Introduction to Real-World Annual Reports

Company explored in the case study: BLACKMORES

Overview:

The case study assignment is an assessment item worth a total of 30% of the final grade for this subject. Note; this assessment is NOT ahurdle assessment; however, students are required to attempt all assessments in order to pass the subject.

The case study provides students with the opportunity to:

1. Explore subject topics using a real-world example;

2. Develop skills required for financial analysis;

3. Work collaboratively on a piece of academic work; and

4. Learn from their peers regarding their own behavior in group work.

The questions in this case study workbook have been designed to introduce and prompt students to answer questions based on the concepts and principles learned the topic content throughout the study period.   The workbook consists of;

Part 1 - Develop a background of the company and an overview of the company's corporate governance principles.

Part 2 - Familiarise students with the published annual reports and identify differences between results over a period of time.

Part 3 - Conduct ratio analysis on the company annual report.

Part 4 - Prepare a comparative analysis of the 4 companies assigned to the group, summarise the findings and present as a response to the investor.

In your first tutorial class, your tutor will assign you a company for the case study assignment.  You will work as an individual on the assignment completing all of questions for parts 1, 2 and 3 in the case study workbook.  Once census date has passed, your tutor will assign you to a group with a maximum of 4 students.  Each student in the group will be assigned a different company, this means that there will be 4 different companies within each group.  Students may choose members fortheir group, but each member must have been assigned a different company for analysis.

The purpose of the group work component is to conduct a comparative analysis of all 4 companies using the information prepared as individuals.

Before starting the written response you should read over the marking criteria sheet. The essay should be typed and APA referencing should be used (see http://libguides.jcu.edu.au/apa ).

Part 1 - Introduction to Company Annual Report and Financial Statements

The purpose of part 1 is to begin your exploration of your company's annual report and corporate governance structure.

Question 1: Write a background summary of your assigned company including the following:

• When and why did your company first commence operation?
• What is the main or core business of the company?
• Some companies are diversified and have investments in other industries, for example, Wesfarmers has diverse business operations that cover supermarkets, department stores, home improvement and office supplies; coal production and export; chemicals, energy and fertilisers; and industrial and safety products. Is your assigned company diversified? What industries does the company operate in?
• Does your assigned company operate solely within Australia or does it operate internationally? Identify the operational locations.

Question 2: What are the headings and sub-headings of the discussion on corporate governance?

Question 3:  What are the page references for the discussion on corporate governance?  (Hint - try the table of contents at the beginning of the annual report.) Briefly summarise the information included in the company's corporate governance report.

Question 4: What position was held and what was the composition and total remuneration of the highest paid board member?  (Hint - try the Directors' Report.)

Question 5:  How many "subsidiary companies" or "controlled entities" are in the group?  (Hint; try looking towards the end of the financial statements, near the end of the report).  Are the subsidiaries/controlled entities located domestically and or internationally?  Identify where they are located.  This will give you insight into how widespread the company's operations are and may assist you with your background information.

Part 2 - Financial Statements

The purpose of part 2 is to not only introduce students to an actual set of financial statements of a publicly listed company, but to also identify information that may be significant for ratio analysis which will be conducted in Part 3.  The financial statements are presented in the financial report section of the company's annual report.  For this section you may find it easier to refer to the excel spreadsheets to obtain the financial data.  The excel spreadsheet will contain the financial information for the past 10years; however you will only need to refer the data for the past four years in your spreadsheet, (the past three years and the fourth may be required to create averages for some of the ratios in part 3).  This will make it easier to refer to the financial data for several years in one excel worksheet.

Question 1: What is the amount invested by the company in net assets for the current year?  (Hint use total assets less total liabilities).  How does this amount differ from the value of net assets for each of the previous three years?  Can you identify any reason for the changes?  (Hint: look at the individual amounts that make up both the total assets & total liabilities, are there any changes to individual items over this three-year period?  Alternatively, you could perhaps look at the notes to the financial statements in the annual report to see if there are any changes in the breakdown of individual items in the reports.)  Discuss.

Question 2: How much was the total equity for the current year?  How does this differ from the total equity in each of the previous three years?  Can you identify any reason if there are any changes?  Discuss.

Question 3: How much was the total current assets for the current year and what are the components classified under this heading?    Is there any difference in the value of total current assets for each of the previous three years?  Can you identify any reason if there are any changes?   Discuss.  (Hint: you may need to refer to the notes to the financial statements in the annual report to review more detailed information.)

Question 4: What are the items listed under non-current liabilities? Are there any new non-current liabilities in the current year that were not there in the previous three years? (Hint: you will need to look in the notes to the accounts to see the breakdown of non-current liabilities).

Question 5: How much was net profit for the current year?  How does this compare to the net profit for each of the previous three years?  Can you identify any particular revenues or expenses that may have led to changes in the profit figures over the three-year period?  Discuss.

Question 6: Is the total revenue in the current year greater or less than the total annual revenue recorded in each of the previous three years?  Discuss.

Question 7: How much was the cash flows from operating activities for the current year?  What was the largest inflow item and the largest outflow item in the operating activities section?  Does this differ from the previous three years?  Discuss.

Question 8: How much was the cash flow from investing activities in the current year? Has the company had any new investing cash flows in the current year compared to the previous three years? If they did, list the activities (Hint: it may be necessary to look in the notes to the accounts).

Question 9: What was the net change in cash flows in the current year?  How does this change compare to the previous three years?   Discuss.

Part 3 - Financial Statement Analysis Tools

The purpose of part 3 is to introduce students to using financial statement analysis tools.  Hopefully your answers to questions in part 2 may have flagged monetary differences that you can now compare based on percentages using ratio analysis.  Ensure you include your calculations in your answer and more importantly, try and identify why percentage changes may have occurred.  It is this analysis that is most important in this exercise, trying to identify "why" changes have occurred. The group should aim to incorporate the answers and calculations each member has prepared for their assigned company as supporting documentation for the group analysis in the appendix of the final submission.  The more analysis provided in the answers to these questions, the more information the group will have to draw on when conducting the comparative analysis for the written response for part 4.

Question 1: Has the profit margin changed over the past three years?  Is this a good result for the company?  Briefly discuss what the change indicates.  (Hint:as mentioned above, refer to your horizontal and vertical analysis of the Income Statement and Balance Sheet to assist in your analysis of this ratio.)

Question 2: Can you identify a trend in the return on equity ratio over the past three years?  Comment on the trend.  Briefly discuss possible reasons for this trend.

Question 3: Identify if the asset turnover ratio increased or decreased over the past three years? Is this a good result for the company?  Briefly discuss what the change indicates.

Question 4: Has the receivables turnover changed over the past three years? Is this a good result for the company?  Briefly discuss what the change indicates.

Question 5: Has the inventory turnover changed over the past three years? Is this a good result for the company?  Briefly discuss what the change indicates.

Question 6: Has the current ratio increased or decreased over the past three years?  Is this a good result for the company?  Briefly discuss what the change indicates.

Question 7: Has the quick ratio increased or decreased over the past three years?  Is this a good result for the company?  Briefly discuss what the change indicates.

Question 8: Has the cash flow (to current liabilities) ratio increased or decreased over the past three years?  Is this a good result for the company?  Briefly discuss what the change indicates.

Question 9: Has the debt to assets ratio increased or decreased over the past three years?  Is this a good result for the company?  Briefly discuss what the change indicates.

Question 10: Has the debt to equity ratio increased or decreased over the past three years?  Is this a good result for the company?  Briefly discuss what the change indicates.

Question 11: Conduct a horizontal analysis of the Income Statement for the past 4 years.  Comment on any trends.

Question 12: Conduct a horizontal analysis of the Balance Sheet for the past 4 years.  Comment on any trends.

Question 13: Conduct a vertical analysis of the Income Statement for the past 4 years.  Comment on any trends.  

Question 14: Conduct a vertical analysis of the Balance Sheet for the past 4 years.  Comment on any trends.  

Part 4 - Group Response Instructions

Written response to the following statement:

An investor is contemplating a potential investment opportunity in one of four companies. The investor has asked your group to provide a four-page comparative summary on the profitability, liquidity, asset efficiency and gearing of the four nominated companies and recommend the company that provides the best investment opportunity.

Attachment:- Assignment.rar