BUS 202 Finance: Ratio Analysis, Project Evaluation & Investment

This report provides a financial analysis using ratios, project evaluations based on NPV and IRR, and investment recommendations. It begins with an introduction to financial ratios, followed by a ratio analysis of Kiwi Bank, covering profitability, liquidity, efficiency, and leverage. The analysis includes interpretations, trend analysis, and recommendations for potential investors, advising against investment due to the bank's weak financial performance and the unpredictable banking sector. The report also evaluates projects using NPV and IRR, recommending Project B due to its higher profitability metrics. Additionally, it calculates the weighted average cost of capital (WACC) for various projects, recommending Project D due to its highest return (IRR) and the largest difference between IRR and WACC. The report concludes with findings that all projects are acceptable because they have positive IRR and are greater than WACC.

Diploma in Business
BUS 202Finance
Assessment2

 The major categories of ratios that are
widely used in calculations are given below:
 Profitability ratios
 Liquidity ratios
 Efficiency ratios
 Leverage ratios
 Valuation and Growth ratios
Financial Ratios

2017 2016
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0.5
Profitablity Ratio
Profitability Analysis

2017 2016
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.25 1.24
0.05 0.06
0.03 0.03
Liquidity Ratio
Liquidity Analysis

2017 2016
0
1
2
3
4
5
6
7
2.7 2.77
0 0
6.52
3.78
0.04 0.05
Efficiency Ratios
Efficiency Analysis

207 2016
0
2
4
6
8
10
12
14
16
18
0.93 0.940000000000001
0.07 0.06
13.94
16.15
Leverage Ratio
Leverage Analysis

2016 2015
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.07
0.310000000000001
0 0
Growth Ratio
Growth Analysis

 Kiwi Bank has not having a good financial
position
 Potential investors are not recommended to
invest in the bank
 Banking sector is highly unpredictable and
therefore the bank having weak financial
performance is not a good option
Recommendation to Potential Investors

 On the basis of NPV and IRR calculated of
the both the projects, it can be stated that
both the projects are profitable as they have
positive values of NPV and IRR
 Project B can be regarded as much
profitable as its NPV and IRR values are
much higher as compared to the project A
Project Evaluation

 Based on calculation it can be said that all
the projects are acceptable as all the
projects have positive IRR and are greater
than WACC
 Highest return (IRR) has been received in
Project D and difference between IRR and
WACC is also highest for this project
 Project D is recommended
Weight-age Average Cost of Capital for various given projects