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BMAN20081 Financial statement analysis

Practice (Additional 1) December 2023

Scenario - As a fledgling investor, you are keen to research, understand, and ultimately invest in a company which will bring you long-term financial benefits. You have discussed the possibility of investing in Pets at Home Group Plc with friends and family and heard varying opinions about whether its success is sustainable in the long-term.

With reference to the scenario above, answer ALL of the following 4 questions:

1. Using the Capital IQ database or another reputable database, produce a table to include 10 different ratios, over a five year period. State your source and briefly explain why you chose those ratios. (20 marks) 

2. With reference to the ratios provided in question 1, as well as use of other information from your own research, analyse the company’s current and expected future financial position and clearly explain whether you would invest in the company. (60 marks) 

3. Briefly explain how Porter’s five forces model can influence your analysis. (10 marks) 

4. Briefly reflect on how you have used AI (or not) in your work. (10 marks)

(Total: 100 marks)

Brief notes for answering:

Question 1 – include ratios from each main group, but also consider more investor-specific ratios such as ROE, Sustainable growth, dividend yield etc. If Capital IQ doesn’t provide these, then calculate them manually, but state that you have done so. Put an asterisk (*) against the relevant ratios and then under the table put * = manually calculated as not available from Capital IQ. Or a similar statement.

Question 2 – consider the investor needs as a new investor and state any assumptions you make.

This question was set during lock down so there were additional risks to consider in relation to sales growth with increasing pet ownership and also ‘humanisation’ of pets. There were macro issues around health and Brexit, as well as recruitment risks. Competitor analysis was also important. For the numbers, it was important to relate the ratios to investor needs, and in turn to relate all of this to future prospects. A case could be made for either investing or not investing, just be clear and provide reasons to back up your concerns.

Question 3  - Porter’s 5 forces analysis gives us a more indepth understanding of a company’s position in its market, its risks and the opportunities for growth, which will help in decision making.

Question 4 – this question stays the same