Finance for Business Analysis Report

Finance for business

Table of Contents
Question 1:.......................................................................................................................................4
A description of the company:.........................................................................................................4
Question 2:...................................................................................................................................5
Specify ownership-governance structure of the company:..........................................................5
i) Name the main substantial shareholders: .............................................................................5
ii) Name the main people involved in the firm governance:...........................................................7
Question 3........................................................................................................................................9
I. Calculate the following key ratios for your selected company for the past 4 years.................9
II. Explain what phenomenon is being “captured” by the variable TA/OE, and.................10
III. Explain why the ROE (EBIT) is significantly greater than or less than the ROA (EBIT)......11
Question 4......................................................................................................................................12
Using the information from the ASX website: www.asx.com.au you must complete the following
tasks:..............................................................................................................................................12
i) Prepare a graph/chart for movements in the monthly share price over the last two years for
the company that you are investigating. Plot them against movements in the All Ordinaries
Index...........................................................................................................................................12
ii). Write a report which compares movements in the companies’ share price index to the All
Ords Index. For instance, how closely correlated is the line with the All Ords Index. Above or
below?........................................................................................................................................13
Question 5......................................................................................................................................14
Explain the factors that affect the share prices of empire resources:.............................................14
Question 6:.....................................................................................................................................15
I. What is their calculated beta (β) for your company?..........................................................15
II. If the risk-free rate is 4% and the market risk premium is 6%, use the Capital Asset
Pricing Model (CAPM) to calculate the required rate of return for the companies' shares.......15
III. Is the company you have chosen a “conservative” investment? Explain your answer...15
Question 7:.....................................................................................................................................16
Weighted Average Cost of Capital (WACC)................................................................................16

i. Using information from the latest company report for the company (i.e. interest rate on
their major source of long-term loans) and the estimated cost of equity capital calculated (in
part 6ii above), calculate the WACC for your company............................................................16
ii. Explain the implications that a higher WACC has on management’s evaluation on
prospective investment projects.................................................................................................16
Question 8......................................................................................................................................17
Consider the debt ratio for your company over the past two years:..............................................17
i) Does it appear to be working towards the maintenance of a preferred optimal capital
structure? (i.e., does it appear to be “stable”?). Explain your answer.......................................17
ii). what have they done to adjust/amend their gearing ratio? Increase or repay borrowings?
Issue or buy back shares? Has the Director’s Report given any information as to why they
have made any adjustments?......................................................................................................18
Discuss what dividend policy of the management of the company appears to be implemented.
Explain any reason related to that particular dividend policy....................................................19
Question 10:...................................................................................................................................20
Based on your analysis above, write a letter of recommendation to your client, providing an
explanation as for why you would like to include this company in his/her investment portfolio. 20
References:....................................................................................................................................21

Question 1:
A description of the company:
Kathmandu Holding Limited:
Kathmandu Holding Limited is a retailing company which engaged in the designer marketing,
clothing retailing, retail of fabrics & products & deals with tools of travel or tourism adventure.
This company had founded in 1987 & located in Christchurch, New Zealand. The company has
been expanding its market Australia, New Zealand US & UK with 98 branches across the world.
The company offers its potential customers technical wearing, down gown & jackets, fleece &
casual wear in merino fabrics. Kathmandu Holding Limited also deals in clothing packs, sleeping
bags, canvas tents, camping-projects accessories & footwear as well as home appliances and
products for children. Family camping products like tents, shelter, furniture-fitting and kitchen
appliances in good and value varieties are also manufactured in KMD Company for their
customers.
The actual headquarter of the company is in New Zealand only that operates its business
activities & overall network of approx. 180 stores in New Zealand. Kathmandu holding limited
has been delivering a sufficient & improved result as shown in its financial statements. Sales
growth in last year was 4.0% which is around $425.6 million. Company has increased its gross
[profit margin around 62.5% which is hike of total 1% from 2016. Profit before earning and tax
were 54 % from NZ$33.4 million to NZ $50.3 million. Total dividend earning was enhanced by
38% t0 13% per share & EPS earning per share was increased from 10.2cent in financial year
2016 to 16.6 cent (Maher and Andersson, 2014).
Figure 1: Kathmandu Holding Limited.
(Source: Kathmandu Holdings Limited, 2016)

Question 2:
Specify ownership-governance structure of the company:
i) Name the main substantial shareholders: 
 With higher than 20.00% of shareholdings. Based on this argument you should classify a
firm as a family or non-family company
 With higher than 5.00% of shareholdings.
Ownership Governance structure of Kathmandu Holding Limited: -
The ownership structure of any organisation can be considered by the level of focusing on the
right of shareholders or ownership & shareholding of owners. Ownership governance structure
basically involves inside and outside shareholders. Managers, BUD, CEO, MDs’ & so on
internal owners are righted to hold internal shareholding.
Figure 2: Ownership structure
Source: Kathmandu Holdings Limited, 2017)
David Kirk & Xavier Simonet is major or substantial shareholder of Kathmandu Holding
Limited from 2013 & 2015 respectively. The actual ownership structure of KMD is following: -

II. With higher than 5.00% of shareholdings.
Other shareholders with their shareholding formation: -
Names equities %
Briscoe Group Ltd. (substantial
shareholding)
40,095,432 19.8%
TA Universal Investment Holdings Ltd. 24,212,664 12.0%
Challenger Ltd. (Investment Management) 15,313,741 7.57%
Nova Port Capital Pty Ltd. 15,194,513 7.52%
Unit Super Ltd. 13,858,777 6.86%
Harbour Asset Management Ltd. 12,374,372 6.12%