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- 1. 1 Faculty of Business and Law ACADEMIC YEAR 2018/19 ASSESSMENT BRIEF Module Code: UMACLK-15-M Module Title: Financial Statement Analysis Submission Deadline: 2.00pm Thursday 11th April 2019 Assessment Component B Assessment Weighting: 70 per cent of total module mark Marking and feedback deadline (20 working days) Wednesday 15th May 2019 Assessment Instructions You are a respected city analyst who specialises in advising clients who are interested in purchasing equities in a given industry sector. You are asked to give investment advice on a company to be agreed at an early opportunity with the module leader. Your company must be:
- 2. • Discussed and agreed with the module leader by Friday 1st February 2019 • Quoted on a major stock exchange (e.g. LSE, NYSE, NASDAQ) • A prominent company, for which significant information is publicly available in English (both financial and non-financial information) • Drawn from a mainstream industry where there are readily identifiable peers (competitors) for which you can also gather good financial information • Drawn from an industry where you can gather good industry- wide information and from a country where there is readily available macroeconomic indicator information Requirement for the Equity Analyst’s Report You are to produce a company (equity) analysis report. It is expected that you will use the full range of information sources available to you (including DataStream, Osiris, and Bloomberg, where possible) to complete your assignment. Once you have completed your student tearsheet presentation exercise and received some informal, formative feedback from your module leader and informal feedback from your module colleagues, you must engage in deeper analysis to produce a full equity analyst’s report. The report must be word-processed and the length must not exceed 3,000 words. Your report must contain the following sections:
- 3. a) Analyst’s tearsheet; b) Company profile, including a segmental analysis; c) Macroeconomic analysis; d) Industry analysis; e) Competitor analysis, using Porter’s Five Forces model; f) Discussion of the company’s business model and corporate strategy; g) Analysis of key corporate events and activities (if relevant); h) A summary analysis of the company’s financial statements; i) A full financial ratio analysis, including trend analysis, comparison with industry ratios, the identification and computation of customised industry ratios; j) Company valuations, employing dividend models (where appropriate) and multiples models, with all assumptions justified; k) A basic free cash flow model, with an Excel printout of that model to be placed in the appendix, along with a justification of the assumptions made; 2 l) A conclusion which summarises the key points made across your report, the outlook for the company, and the investment recommendation, the latter of which compares your valuations with the current market price; m) A references section at the end of your report.
- 4. Your report is to be pitched at fund managers who require investment advice on buying/selling shares in the company you have selected. You must clearly reference any material you have used at the end of your report and carefully source all data tables, graphs, and material from other parties, giving the date at which the data was collected. Please feel free to discuss your case company with your module leader throughout the term, particularly where your question relates to the lecture topic or tutorial exercise in a given week. Further, you can email your module leader with coursework related questions at any time at [email protected] . Marking Criteria The following criteria will be used in evaluating this assessment: 10% Presentation and quality of the final report 20% Depth of analysis of the macroeconomic and industry environment 20% Quality of analysis of the company, its business model, and its strategy 20% Competency of financial statement analysis 20% Quality of equity valuations 10% Credibility of outlook and investment recommendation ------ 100% of report mark Formative feedback and Support Formative feedback provides opportunities to reflect on your ongoing work and preparation for your assignment. During the term you will be asked to complete
- 5. various tasks related to your case companies and you will be asked to present a tearsheet for your company. You will receive oral feedback on your work, please listen carefully and take notes. Formatting Please use the following file format: Microsoft Word. We cannot ensure that other formats are compatible with markers’ software. All work should be word processed in 12-point font Times New Roman or Arial or any font that would be used in a professional work setting. The first page of your coursework must include: • Your student Number • The module Name and Number • Your word Count • Name of your case study company Word Limit The maximum word limit for this coursework is 3,000 words. • This word count includes everything in the main body of the text (including headings, tables, citations, quotes, lists, etc.). • The references and appendix material are NOT included in this word count. • There is no direct penalty for exceeding the word count, but the marker WILL stop reading once the maximum word limit has been reached and nothing further will be taken into account
- 6. in the allocation of marks. You can view the UWE word count policy here: http://www1.uwe.ac.uk/aboutus/policies mailto:[email protected] http://www1.uwe.ac.uk/aboutus/policies 3 Referencing: Please adhere to the principles of good academic practice and ensure you reference all sources used when developing your assessment, using the UWE Harvard system. Failure to properly reference your work to original source material can be grounds for the assessment offence of plagiarism and may result in failure of the assessment or have more serious implications. For further guidance on correct referencing go to: http://www1.uwe.ac.uk/students/studysupport/studyskills/refere ncing.aspx Details of what constitutes plagiarism and how to avoid it can be found here: http://www1.uwe.ac.uk/students/studysupport/studyskills/readin gandwriting/plagiarism.aspx For general guidance on how to avoid assessment offences see:
- 7. http://www1.uwe.ac.uk/students/academicadvice/assessments/as sessmentoffences.aspx Instructions for submission You must submit your assignment before the stated deadline by electronic submission through Blackboard. Notification that the electronic submission portal is open for your assignment is displayed (usually two weeks before the submission date) in the Coursework tab in myUWE, the Coursework tab in Blackboard and via an announcement in the Blackboard course. Please allow sufficient time to upload your assignment, noting that the system becomes busier and slower as the deadline approaches. Only your final upload will be counted. Ensure all your information is submitted at one attempt to avoid ‘overwriting’ your intended submission. Always check and retain your receipts. Late submission in the 24 hours following the deadline will be accepted but the assignment mark will be capped at 50%. Submissions after 24 hours will not be accepted. For full guidance on online submission through Blackboard, see: http://info.uwe.ac.uk/online/Blackboard/students/guides/assign ments/default.asp Submissions of coursework by any other method (including a paper copy, on disk or by email) are NOT permissible for this module unless specifically agreed in advance of the submission date. Before submitting your work, please ensure that:
- 8. • You have proof read you work thoroughly to ensure your work is presented appropriately • You have addressed all the required elements of the assessment • You have referenced in accordance with the guidance provided • You have addressed each of the marking criterion • The submission is in the correct format Final feedback and marks release Students will normally receive marks and feedback on their submission within 20 working days of the submission deadline (not including any public holidays or university closure days). Any delay in returning students’ work will be communicated by the module leader via Blackboard. Feedback on this module is not limited to the written comments you will receive on individual written assessment submissions. Feedback and marks for this module will be available by Wednesday 15th May 2019. For further guidance on feedback, please refer to the module handbook. Further Guidance and Support General guidance on study skills: is available at: http://www1.uwe.ac.uk/students/studysupport/studyskills.aspx Specific study skills pages relating to this module include: https://www1.uwe.ac.uk/students/studysupport/studyskills/refer encing/uweharvard.aspx
- 9. http://www1.uwe.ac.uk/students/studysupport/studyskills/refere ncing.aspx http://www1.uwe.ac.uk/students/studysupport/studyskills/readin gandwriting/plagiarism.aspx http://www1.uwe.ac.uk/students/academicadvice/assessments/as sessmentoffences.aspx http://info.uwe.ac.uk/online/Blackboard/students/guides/assign ments/default.asp http://www1.uwe.ac.uk/students/studysupport/studyskills.aspx 4 Writing skills: https://www1.uwe.ac.uk/students/studysupport/studyskills/readi ngandwriting/writing.aspx Support from the FBL Academic Success Centre (room 4X224): http://www1.uwe.ac.uk/bl/bbs/aboutus/studentexperience/acade micsupportcentre.aspx Guidance on UWE assessment regulations and terminology: http://www1.uwe.ac.uk/students/academicadvice/assessments/as sessmentsguide.aspx Guidance on using the library: http://www1.uwe.ac.uk/library/usingthelibrary.aspx Personal Circumstances If you are experiencing difficulties in completing a piece of assessment on time due to unexpected circumstances (for example illness, accident, bereavement), you should seek advice from a Student Support Adviser at the earliest opportunity.
- 10. Please note the module leader cannot grant personal circumstances or extensions. Appointments with a student adviser can be made via an Information Point or online at: http://www1.uwe.ac.uk/students/academicadvice/studentadviser s.aspx The Student Support Adviser will advise as to whether you should submit an application for ‘Personal Circumstances (PCs)’, how to do so and what evidence is required to support the application. Further details on PCs can be found here: http://www1.uwe.ac.uk/students/academicadvice/assessments/pe rsonalcircumstances.aspx https://www1.uwe.ac.uk/students/studysupport/studyskills/readi ngandwriting/writing.aspx http://www1.uwe.ac.uk/bl/bbs/aboutus/studentexperience/acade micsupportcentre.aspx http://www1.uwe.ac.uk/students/academicadvice/assessments/as sessmentsguide.aspx http://www1.uwe.ac.uk/library/usingthelibrary.aspx http://www1.uwe.ac.uk/students/academicadvice/studentadviser s.aspx http://www1.uwe.ac.uk/students/academicadvice/assessments/pe rsonalcircumstances.aspxaCADEMIC YEAR 2018/19assessment brief deltablueflowchartOB = OverBookUB = UnderBook Door-to-Door
- 11. generate # of Economy passengers Accounting_Profit = Econ Profit + 1st Class Profit # Econ OB = 0 # of Econ OB = # Econ -30 # of Econ UB = # Econ -30 # Econ UB = 0 N N Y Y generate # of 1st Class passengers Econ OB Cost = $150* # 0f Econ OB Econ Profit = $3000 Econ Profit = $100* # of Econ # 1st Class OB = 0 # of 1st Class OB = # 1st Class -6 # 1st Class UB = Abs(# 1st Class- 6) # 1st Class UB = 0 N N Y Y 1st Class OB Cost = $300 * # 0f 1st Class OB 1st Class Profit = $1200 1st Class Profit = $200* # of 1st Class
- 12. Upgrade = 1 Upgrade_cost = $200 * # 1st Class UB Economic_Profit = Accounting_Profit - Econ OB Cost -1st Class OB Cost + Upgrade_cost simadvEconomyupgradeProfit$100$200$200Overbooking Cost$150$300Capacity306DemandEconomyFirst Class# of passengers04280115292927230793082438094312544495993245 695709269397798998EconomyFirst classSwitch to first classeconomyfirst classeconomicAccounting demandoverbookunderbookdemandoverbookunderbookprofitove rbook costprofitoverbook costupgradenet profitProfit1290-140- 22$2,900$0$800$0$400$4,100$3,7002311050- 11$3,000$150$1,000$0$200$4,050$4,0003300040- 22$3,000$0$800$0$400$4,200$3,8004300050- 11$3,000$0$1,000$0$200$4,200$4,000530007100$3,000$0$1,2 00$300$0$3,900$4,2006300040- 22$3,000$0$800$0$400$4,200$3,8007290- 16000$2,900$0$1,200$0$0$4,100$4,1008290- 16000$2,900$0$1,200$0$0$4,100$4,100930006000$3,000$0$1, 200$0$0$4,200$4,2001030006000$3,000$0$1,200$0$0$4,200$4 ,20011311030-33$3,000$150$600$0$600$4,050$3,60012280- 26000$2,800$0$1,200$0$0$4,000$4,00013300050- 11$3,000$0$1,000$0$200$4,200$4,00014300030- 33$3,000$0$600$0$600$4,200$3,60015300050- 11$3,000$0$1,000$0$200$4,200$4,00016311040- 22$3,000$150$800$0$400$4,050$3,8001730008200$3,000$0$1, 200$600$0$3,600$4,20018290-140- 22$2,900$0$800$0$400$4,100$3,70019300050- 11$3,000$0$1,000$0$200$4,200$4,00020300050- 11$3,000$0$1,000$0$200$4,200$4,0002130006000$3,000$0$1, 200$0$0$4,200$4,20022311020- 44$3,000$150$400$0$800$4,050$3,4002331108200$3,000$150 $1,200$600$0$3,450$4,20024290-130- 33$2,900$0$600$0$600$4,100$3,50025290-
- 26. 22$3,000$0$800$0$400$4,200$3,800499311020- 44$3,000$150$400$0$800$4,050$3,400500300050- 11$3,000$0$1,000$0$200$4,200$4,0002966.635.1890.832.4309. 24099.1avg profit3857.4#9774021343$3,000$0$1,000$0$200$4,100median$ 3,900prob0.1940.0140.080.0420.68655.049986394276.4505026 715279.4127824671117.2080007118279.4127824671146.31132 56314stdev288.2558288148$2,800$0$200$0$0$3,300min$3,100 missed11716754773$3,000$300$1,200$600$1,000$4,200max$4, 200% overbook0.0079646532 Delta Blue Airlines Delta Blue Airlines operates a commuter flight between Charlotte and Philadelphia. The plane holds 30 passengers in Economy and 6 passengers in First Class. The airline makes a $100 profit on each passenger in Economy and $200 per passenger in First Class on the flight. When Delta Blue takes 30 Economy reservations and 6 First Class for the flight, experience has shown that on average, two passengers do not show up for each class. As a result, Delta Blue is averaging 28 Economy passengers and 4 First Class passengers with a profit of 28*$100 + 4*$200 = $3600 per flight. The airline operations office has asked for an evaluation of an overbooking strategy where they would accept 32 Economy reservations and up to 8 First Class reservations even though the airplane holds only 30 Economy and 6 First class passengers. The probability distribution for the number of passengers showing up with the new overbooking reservations policy is as follows: # of Passengers Showing up For Economy Probability 28 0.05
- 27. 29 0.25 30 0.50 31 0.15 32 0.05 # of Passengers Showing up For First Class Probability 1 0.02 2 0.06 3 0.17 4 0.20 5 0.25 6 0.23 7 0.05 8 0.02 The airline will incur a cost for any passenger denied seating on the flight. This cost covers added expenses of rescheduling the passenger as well as loss of goodwill, estimated to be $150 per Economy passenger and $300 per First Class passenger. On the other hand, if there are First Class seats available, they move up Economy passengers to First Class. When this happens, they
- 28. believe there is a positive goodwill “cost” of $200. Build a simulation model in an Excel file that will model the performance of the overbooking system. Model 500 flights. And answer the following questions. a. What is the mean profit per flight if overbooking is implemented? b. What percentage of customers will experience an overbooking problem? c. Does your model recommend the overbooking strategy? Any suggestions?