The coursework requires analysis on the recent performance of a major international company to give advice to the investor based on the findings. From the research a 3000 to 3500 word report must be presented on what the best course of action would be with respect to the company’s share. You need to describe the investor who might be looking for growth or income. The investor may already hold the shares of the company or may be considering buying shares in the company. It is required to use the company’s latest annual report and to make comparisons with the performance of one other company in the same industry (it should also be compared with the industry average i.e average p/e ratios etc). Given that the latest annual report is already out of date by the time it is made available, it will be expected to show knowledge of the present and likely future environment within which the company is operating. The completed work should be presented in a form of a report. It will be sufficient to submit extracts from the latest annual reports, namely the chairman’s statement (or equivalent), the profit and loss accounts and the balance sheet – with notes to the accounts where appropriate – with the report. Everything done must be noted. The ratios to look at and analyze are all the following:
Investor Ratios:
1. EPS = Profit after interest and tax/ number of shares (basic eps and not diluted)
2. PE= Price/ EPS
3. Dividend per share = Dividend/ number of shares
4. Dividend yield = Dividend/ share price
5. Dividend Cover = Profit After tax/ Dividend
6. Interest Cover = PBIT / Interest
7. Leverage/ gearing = Debt (long term+ short term) / debt + equity
Profitability Ratios:
1. Return on equity = PAIT / Equity * 100 %
2. Return on capital employed= PBIT/capital employed (long term debt +equity) * 100%
3. Gross profit margin= Gross profit/ sales * 100%
4. Net profit margin= PBIT/sales * 100%
5. Asset turnover = Sales/ net sales
Liquidity Ratios:
1. Current Ratio= current assets/ current liabilities
2. Quick Ratio = Current assets – stock / current liabilities
Activity Ratios:
A. Stock holding period= stock/cost of sales * 365
B. Debtors collection period = debtors/sales * 365
C. Creditors payment period = Creditors/ cost of sales * 365
Working capital cycle: A+B-C
All figures have to be analyzed and given both sides of the story (positive and negative aspect) and compared against other company and industry.
The following criteria will be used in assessing this work:
Communication skills 25%
Report writing ability – power of expression; clarity of language and analytical logic; originality and effectiveness of structure and presentation.
Analytical and problem solving skills 50%
Depth of analysis and extent of understanding of the analytical techniques used; breadth of knowledge demonstrated; the relevance and practicability of the recommendations made and the extent to which they relate theory to practice.
Research skills 25%
The ability to secure information about the companies and industry examined by the group. It is to be expected that the information is up-to-date and relevant. Consideration of the future prospects of the company is expected.
It should be set out as follows:
Abstract/Executive summary
Introduction
Literature review
Method
Results/ Findings
Analysis/ Discussion
Conclusions
Recommendations
References
The two companies are Toyota Motor Corp and Ford, it’s up to you who you would like to be the main company and who will be the comparable company.