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Part 1: Financial Statement Analysis (15 marks)

a) For the company that is assigned to you, collect data from the company’s annual report and perform financial analysis over the past three years financial statements. Specifically, you should calculate two ratios for each of the following categories: • Liquidity (1 Mark) • Efficiency (1 Mark) • Profitability (1 Mark) Based on the ratios you calculated, interpret each of the ratios and describe what each of the ratio indicates about the firm in the last financial year (i.e., the most recent values). Based on the values from the two ratios you calculated for each category, draw an overall conclusion about the liquidity, profitability, and efficiency of the firm. (3 Marks)

b) Discuss how each ratio has changed over the past three years identifying if it has improved, worsened, or stayed the same. Investigate possible reasons for the change i.e., if you see that the net profit margin has decreased, you can examine what has caused that and then use publicly available information from the annual report, media reporting etc. to identify what might have caused that. I.e., if you were assigned Air NZ and its profitability had decreased you might find that this was due to fewer passengers related to COVID, but also increased fuel costs. Explain any factors that you think have driven the either increase or decrease in your metrics Hint: the more comprehensive and accurate your explanation is, the better your mark will be. Do not just describe the trends and/or changes observed, discuss the factors driving them with appropriate referencing to your sources. (6 Marks) c) Select a suitable peer company from the NZX, they should be in the same industry. For each peer firm, calculate the same ratios as above for the most recent financial year. Compare the values with those for your firm, what does it tell you about your firm? (3 Marks)

c) Part 2: Working Capital Management (10 marks)

a) Calculate the Average Age of Inventory (AAI), Average Collection Period (ARP), Average Payment Period (APP), Operating Period (OP) and Cash Conversion Cycle (CCC) for the past three financial years. Compare the ratios and describe whether the ratios increased/decreased, interpret what that means for the company, and discuss what the implications of the changes in the ratios to the firm. (5 Marks) b) Compare the five ratios you have calculated with the peer firm you previously identified. What does this indicate about your companies working capital management policies? (3 Marks) c) Identify one strategy that the company could use to minimise their cash conversion cycle (CCC) and Operating Period (OP). Be specific and discuss how it would affect the CCC and OP.