This assessment aims to check on the understanding of concepts covered in topics from 1-7 in the Business Analysis for Investment (FNCE2003) unit. This

.    Is a group assignment, each group should comprise 3-5 students;

.    Answer all the questions in parts A and B;

.    Represents 50% of the overall marks of this unit;

.    Should be submitted via Turnitin to the link provided on the Blackboard on or before Friday 12th January 2024, 17:00 (Singapore time);

.    Answer all the questions in the assignment, and don’t forget to provide detailed calculations/justifications;

.    Submit your answer script with the Assignment Cover Sheet, don’t forget to mention question members clearly and correctly;

.    Submit only ONE copy per group;

.    You can use Excel for calculations. However, you are not allowed to submit Excel worksheets. Screenshot is allowed (as appendix).

I would also remind you of your obligations under the University rules on academic integrity; if you are unsure of your responsibilities then please check the relevant section of the Curtin website:http://academicintegrity.curtin.edu.au/.

Part A: General Questions (15 marks)

Question 1

Assume that you are analysing the financial statements of BHP for the year 2022. Where can you find the information to examine its performance? How would you comment on the performance of BHP for the year 2022? What more information do you need to draw a reasonable conclusion about the performance of the firm? [1+2+2=5 marks]

[Check Blackboard assessment folder for a copy of the annual report].

Question 2

Assume that you are analysing the financial statements of ZIP for the year 2022. What information can you obtain from MD&A? How can it help you to evaluate  the performance of ZIP? [1+1=2 marks]

[Check Blackboard assessment folder for a copy of the annual report].

Question 3

What are ‘Big Bath Accounting’ and ‘Earning smoothing’? What are the motivations for such accounting choices? Explain with examples. [1+1=2 marks]

Question 4

What are the motivations associated with low financial reporting quality? Explain with examples. [2 marks]

Question 5

Calculate the company’s basic and diluted EPS for the year ended 30 June 2022 using the information below. [2+2=4 marks]

.    No. of shares outstanding on 01 July 2021                                          1,518 million

.    No. of shares issued on 01 December 2021                                           458 million

.    No. of shares repurchased on 01 April 2022                                          (93) million

.    No. of shares outstanding on 30 June 2022                                          1,883 million

.    The company does not pay any dividends to the common shareholders in the year ended 30 June 2022;

.    The company has 1.2 million shares of preferred stock outstanding for the entire year which are each convertible into 40 shares of common stock. There is no preferred dividend paid during the year. The company does not have other potentially dilutive security.

Part B: Company-specific Questions (35 marks)

This part requires you to conduct financial statement analysis of a publicly listed company for the year 2022. By now, one of the following companies should be allocated by your local lecturer (if not, please contact your local lecturer ASAP).

•          Wesfarmers Limited (Stock Code: WES)

•          Woolworths (Stock Code: WOW)

An important element of this project is the requirement of identifying and obtaining relevant, publicly available information. Therefore, you should ensure that you are able to access sufficient information for your selected company. I have uploaded the relevant annual reports on Blackboard for your convenience.

1.     What is the name of the company that you/your group members were  assigned to complete this project? What is the industry in which your company belongs to? What is the view of the management of the company about the future outlook and performance of the company? [0+1+2=3 marks]

2.    Identify two (2) pieces of information not included in the major financial statements (but still in the annual report) that you think would be important to someone considering whether to invest the company. Discuss your reasons for believing that this information would be important in making an investment decision. [2+2=4 marks]

3.   Analyse your allocated company’s investing and financing activities for the year 2022 as  identified  in the  statement  of cash  flows,  specifically  identifying  the  two  largest investing activities and the two largest financing activities. Evaluate the cash flow from operating activities of the firm (specifically analyse whether the company is performing better over the years, discuss whether cash flow from operating activities appears to be satisfactory given the current business environment and firms’ stage in life cycle).  [1+1+2=4 marks]

4.   Assume that you are evaluating your allocated company. Only use  the  MOST appropriate ratios for the year 2022 from the annual report and evaluate whether one should provide long-term loan to this company [Use at least 4 ratios]. [2+2=4 marks]

5.   Assume  that you want to buy  stock of this company. Use the most appropriate efficiency and profitability ratios from the annual report and use these data to evaluate

whether this company is a suitable candidate for investment purpose [Use at least 4 ratios for efficiency and 4 ratios for profitability]. [2+2+2=6 marks]

6.   Assume that you are also considering to invest in the stock of CSL. You have limited fund to invest and therefore, you can invest in either of the company (CSL or your allocated company). Compare your company’s financial statements, and performance, with those of the CSL. If you were making a decision to invest in one of the two companies, which company would you choose? Discuss. [In evaluating and comparing the companies, use appropriate ratios and other analysis. Provide clear justification as to why you believe your approach to evaluation is appropriate for investment decision purpose]. [8 marks]