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This assignment has three parts. Part 1. As a financial analyst in a consultancy
This assignment has three parts. Part 1. As a financial analyst in a consultancy firm in this part, you are required to evaluate and analyse the ratios of two companies operating in two different sectors for two most recent years. You are required to choose 2 companies from two different sectors from the list of FTSE 350 companies from the below sectors (Transportation and storage (for more information see section H on SIC code)) https://www.gov.uk/government/publications/standard-industrial-classification-of-economic-activities-sic (UK SIC code information) **For a good report you are expected to consider some industry/competitor data and information from various sources to support your analysis. Based on the ratios you have calculated and consideration of any other information such as industry/competitor data and information from various sources you are required to comment on the performance and position of both companies from the perspective of prospective investor. Also, briefly discuss the problem when comparing the companies from different sectors. Your report should cover following ratios: • Profitability ratios (such as gross profit margin, operating profit margin, net profit margin). • Financing management ratios (such as debt to equity, interest cover, liquidity ratios) • Efficiency ratios (such as inventory turnover, trade receivable turnover, trade payable turnover) • Overall profitability (such as ROA, ROE, EPS) • Shareholders’ Investment ratios (such as dividend cover, dividend yield, P/E ratio) NOTE: You can also download annual reports from the company’s website. It is also expected that you will collect information from the narrative section (first part) of the annual reports and accounts of companies. In addition, use of information from financial press and some industry/competitor data is expected in a good report. Part 2: In this part you are evaluating two capital budgeting projects with the same initial investment cost (required to provide example of cash inflow and outflow of both projects). You are required to use the key capital budgeting methods and make recommendation which project should be selected. You are also required to provide reasons for your recommendation. Part 3: In this part, you are required to prepare a valuation of a company using one of the following two methods: 1. Prospective price-earnings ratio analysis based on forecast normalised earnings. 2. Forecast dividend growth model. You are required to compare your valuation with the actual market value of the company. In preparing valuation, you should state all your assumptions clearly in the report. Show your calculations clearly either in the main report or in appendix.
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