Case Study Assignment

Part A - Financial Statement Analysis

ASSIGNMENT ( company NAME is already choosen by coordinator is" SEAFARMS")

You are to choose an Australian listed public company that is quoted on the industrial board and is not in the financial services sector. Obtain copies of your company's recent financial statements, and together with other references, use them to evaluate the company according to the guidelines listed below under "REQUIRED".

CHOICE OF COMPANY.

A copy (preferably electronic) of your company's financial statements must be submitted with your assignment.

Maximum length: 1600 words (+/- 10%) plus tables, calculations, references etc.

Extensions are not given except in circumstances that are onerous, unavoidable or Unforeseen.

CHOICE OF COMPANY
Students must not choose a company that is chosen by other students in your workshop. This means that you must register your company choice with your WORKSHOP COORDINATOR before commencing your assignment. The first-come, first-served rule applies.

There are around 2400 companies listed on the ASX. You are to choose a non-financial industrial company because mining companies and financial companies have unusual ratios.

Below are the industry codes (GICS) used on the ASX - avoid "Energy" "Materials" "Banks"

"Diversified Financials" "Insurance" and "Real Estate"
1010 Energy
1510 Materials
2010 Capital Goods
2020 Commercial Services & Supplies
2030 Transportation
2510 Automobiles & Components
2520 Consumer Durables & Apparel
2530 Hotels, Restaurants & Leisure
2540 Media
2550 Retailing
3010 Food & Drug Retailing
3020 Food, Beverage & Tobacco
3030 Household & Personal Products
3510 Health Care Equipment
3520 Pharmaceuticals & Biotechnology
4010 Banks
4020 Diversified Financials
4030 Insurance
4040 Real Estate
4510 Software & Services
4520 Technology Hardware & Equipment
4530 Semiconductors & Semiconductor
Equipment
5010 Telecommunication Services
5510 Utilities

Also, check if your company is Australian. Non-Australian companies can list on the ASX, but they could be reporting in a foreign currency and subject to foreign rules - again, this makes your job more difficult

REQUIRED

You will evaluate your company using accounting concepts, ratios or analysis techniques (i.e., correct data, correct formulae, correct calculations, and correct interpretations) as follows:

I. Introduction
- Summary of the company of your choice that includes the following elements:
- Name of CEO
- Home office
- Ending date of latest fiscal year
- Description of the principal products or services that the company provides
- Main geographic area of activity
- Name of the company's independent auditors. What did the auditors say about the company financial statements?
- The most recent price of the company's stock and its dividend per share (provide the date for this information)
II. Industry Situation and Company Plans
- Describe the industry and its outlook
- Summarise the company's future plans (based on your research and on reading the annual report)

III. Financial Statement Analysis
- Statement of Financial Performance
- Determine gross profit, income from operations, and net income for the last 3 or 5 years and comment on the increases or decreases in these amount
- Adopt common-size statement analysis technique / Trend analysis technique (Include and present the time series common-size Statement of Financial
Performance in a table)
- Identify significant (or change in) accounting policies in preparation of the statement / relevant notes to the financial statement should be taken into consideration (i.e. revenue recognition...)
- Identify trends and items that might be different from the industry norm
- Statement of Financial Position
- Show that the Assets = Liabilities + Stockholders' Equity for the past 3 or 5 years
- Adopt common-size statement analysis / Trend analysis technique
(Include and present the time series common-size Statement of Financial Position in
a table)
- Identify significant accounting policies in preparation of the statement / topics of the notes to the financial statement (i.e. property and equipment, merchandise inventories, receivables, goodwill and intangibles, cash...)
- Identify trends and items that different from the industry norm
- Statement of cash flows
- Compare operating cash flows with the net income for the past years
- Is the company expanding through investing activities?
- Identify the company's most important source of financing?
- Overall, has cash increased or decreased over the past years?
- Summarise, discuss and report the major points of interest from your analysis

IV. Ratio analysis
- Calculate the discuss the significance of the following ratios for the past 3 or 5 years, and compare them with the industry ratios (show your calculations)
- Liquidity ratios: Working capital / Current ratio / Receivable turnover / Average days'
sales uncollected / Inventory turnover / Average days' inventory on hand
- Profitability ratios: Profit margin / Asset Turnover / ROA (Du Pont equation) / ROE
- Long term solvency ratios: Debt to equity / Interest coverage
- Cash flow adequacy: Cash flow yield / Cash flows to sales / Cash flows to assets /
Free cash flow
- Market strength Ratios: Price/earnings per share / Dividends yield
- Identify trends, strength and weaknesses

V. Conclusion
- Summarise your findings and make recommendations as to what you think the company should do to enhance performance
- Based on your analysis, would you consider the company to be a strong performer?
- Your decision - rationale for the decision