Documents “Essentials for Financial Statement Analysis” as well as “Final Project Format” are available on fin619 home page in the “Downloads” section. You have to follow them while preparing your final project.
Financial analysis includes ratio analysis, horizontal, vertical, industry and trend analyses.
Presentation of Ratio Analysis
You should proceed in the following way .i.e. first describe a brief introduction of a particular ratio, then its formula, afterwards its calculations and workings should be shown. Then show its graph and then finally give interpretations.
Follow the below given format:
Name of the ratio
Step 1: Show the table as given below:
Year 20XX Year 20XX Year 20XX
Company A Show the amounts in numerator and denominator and then the final result. i.e.
Note:
All these ratios have been taught to you under the subject of Financial Accounting (MGT101), Financial Statement Analysis (FIN621) and Investment Analysis & Portfolio Management (FIN630). So consult handouts and reference books of these courses to get help about ratios and their formulas.
Step 2: Working
After the table show how you have calculated the amounts given in numerator and denominator (for those items that require calculations)
Step 3: Graphical Presentation of Ratio
Plot the calculated ratio results on graph for all the three years. You can use Bar chart or Line chart for graphs. Do not use Pie chart.
Step 4: Interpretation
In this section interpret the graph shown above and explain that what are the reasons/factors for decreasing or increasing trend of this ratio i.e. you have to explain that why it has been increased or decreased over the three years.
You have to follow the same format for all the ratios that you will calculate. This format will cover two types of analyses i.e. Ratio analysis and Trend analysis as in trend analysis ratios are plotted on graphs to show the increasing\decreasing trends. So by following the above format you will do both these analyses.
Remember, without formulas, working, graphs and interpretations your analysis will NOT be accepted.
You have to calculate minimum 40 ratios out of the total ratios.
After Ratio and Trend analysis conduct Horizontal and Vertical Analyses. Guidelines about how to conduct Horizontal and Vertical Analyses are given in “Essentials for Financial Statement Analysis”. You have to interpret these analyses as well.
Then do the Industry Analysis. For industry analysis, you are required to select 3-4 companies from the same industry and then calculate their 8 -10 ratios for most recent three years. You should proceed in the following way that first calculate a particular ratio for all three selected companies for the year 2007 then take after calculation take average of these ratios. The resulting figure will be the industry average for the year 2007. Similarly calculate industry averages for the year 2008 and 2009 and then compare these ratios results with your companies’ ratios results. This enables financial analyst to check that where the selected companies fall in that particular industry.
Summarize your analyses. After complete financial analysis, you as a financial analyst will have to compare both these companies and on the basis of financial analysis you have to give comments/opinion in the form of “Conclusion” to all the stakeholders about which company is good. Stakeholders include management of the companies, shareholders, customers, investors and all related person that can affect and that can be affected by your selected companies business. You should give comments to each member/party of stakeholders separately i.e. you should give comments firstly to management of the companies then to the shareholders and so on to the rest of parties.
After giving summary and conclusion you will be required to give “Recommendations/Suggestions” to both the companies separately about how they should improve the weak areas. Your recommendations must be based on logical facts that you will know after doing financial statement analysis rather than raw data.
At the end of your final project, attach all of the supportive material you have used for the preparation of your final project. You must provide scanned copies of all the financial statements used for financial analysis. (If you have downloaded the financial statements from internet then its source or web link should be provided. Scanned copies are not required in such case).
Your work will NOT be considered or accepted in case you do not provide scanned copies or source of original financial statements.
Read and follow formatting guidelines uploaded on VULMS of this course under Lesson 05: Guidelines & Instructions while preparing your final project.
For any further guidance about your final project, ask your queries via emails at vuaccess@gmail.com
You are required to do complete financial analysis of most recent three years. Analysis done other than recent years will NOT be considered.
Guidelines for Final Project
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