International Accounting and Finance project (BT group)

at
Categories
Tags

A 5,000 words report plus a 250 words executive summary. A report based on very detailed research into company accounts. Analyse company’s business activities – Use your own explanation of how company’s business model works (DO NOT COPY COMPANY’S STATEMENTS)
• Identify key drivers of business model and competitiveness
– Use independent data on company’s markets
– Assess future prospects for these markets
• Compile financial ratios for performance, efficiency, liquidity and solvency for company and at least three competitors
– Ratio analysis over the past five years
– Comparing these ratios – draw your own conclusions, NOT just descriptions
Structure of the Project

REPORT SUMMARY:
– equity data, company fundamentals, prospects, valuation & recommendation
• Show key data on share price & performance, valuation price & ratios and investor recommendation
• Two to three statements which explain your forecasts for the company’s revenue, income and cash flow
• Key economic and market forces driving company’s prospects
• How this translates into valuation, target price & recommendation

1) INTRODUCTION:
• Summarise company’s activities and business model
– What does it sell? Where? To whom? With what competitive advantage? • Main markets served by company – by region, product, customer type
• Typical features which MIGHT affect your company:
– Demographics, social trends, consumer behaviour, fashion, changes in global trading patterns, environmental issues
• Avoid lengthy history and descriptions
• Use short, sharp summary of what drives this business)
– Company’s business model – which markets drive its revenue and profit?
2) SECTOR REVIEW:
– the market forces driving demand, supply, competition, prices, costs & margins in the sectors which contribute most of the company’s revenue and profits
• Sector comments must be relevant to company’s operations
• Identify two to four key market forces driving demand
• Understand how competition works in sector
• Reach clear conclusion on likely future directions
• Reach clear conclusions about specific market forces
• Support those conclusions with statistical evidence
• Do NOT simply download economic and sector data without explaining how it affects sector prospects

3) COMPANY ASSESSMENT:
– company’s competitive position in sector, past performance relative to peers (using financial ratio analysis), key drivers of future trading, conclusion on their likely direction and impact on financial forecasts
• Assess historic performance and future prospects
• Analyse 5-year trends in financial ratios:
– Has it improved or deteriorated in recent years?
– Have there been any volatile movements – what may have caused them?
– Is the company reliable in delivering sustained earnings growth?
– Or is it poised for recovery from a low point? Or unlikely to recover?
• Compare company’s performance with sector peers
– Has it performed better or worse than its peers?
– Are its finances stronger or weaker than its peers?
– Has it been operated more efficient than its peers?

4) FORECASTING:
– translate trading assumptions into sales, costs, income & cash flow forecasts
FORECASTS FOR:
• Revenue from demand, price & competitor analysis
• Expenses from assessment of supplier pressures and movement in operating overheads
• Net income & earnings from tax, debt & interest rates
• Dividend from earnings and payout ratios
• Cash flow from working capital and depreciation accruals
• Balance sheet from accruals, retained earnings and cash flow

5) VALUATION:
– translate forecasts into DCF & DDM valuations relative to share price, and Price Multiples relative to peers
Absolute Valuation Methods / Intrinsic Value
• Convert dividend forecast into DDM
• Convert free cash flow forecast into DCF
Relative Valuation Methods / Price Multiples
• First-year forecast of sales, earnings & book value of equity
• Calculate ratios of:
– P/E
– P/Sales
– P/Book
• Compare with peer company ratios

6) RECOMENDATION AND CONCLUSION:
• If wide variations (>15%) between these valuations, check assumptions
– does cash flow over/understate by using too high/low depreciation charge?
– does dividends over/understate by using too high/low payout ratio?
• If after re-examination values still widely divergent, explain why
• Compare each valuation with current share price to identify Buy (valuation > share price) or a Sell
(share price > valuation)

Criteria for marking the reports
USE OF DATA
• How well have you used data to compile an INDEPENDENT view of company prospects, accessing websites of:
– Company & its competitors
– Industry bodies
– Government statistics and reports
– Financial and economic reports
LOGIC, ARGUMENT & FINANCIAL FORECASTS
• Logical argument to support assessment of company prospects
• Accuracy and clear exposition of company’s financial forecasts
• Independent thinking to link research data to conclusion
• Presentation of argument, financial forecasts and valuation

Sample Solution

Insect’s Social Organization and Feeding Habits

A. Ali has in excess of 12,000 ants from family’s Ali Family. This is the most widely recognized subterranean insect in any social bug. They represent “practically all major earthly natural surroundings” and designate “noteworthy social conduct, taking care of propensities and importance” with different creatures (Bolton et al., 2006; Ward , Quoted in 2007). A. Ali’s Social Organization and Feeding Habits Ali as a rule incorporates three animal varieties: winged, prolific, female or female; wingless, fruitless ladies or laborers; and men with wings.

Three sorts of gathering ants in red, western part, and california each have one of a kind practices, cast and crucial, settling designs, safeguard instruments. From the propensity for rearing and settling, you can see that the reaping ants of every species demonstration in an unexpected way. Besides, dissimilar to numerous different ants attacking indoor structures, a wide range of collecting ants don’t care to attack houses or structures, however they make homes around the nursery and the yard, frequently making vegetation I will crush it.

Ants for gathering, likewise called reaping ants, are put away in the open room home with ants gathering seeds (called species prey), or Euprenolepis procera in the conventional name of ants of any sort or variety of mushrooms It will be. Storage facility They are otherwise called agrarian ants. Some desert insect seed gather is adjusted to the absence of ordinary subterranean insect assets, for example, prey and nectar from such mid-wings. Reaper ants improve the scattering and assurance of seeds and give supplements that upgrade the endurance pace of desert plant seedlings. Furthermore, Ali will ventilate the dirt through the establishment of displays and rooms, the blending of the dirt of the upper layer and the dirt, and the incorporation of natural waste into the dirt.

1 Organization: Ali is an exceptionally composed creepy crawly. This can be found in the shellfishes palace they call Mound. There is a province in the ant colony dwelling place, and there is a division of an exacting subterranean insect life. You have a sovereign, a province key, men lying with her throughout the day, and a laborer subterranean insect foreseeing striving to keep up the uprightness of the state. Exacting division of work inside the group can decrease duplication among individuals. By obviously characterizing jobs along these lines, even the most testing undertakings can accomplish unrivaled effectiveness.

Ants are a run of the mill case of nature. As a renowned scientist E.O. Wilson brought up that Ali shows the most unpredictable social structure close to people. In any case, these structures originate from straightforward activities. In the state, when Ali redraws the hint of the hormone left by different ants during the wandering procedure and redraws, the outcome shows the utilization of anthilles, viable utilization of all food close by, capacity to secure home and domain, movement, And it is a debacle. Endure. A few ants are not directional, however after a specific populace point their aggregate insight and capacity will be more prominent. It is more astute for ants. Because of crisis data, there is generally no change in the course of the last 90 million years.

This question has been answered.

Get Answer