salient issues and may not address every
issue with the interim submission. The incorporation of feedback into the final report does
not guarantee any particular grade. The provision of feedback (and its incorporation into the
final report) is not in itself a grounds for appeal of the grade awarded.
Students who choose not to make an interim submission will not be penalised – interim
submissions will not be tracked.
6: Report Format
6.1: Analysis Section (75% of the available marks from continuous assessment)
You should analyse the two companies that have been allocated to you – ostensibly to
determine which is the better company from the perspective of an equity investor. Your final
conclusion should include a recommendation (buy both, buy one, buy neither, other –
analysis inconclusive, need more information….)
The analysis report should address the following issues:
- Introduction and Overview of Companies (10%)
- Financing structure and capital & financial risks management (20%)
- Asset and Operating performance (15%)
- Cash Flow Analysis (10%)
- Valuation and Decision (10%)
- Conclusion (5%)
- Document (5%)
o Total Marks (75%)
The report should be written from the perspective of a potential investor and should be fully
referenced.
These areas can be subdivided into smaller sections. If you feel that the format above is a
constraint then you may deviate from it. If you choose to do this then you should include a
note on the front cover stating this (otherwise I will assess the report based on an
inappropriate marking scheme). You should also set out how you propose how the marks for
the various sections should be allocated, I am under no obligation to agree to your suggestion.
The report should be no more than 3,200 words and no less than 2,500 words. This excludes
footnotes, appendices and references. All figures used should be referenced to their source or
if you have calculated the figure yourself then the calculation should be shown as a footnote
along with the source of the original information in the calculation.
6.2: Application of Finance/Economic Theory (25% of the available marks for the
report)

This section should be no more than 500 words. The subject matter is your choice but if you
cannot arrive at a suitable topic then an application of agency theory will usually provide
ample scope. In the Vodafone example that we will be using in class – why has the company
decided to return so much cash to shareholders? Can this be explained using a
finance/economic theory?
Why are the directors paid so much money?
7: Submission
Submission must be as a WORD document via Turnitin (on module Moodle page) and a
hardcopy to School of Business Office. The submission will be subject to a Turnitin analysis
(please ensure that you have submitted it via Turnitin by the deadline and that the version at
the deadline is the final one), and usual regulations apply (see ‘School of Business Guide to
Using TurnitIn in Moodle’).
8: The Report – Some Guidance
The report should not be a series of ratios with mundane commentary (for example “the X
ratio went up during the year with is a positive performance…..”). A scattergun of ratios
without any real analysis and insight will not score highly. Any comment and analysis should
be evidence based – anecdotal evidence and conjecture will not attract significant marks.
Finance Structures
● how do the companies source it’s finance, the asset structure that then needs to be financed,
where the finance is obtained, the interest rates (for debt), currencies, maturity profile, risk
management processes… – comment on the finance policy of the companies
Asset and Operational Analysis
● analyse the business lines of the companies from an operations perspective – what are the
implications. Use the segmental profit note - bear in mind that there needs to be a degree of
comparability. Use other ratios that you feel are appropriate. Can other metrics be used to
measure the performance of the business? Does your analysis concur with the commentary of
the executives?
Cash Flow Analysis
● is the business generating cash? What is the Free Cash Flow? Is there enough cash being
generated to pay down debt and provide a return to equity investors
Valuation
● this is where you need to bring the output of the previous analysis together. Company A
may be superior to Company B but what is the price differential and is that differential
consistent. You will need to control for the different sizes of the companies. This is the same
as comparing a Ford Mondeo with a BMW 3 Series – the BMW may be a better car but is it
worth the price differential. You can also use a number of standard valuation techniques to
arrive at a potential valuation for the companies. What assumptions have you made – are
these assumptions appropriate? How does your valuation compare to the current market value
of the business

Company Listing
The list of companies below is a matched list based on the FT’s sectors. These sectors can be
quite broad and in some cases the companies may be dissimilar. The list excludes banks,
insurance companies, REIT’s and Investment Companies.
1. Berkely
2. Bellway
Their 2016 annual report can be found on the their website