Financial analysis report

ASSESSMENT 2: FINANCIAL ANALYSIS REPORT

35%
2200 words ± 10%
Modules 2-3
Learning outcomes 1-3
Electronically through MyLO Assignment submission folder

Submission:
Before attempting this assignment:

Ensure the ‘Assessment’ section in this Unit Outline is read and understood. If you have any questions, please do not hesitate to contact the lecturer.

Students should refer to the ‘Guide to Assessment’ file under the Content tab on the unitMyLO site for guidelines on assignment presentation.

Ensure you understand the assignment question(s) and/or tasks. Once again, consult your lecturer should you be unsure of any matters.

Note: All students are required to submit this assignment to be eligible to undertake the final unit examination.

Task description & requirements

There are TWO questions in this assignment, including the preparation of a company’sincome statement and balance sheet and undertaking the financial statement analysis for two global companies operating port and terminal business.

Note there is NO requirement for presenting an abstract, table of contents, introduction and conclusion in the assignment. Answer the questions directly, clearly indicating the question number. Source of information used for this assignment should be acknowledged.

Question 1

The following data relates to the financial information of Chen Marine and Port Group as at 30 June 2018. Complete the following tasks for the company. The company tax rate is 30%.

1. (1) Prepare an income statement for the year ended 30 June 2018.
2. (2) Prepare a balance sheet as at 30 June 2018 in a vertical format.

[2 Marks]

[4 Marks]

JNB518 Finance for Decision-Making Page 9

	Account			$’000			Account			$’000
Revenue			300,000			Accounts receivable			32,000
Asset maintenance			32,400			Inventory			3,000
Depreciation expense			13,420			Insurance expense			10,900
Land			80,000			Electricity and telephone expenses			5,600
Property, plant and equipment			488,000			Prepayments			8,000
Accumulated depreciation			40,000			Ordinary shares			50,000
Port operations expenses			30,000			Long-term loan			283,000
Interest expense			14,400			Wages expense			38,000
Cash			38,000			Deferred tax assets			28,000
Current tax liability			1,300			Marine expenses			9,000
90-day bank bill payable			2,000			Retained earnings 2017			?
Accounts payable			24,000			Retained earnings 2018			?
Bank overdraft			1,000

Question 2

Suppose you are working in a financial institution as a financial advisor. Recently you receive a request from a client who is interested in investing in shares of two international container terminal operators, DP World and PSA International. You have to provide a written reportto the client on the companies’ financial performance and recommended actions for investment. The two companies’ consolidated financial reports for 2017 are available in the following links. Use the two-year data, i.e. 2016 and 2017 in the reports for the analysis.

DP World Annual Report 2017:http://web.dpworld.com/wp-content/uploads/2014/05/DPWORLD_AR.pdf, where the Consolidated Statement of Profit and Loss and Consolidated Statement of Financial Position are available on pages 76 and 78 respectively. Notes to financial statements are also available in the report, which provides further information for your analysis.

PSA International Annual Report 2017:https://www.globalpsa.com/assets/uploads/AR2017.pdf, where the Statements of Financial Position and Consolidated Income Statement are available on pages 39 and 40 respectively. Notes to financial statements are also available in the report, which provides further information for your analysis.

Both annual reports are also available in MyLO (in the ‘Assessment Information’ file underthe Content Tab).

JNB518 Finance for Decision-Making Page 10

Your report should consist of the following:

(1) Calculations of the ten (10) financial ratios below using relevant data in the reports for the two companies for the two years (i.e. 2016 and 2017).

a. Current ratio	f. Times interest earned ratio
b. Quick ratio	g. Total asset turnover
c. Debt ratio	h. Fixed assets turnover
d. Average collection period (days)	i. Net profit margin
e. Return on equity	j. Return on total assets (ROA)

[8 Marks]

(2) Analyses of financial performance of the two companies based on short term solvency, financial stability (gearing), efficiency of asset management, and profitability over the two year period.

(3) A cross sectional analysis using 2017 ratios.

[12 Marks]

[3 Marks]

(4) Investment recommendations based on your analysis results. You should research relevant information to help you make recommendations, such as current market environment of the container shipping and port industry and the companies’ businessnature and strategies.

Note:

•  Question 2 is a report. The information on the format of report writing is includedin module 3; it is also available in MyLO (in the ‘Assessment Information’ file underthe Content Tab).
•  Keep the report concise. Present only the results of ratio calculations in tables in the report itself. However, the details of ratio calculations should be provided as an appendix to the report. Set out your ratio calculations clearly using Excel spreadsheets or Word tables. If the working process is not shown, NO mark will be allocated regardless of whether the answer is correct or not.

See the Essay/report assessment criteria sheet on the following page for information about the criteria and the standards by which your work will be judged.

JNB518 Finance for Decision-Making Page 11

[6 Marks]

Assessment rubric for financial statement preparation and analysis report

Assessment Criteria*	HD (High distinction) 80%-100%	DN (Distinction) 70%-79%	CR (Credit) 60%-69%	PP (Pass) 50%-59%	NN (Fail) 0%-49%
Financial statement preparation	All or almost financial data accurately presented	Most financial data accurately presented	Many financial data accurately presented	Around half the financial data accurately presented	More than half the financial inaccurately presented
Ratio calculations	80%-100% of ratios calculated correctly	70%-79% of ratios calculated correctly	60%-69% of ratios calculated correctly	50%-59% of ratios calculated correctly	0%-49% of ratios calculated correctly
Financial statement analysis	All financial information accurately interpreted Effectively apply theory and concepts to analyse financial data with precision	Most financial information accurately interpreted Most theory and concepts applied proficiently to analyse financial data with precision	Many financial information accurately interpreted Some theory and concepts applied to analyse financial data but with some mistakes	Around half the financial information accurately interpreted Some important theory and concepts not applied; many mistakes in analysing the financial data	More than half the financial information inaccurately interpreted Little attempt to apply theory and concepts for analysing the financial data
Demonstrate ability to articulate and defend analysis and recommendations	Relate all relevant factors to the decision making with logical and persuasive justification	Relate most relevant factors to decision with plausible justification	Relate some factors to the decision making with reasonable justification	Relate few factors to the decision with reasonable justification	No or very limited factors considered for decision making, and justification is unclear
	Evidence of wide researching extra information taken into consideration		A range of extra information taken into consideration	Limit use of extra information taken into consideration	No evidence of using extra information taken into consideration
Quality of Communication	Effective use of formulae, tables and spreadsheets		Use formulae, tables and spreadsheets competently	Use formulae, tables and spreadsheets satisfactorily	Poor use of formulae, tables and spreadsheets
	Professionally write a report to the financial information user		Competently write a report to the financial information user	Fair report writing to the financial information user	Poor report writing to the financial information user
	Logical structure with coherent, concise well developed argument Acknowledged all sources professionally Professionally and apply referencing style faultlessly	Well organised structure with argument, mostly logical, concise and coherent Acknowledge main sources Mostly accurate referencing	General organised structure and argument, generally logical, concise and coherent Acknowledge some sources Reasonably accurate referencing	Ineffective organised structure and in some areas argument illogical and unclear Significant lapses in appropriately acknowledging sources Significantly inconsistent referencing	Poor organised structure and argument generally illogical and unclear Sources poorly acknowledged Incorrect referencing style

* Please note that the criteria listed above are not necessarily of equal weighting, nor are they all-inclusive; they give an indication of your performance