Comprehensive Financial Analysis Report for ABC Tax Consultancy Firm

This report offers a detailed financial analysis of ABC Tax Consultancy, a firm specializing in tax-related services. The analysis covers various aspects, including the firm's structure as a partnership, benefits of conversion, and financial performance over a period. It examines investment strategies, return on investment (ROI), and capital rationing techniques employed by the firm. The report delves into specific activities undertaken in each week, such as stock data analysis, portfolio performance, and the impact of financial instruments. Furthermore, it discusses managerial roles within the organization and explores concepts like yield and credit risk in relation to bonds. The report provides a comprehensive overview of the firm's financial health and operational strategies, making it a valuable resource for students studying finance and business.

ASSESSMENT

Table of Contents
INTRODUCTION............................................................................................................3
TASK............................................................................................................................3
Week 1 Activity............................................................................................................3
Week 2 Activity............................................................................................................7
Week 3 Activity............................................................................................................7
Week 4 Activity............................................................................................................9
WEEK 5 Activity..........................................................................................................11
Week 6 Activity..........................................................................................................15
Week 7 Activity..........................................................................................................15
WEEK 8 Activity..........................................................................................................17
WEEK 9 Activity..........................................................................................................20
CONCLUSION..............................................................................................................21
REFERENCES.......................................................................................................................22

INTRODUCTION
The report prepared as under helps to understand and give an overview about
working and functioning of a business in competitive environment (Al-Fedaghi, S. and
Al-Huwais, N., 2018). It explains what tools and techniques would be helping a company
to overcome hurdles coming on its way and how they could dela with it in given time
frame as well. The chosen company is ABC and delas in tax related files and is a
consultancy firm which helps to file returns and provides services related to tax queries
which a customer would be having., It also helps in computation of figures such as Net
present value, internal rate of return, payback period and weighted average as well.
TASK
Week 1 Activity
a)
The name of the partnership firm will be ABC and Associates which engages in
providing tax consultancy to various group of individuals. The firm consist of three
different partners who are practicing legal consultants which provides tax advisory to
others and for this they are receiving fees from them (Baek, F., Ha, I. and Kim, H., 2019).
The business is solely based on the services they are providing, services include tax
advisory in various matters, filling of tax returns, Handling of tax matters in Court,
Handling of Appels relating to revenue matters amongst various tax authorities and so on.
The benefits for converting into partnership firm are being mentioned below:
 Firstly, there may be no automated switch i.e., all of the property and the
liabilities of the firm, simply earlier than the conversion, come to be the property
and liabilities of the organization. There isn't any any stamp responsibility on
such switch from Firm to Limited Company.
 The complete movable and the immovable homes of the company get vested into
the organization automatically. There isn't any requirement of a tool of switch to
be executed, so there may be no stamp responsibility required to be paid.
 No capital benefit tax is likewise charged on switch of assets from partnership
company to organization.
 The goodwill of the partnership company and its logo fee is usually stored intact
and it can actually preserve taking part in the preceding fulfilment tale with a
higher prison recognition.

 The collected loss and un-absorbed depreciation of partnership company are taken
into consideration to be loss/depreciation of the successor organization for the
preceding year wherein the conversion turned into done.
Date Open High Low Close Adj Close Volume Return
01-01-2017 27.530001 28.809999 26.51 27.23 22.472979 133097900 -1.09
01-02-2017 27.23 29.74 26.98 29.26 24.148342 115236800 7.46
01-03-2017 29.01 31.879999 28.950001 31.139999 26.552385 109196400 7.34
01-04-2017 31.049999 31.4 29.629999 30.25 25.793503 69186800 -2.58
01-05-2017 30.32 34.689999 30.209999 34.389999 29.323586 95776400 13.42
01-06-2017 34.740002 35.599998 33.869999 34.09 29.067785 82987600 -1.87
01-07-2017 33.84 34.5 28.43 30.18 25.733816 142102100 -10.82
01-08-2017 30.43 30.5 28.780001 29.83 25.435377 85950600 -1.97
01-09-2017 30.190001 34.07 29.98 33.880001 29.332407 116166600 12.22
01-10-2017 33.849998 34.939999 33.349998 34.5 29.869184 78935200 1.92
01-11-2017 34.5 34.790001 32.610001 32.869999 28.457973 61424400 -4.72
01-12-2017 32.799999 34.950001 31.99 34.700001 30.042339 57878200 5.79
01-01-2018 35.240002 36.700001 34.919998 35.060001 30.354019 74562500 -0.51
01-02-2018 35.150002 36.290001 32.849998 33.189999 28.735022 98283000 -5.58
01-03-2018 33.34 35.529999 32.689999 34.970001 31.134932 76785000 4.89
01-04-2018 34.889999 36.75 34.48 35.529999 31.633516 84176200 1.83
01-05-2018 35.689999 37.299999 35.400002 37.029999 32.969009 103121800 3.75
01-06-2018 36.720001 37.060001 34.380001 35.110001 31.259581 61047200 -4.38
01-07-2018 34.52 39.25 34.400002 39.130001 34.838715 78292300 13.35
01-08-2018 38.689999 39.759998 37.849998 38.34 34.135349 99212600 -0.90
01-09-2018 37.830002 39.740002 36.880001 39.57 35.639065 70304800 4.60
01-10-2018 39.59 40.16 36.669998 38.779999 34.92754 105358800 -2.05
01-11-2018 38.470001 41.779999 37.630001 39.82 35.864227 98643700 3.51
01-12-2018 39.950001 40.349998 36.490002 37.98 34.207016 85247700 -4.93
01-01-2019 37.720001 39.380001 35.299999 36.580002 32.946095 124681100 -3.02
01-02-2019 36.599998 42.580002 36.540001 41.580002 37.44939 96438000 13.61
01-03-2019 41.610001 43.299999 40.139999 40.43 37.248398 114327800 -2.84
01-04-2019 41.439999 41.66 36.830002 37.66 34.696381 118384900 -9.12
01-05-2019 37.509998 39.32 37.119999 37.380001 34.438419 95163300 -0.35
01-06-2019 38.040001 42.080002 37.759998 41.279999 38.031506 46817700 8.52
01-07-2019 41.650002 44.740002 39.849998 43.41 39.993893 72093400 4.23
01-08-2019 43.57 45.689999 43.16 45.029999 41.486404 70297500 3.35
01-09-2019 45.16 46.220001 42.189999 44.57 41.487686 71244500 -1.31
01-10-2019 44.029999 49.060001 42.25 49.029999 45.639244 71882200 11.36
01-11-2019 49.209999 49.220001 46.310001 48.48 45.127285 51530200 -1.48
01-12-2019 48.669998 51.23 47.450001 49.860001 46.41185 63666300 2.45
01-01-2020 50.299999 51.549999 48.470001 48.700001 45.332069 55336100 -3.18
01-02-2020 48.619999 50.25 42.959999 43.799999 40.770939 63107300 -9.91
01-03-2020 44.450001 48.689999 36.150002 44.66 42.418587 144486400 0.47
01-04-2020 43.75 54 42.799999 52.279999 49.656151 89272400 19.50
01-05-2020 52.029999 57.439999 50.810001 54.599998 51.859711 102351600 4.94
01-06-2020 54.32 55.290001 50.950001 52.889999 50.235535 123291100 -2.63

01-07-2020 52.830002 64.940002 52.389999 55.779999 52.980492 232665600 5.58
01-08-2020 56.68 57.93 54.970001 56 53.189449 79014400 -1.20
01-09-2020 55.849998 56.799999 52.57 54.799999 52.465775 97202100 -1.88
01-10-2020 55.200001 55.450001 49.790001 50.16 48.023418 93776300 -9.13
01-11-2020 50.470001 58.080002 50.150002 52.939999 50.685005 137978600 4.89
01-12-2020 53.060001 55.060001 48.169998 49.990002 47.860664 301070200 -5.79
01-01-2021 50.919998 54.650002 49.889999 50.599998 48.444675 237745900 -0.63
01-02-2021 51.259998 51.98 47.98 48.380001 46.319241 197416300 -5.62
01-03-2021 48.459999 51.209999 46.48 49.720001 48.522247 251940500 2.60
01-04-2021 49.610001 54.560001 48.259998 53.07 51.791542 216081400 6.97
01-05-2021 53.369999 57.73 52.740002 56.77 55.402412 143126800 6.37
01-06-2021 57.139999 60.369999 55.73 59.900002 58.457008 141721000 4.83
01-07-2021 59.869999 60.93 56 57.240002 55.861088 387383900 -4.39
01-08-2021 57.049999 60.189999 56 58.279999 56.876034 135632000 2.16
01-09-2021 58.740002 61.299999 55.130001 60.060001 59.082813 137899100 2.25
01-10-2021 59.290001 62.860001 58.689999 62.380001 61.365067 82631700 5.21
01-11-2021 62.189999 64.209999 54.709999 54.830002 53.937904 113414500 -11.83
01-12-2021 276.600006 283.799988 247.5 275.799988 275.799988 97512540 -0.29
Mean 122%
Variance 41.4391232
Standard
deviation 6.43732268
 This loss may be carried ahead for the subsequent 8 years by way of means of the
successor organization. The partnership company and the personal restricted
organization are totally unique prison entities. They additionally have unique
prison liabilities.
Discussion on managerial role within the organisation are being mentioned below:
 Figurehead: A supervisor performs a figurehead function while he plays sports
along with attending ceremonial capabilities that have symbolic nature.
Sometimes managers greet visitors, attend social capabilities concerning
employees, and managing out advantage certificate and different awards to
tremendous employees.
 Leader: The chief function of a supervisor entails main and motivating his
subordinates for inclined contribution. Managers carry out chief roles after they
carry out sports along with Hiring, Training, motivating, and guiding
subordinates.
 Liaison: In the Liaison function, the supervisor act as a mediator among the
enterprise and the outsider. He serves as a connecting hyperlink among his

gadgets and organizational gadgets, and on occasion with humans from the
outside environment.
Week 2 Activity
The Performance of the firm are being depicted below along with various calculation
mentioned below:
Mean Standard Deviation Variance
Firm
1
Firm
2 Firm 1 Firm 2 Firm 1 Firm 2
-
31% 122% 7.33 6.44 53.79 41.44
-
31% 122% 7.33 6.44 53.79 41.44
-
31% 122% 7.33 6.44 53.79 41.44
-
31% 122% 7.33 6.44 53.79 41.44
-
31% 122% 7.33 6.44 53.79 41.44
-
31% 122% 7.33 6.44 53.79 41.44
-
31% 122% 7.33 6.44 53.79 41.44
Firm 1 Firm 2 Combined
Mean -31% 122% 46%
Standard Deviation 7.33 6.44 1.94
Variance 53.79 41.44 47.61
Portfolio Weights Mean of
portfolio
Standard Deviation of
Portfolio Variance of PortfolioFirm 1 Firm 2
0.5 0.5 45.83% 6.886 47.613
0.1 0.9 106.99% 6.527 42.674
0.2 0.8 91.70% 6.617 43.909
0.4 0.6 61.12% 6.796 46.378
0.6 0.4 30.54% 6.975 48.848
0.8 0.2 -0.05% 7.155 51.318
0.9 0.1 -15.34% 7.244 52.553

Week 3 Activity
Investment is a form of act wherein belongings are bought which enables a person to
earn earnings withinside the destiny. In different words, the funding may be described as
a manner to generate wealth withinside the destiny. It should be referred to that the
belongings bought nowadays will supply a worthwhile profits withinside the lengthy run
(Barata, J., Da Cunha, P.R. and Stal, J., 2018). The belongings bought nowadays may be
offered at a better rate withinside the destiny to earn a earnings. It also can be described
as making an investment your cash to make greater cash. The investor invests his cash
both in security, bonds, etc. withinside the desire of collecting extra capital of their
financial institution accounts. A person can move for special varieties of investments.
Broadly, there are varieties of funding products:
 Financial Assets
 Non-monetary Assets
Return on funding (ROI) is a economic metric this is broadly used to degree the
possibility of gaining a go back from an funding. It is a ratio that compares the advantage
or loss from an funding relative to its cost. It is as beneficial in comparing the capability
go back from a stand-on my own funding as it's miles in evaluating returns from
numerous investments. In commercial enterprise analysis, ROI and different coins float
measures—consisting of inner charge of go back (IRR) and internet gift value (NPV)—
are key metrics which might be used to assess and rank the beauty of some of one-of-a-
kind funding alternatives. Although ROI is a ratio, it's miles commonly expressed as a
percent as opposed to as a ratio.
 Yield is a trendy time period that pertains to the go back at the capital you put
money into a bond. There are numerous definitions which are critical to
apprehend whilst speak me approximately yield because it pertains to bonds:
coupon yield, modern yield, yield-to-maturity, yield-to-name and yield-to-worst.
Let's begin with the simple yield concepts. Coupon yield is the yearly hobby
charge installed whilst the bond is issued. It's similar to the coupon charge and is
the quantity of profits you accumulate on a bond, expressed as a percent of your
unique investment. If you purchase a bond for $1,000 and receive $45 in annual
hobby payments, your coupon yield is 4.5 percentage. This quantity is figured as
a percent of the bond's par fee and could now no longer alternate at some stage in
the lifespan of the bond Current yield is the bond's coupon yield divided via way

of means of its marketplace rate. Here's the mathematics on a bond with a chit
yield of 4.5 percentage buying and selling at 103 ($1,030). Current Yield Math
 Example 1 Say we test the bond's rate later, and it is buying and selling at 101
($1,010). The modern yield has changed: Current Yield Math
 Example 2 If we purchase a brand-new bond at par and preserve it to maturity,
your modern yield whilst the bond matures may be similar to the coupon yield.
Changes in hobby charges have an effect on bond expenses through influencing the cut
price. Inflation produces better hobby charges, which in flip calls for a better cut price,
thereby reducing a bond's charge. Bonds with an extended adulthood see a extra drastic
reducing in charge on this occasion because, additionally, those bonds face inflation and
hobby price dangers over an extended duration of time, growing the cut price had to fee
the destiny coins flows. Meanwhile, falling hobby charge’s purpose bond yields to
additionally fall, thereby growing a bond's charge (Bensadoun, R.J., 2018). Credit danger
additionally contributes to a bond's charge. Bonds are rated through unbiased credit score
organizations inclusive of Moody's, Standard & Poor's and Fitch to rank a bond's danger
for default. Bonds with better danger and decrease credit score scores are taken into
consideration speculative and include better yields and decrease expenses. If a credit
score business enterprise lowers a selected bond's score to mirror extra danger, the bond's
yield has to boom and its charge ought to drop.
Week 4 Activity
There are various ways of resorting to capital rationing. For instance, a firm may
affect capital rationing through budgets. It may also put up a ceiling when it has been
financing investment proposals only by way of retained earnings (ploughing back of
profits). Since the amount of capital expenditure in that situation cannot exceed the
amount of retained earnings, it is said to be an example of capital rationing.
Capital rationing may also be introduced by following the concept of 'responsibility
accounting', whereby management may introduce capital rationing by authorising a
particular department to make investment only up to a specified limit, beyond which the
investment decisions are to be taken by higher-ups.
In capital rationing it may also be more desirable to accept several small investment
proposals than a few large investment proposals so that there may be full utilisation of
budgeted amount (Bydon, M., Alvi, M.A. and Goyal, A., 2019). This may result in

accepting relatively less profitable investment proposals if full utilisation of budget is a
primary consideration. Similarly, capital rationing may also mean that the firm foregoes
the next most profitable investment following after the budget ceiling even though it is
estimated to yield a rate of return much higher than the required rate of return. Thus,
capital rationing does not always lead to optimum results.
Alpha Limited is considering five capital projects for the years 2012 and 2013. The
company is financed by equity entirely and its cost of capital is 12%. The expected cash
flows of the projects are as follows: Year and Cash flows (` '000)
Project 2012 2013 2014 2015
A (70) 35 35 20
B (40) (30) 45 55
C (50) (60) 70 80
D – (90) 55 65
E (60) 20 40 50
Note: Figures in brackets represent cash outflows.
All projects are divisible i.e., size of investment can be reduced, if necessary, in relation
to availability of funds. None of the projects can be delayed or undertaken more than
once.
Calculate which project Alpha Limited should undertake if the capital available for
investment is limited to ` 1,10,000 in 2012 and with no limitation in subsequent years.
For your analysis, use the following present value factors:
Year 2012 2013 2014 2015
Factor 1.00 0.89 0.80 0.71
Computation of Net Present Value (NPV) & Profitability
Index (PI)
(` '000)

Ranking of Projects in descending order of NPV
Rank 1 2 3 4 5
Projects E D C B A
Selection and Analysis: For Project 'D' there is no capital rationing but it satisfies the criterion of
required rate of return. Hence Project D may be undertaken.
For other projects the requirement is ` 2,20,000 in year 2012 whereas the capital available for
investment is only ` 1,10,000. Based on the ranking, the final selection from other projects which
will yield maximum NPV will be:
Project and Rank Amount of Initial
Investment
`
E (1) 60,000
C (2) 50,000
Ranking of Projects excluding 'D' which is to start in 2013 when there is no limitation on capital
availability:
Projects E B C A
Rank 1 2 3 4
WEEK 5 Activity
Examination of the projects by computing payback period for every project.
Payback Period = Initial Investment / Cash flows per year
Project Discounted Cash Flows
2012 2013 2014 2015 NPV PI
A (70) 31.15 28 14.20 3.35 1.048
B (40) (26.70) 36 39.05 8.35 1.209
C (50) (53.40) 56 56.80 9.40 1.188
D – (80.10) 44 46.15 10.05 1.125
E (60) 17.80 32 35.50 25.30 1.422

The calculation of payback with respect to Project A and Project B are being mentioned below:
Project A: (Figures in £)
Years Cash Flows Cumulative Cash Flows
0 -190000 -190000
1 55000 -135000
2 40000 -95000
3 25000 -70000
4 10000 -60000
4 50000 -10000
The payback period in case of the Project A is more than 4 years, since the initial cost is not
recovered fully at the end of 4th year also.
Project B: (Figures in £)
Years Cash Flows Cumulative Cash Flows
0 -170000 -170000
1 15000 -155000
2 25000 -130000
3 45000 -85000
4 65000 -20000
4 20000 Nil
The payback period for the Project B has been 4 Year, Since the initial investment made in the
project that is 170000 has been fully recovered at the end of 4th year and no additional cash
is available in that year.
Compute NPV for both projects.
Net Present Value = (Present Value of Cash Inflows – Present Value of Cash Outflows)
Project A: (Figures in £)
Years Cash flows Discount Factor @
10 %
Present Value of
Cash Inflows
1 55000 .909 49995
2 40000 .826 33040

3 25000 .751 18775
4 10000 .683 6830
4 50000 .683 34150
Total Present Value
of Cash Inflows
142790
Less: Cash Outflows (190000)
Net Present Value (47210)
Project B: (Figures in £)
Years Cash flows Discount Factor @
10 %
Present Value of
Cash Inflows
1 15000 .909 13635
2 25000 .826 20650
3 45000 .751 33795
4 65000 .683 44395
4 20000 .683 13660
Total Present Value
of Cash Inflows
126135
Less: Cash Outflows (170000)
Net Present Value (43865)
Compute the Internal rate of return for both projects.
Discount Project A Project B
factor (20%) CF DCF CF DCF
Year 1 0.83 200000 166600 300000 249900
Year 2 0.69 150000 104100 250000 173500
Year 3 0.58 200000 115800 225000 130275
Year 4 0.48 175000 84350 200000 96400
Total DCF 470850 650075
Initial investment 500000 700000