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SUMMATIVE ASSIGNMENT – ECON42915

Financial Statement Analysis

Postgraduate Programmes 2023/24

Write an equity research report on a company listed on a stock exchange. The report should cover the following analyses:

Strategy analysis: introduce the company’s main business through which it creates value; analyze the company’s business strategies, and its industries competitive environment; comment on the company’s social, environmental, governance strategies/activities and its potential for achieving sustainable development goals. (20 marks)

Accounting analysis: reformulate the company’s balance sheet and income statement and assess the company’s accounting quality.  (20 marks)

Financial analysis: conduct the trend and comparative analysis of the company’s sales and financial ratios.  (20 marks)

Prospective analysis: forecast the company’s future sales, future net operating profit margin ratios, and operating assets turnover ratios, and estimate the company’s weighted average cost of capital, utilizing your analysis in items (i), (ii), and (iii). You should detail and justify all the assumptions underlying your forecasting methodology and estimation. (18 marks)

Apply the residual operating income model and the free cash flow valuation model to estimate the fundamental value of the equity capital of the company and do a sensitivity analysis.                                              (18 marks)

Provide stock recommendation and conclusion remarks.                        (4 marks)

 Notes: The firm you choose for the equity valuation should not be the same as the one you analyse for your formative assignments. Annual reports of your chosen company (if listed in UK) can be downloaded at www.northcote.co.uk  or the company’s website. You should use the latest published annual report for the fiscal year 2023.

Overall word limit: 2500 

SUBMISSION INSTRUCTIONS

Your completed assignment must be uploaded to Learn ULTRA
no later than 11:59am (UK time) on Friday 26^th April 2023/24.

It is your responsibility to back up your work. IT issues are not a valid reason for a late submission.

You should back up your work on more than once device.

A penalty will be applied for work uploaded after 11:59am as detailed in the Programme Handbook.  You must leave sufficient time to fully complete the upload process before the deadline and check that you have received a receipt. At peak periods, it can take up to 30 minutes for a receipt to be generated.

Assignments should be typed, using 1.5 spacing and an easy-to-read 12-point font. Assignments and dissertations/business projects must not exceed the word count indicated in the module handbook/assessment brief.

 The word count should:

§ Include all the text, including title, preface, introduction, in-text citations, quotations, footnotes and any other items not specifically excluded below.

§ Exclude diagrams, tables (including tables/lists of contents and figures), equations, executive summary/abstract, acknowledgements, declaration, bibliography/list of references and appendices. However, it is not appropriate to use diagrams or tables merely as a way of circumventing the word limit. If a student uses a table or figure as a means of presenting his/her own words, then this is included in the word count.

Examiners will stop reading once the word limit has been reached, and work beyond this point will not be assessed. Checks of word counts will be carried out on submitted work, including any assignments or dissertations/business projects that appear to be clearly over-length. Checks may take place manually and/or with the aid of the word count provided via an electronic submission. Where a student has intentionally misrepresented their word count, the School may treat this as an offence under Section IV of the General Regulations of the University. Extreme cases may be viewed as dishonest practice under Section IV, 5 (a) (x) of the General Regulations.

Very occasionally it may be appropriate to present, in an appendix, material which does not properly belong in the main body of the assessment but which some students wish to provide for the sake of completeness. Any appendices will not have a role in the assessment - examiners are under no obligation to read appendices and they do not form part of the word count. Material that students wish to be assessed should always be included in the main body of the text.

MARKING GUIDELINES

Performance in the summative assessment for this module is judged against the following criteria:

· Relevance to question(s)

· Organisation, structure and presentation

· Depth of understanding

· Analysis and discussion

· Use of sources and referencing

· Overall conclusions

The word count should include all the text (plus endnotes and footnotes), but exclude diagrams, tables, bibliography, references and appendices. Guidance on referencing can be found on Sharepoint; Examinations and Assessment (sharepoint.com)

Summative assignments

• Write an equity research report on a company listed on a stock exchange. The report should cover the following analyses:

– Strategy analysis: introduce the company’s main business through which it creates value; analyse the company’s business strategies, and its industries competitive environment; comment on the company’s social, environmental, governance strategies/activities and its potential for achieving sustainable development goals.

– Accounting analysis: reformulate the company’s balance sheet and income statement and assess the company’s accounting quality.

– Financial analysis: conduct the trend and comparative analysis of the company’s sales and financial ratios.

– Prospective analysis: forecast the company’s future sales, future net operating profit margin ratios, and operating assets turnover ratios, and estimate the company’s weighted average cost of capital, utilizing your analyses in items (i), (ii), and (iii). You should detail and justify all the assumptions underlying your forecasting methodology and estimation.

Summative assignments

Apply the residual operating income model and the free cash flow valuation model to estimate the fundamental value of the equity capital of the company and do a sensitivity analysis.

Provide stock recommendation and conclusion remarks.

Notes: The firm you choose for the equity valuation should not be the same as the one you analyse for your formative assignments. Annual reports of your chosen company (if listed in UK) can be downloaded at www.northcote.co.uk or the company’s website. You should use the latest published annual report for the fiscal year 2023.

Further guideline on summative assignments

· You are encouraged to choose a company where its type of work and profession match your interests and career goals.

· The FSA assignment specification, by nature, is open-ended; there is no right or wrong for making sell, hold, or buy stock recommendation opinion; but your points and analysis that lead to your stock recommendations need to be made compelling and in depth.

· Though you have much room in developing your assignment works in a way that fulfils the requirements set out in the assignment question paper, your assignment works need to be aligned with the aim of our module and with the teaching covered in the lectures and seminars.