Notes for the Assignment
The group (up to five members) project completed in two parts requires you to
conduct an analysis of a business. A key feature of the project is that it requires you
to identify and obtain the relevant information. Thus, in addition to being evaluated
on your ability to apply the tools of analysis described in the course, you will also be
evaluated on your ability to identify and obtain the relevant information. Your
assignment should use only publicly available information, and you should provide a
reference list of the information you use. Do not use inside information obtained from
personal company contacts etc.
Choice of company: You will choose one company from the list on UTSOnline.
Valuation and assessment: Your group will evaluate and report (in two parts) on your
chosen company as though you were a prospective management consultant.
Write-up is limited to 10 pages of text with 10 pages of supporting tables.
Please use a font size of 12 and 2.5cm margins.
Due: Lecture 4
1. Macro economic Analysis
Describe the firm’s economic environment and evaluate how this has impacted
historic firm performance and is likely relevant to future performance.
• Look at the Global economy over the last 5 years – what has been going on?
What is predicted to happen?
• Look at individual economies that affect your firm also for the last 5 years –
what has been going on? What is predicted to happen?
• USE REAL DATA!!! Not “the economy is good/bad” language
• Analyse at least: GDP, Inflation, Cost of Debt
2. Industry Analysis
Perform an industry analysis and evaluate the level of competition in the industry or
industries that your firm operates in.
• Use Porters Five Forces (all of them) to analyse each of your industries
• USE DATA
• Form a conclusion for each force, and for the industry overall (that is, the level
of competition is high/moderate/low)
3. Business Strategy Analysis
Identify the key success factors and the key risks of the firm’s strategy. Discuss the
sustainability of profits generated by the strategy
• Identify the key success factors
• Identify the key risks (don’t just list the ones that your company tells you)
• What will happen in the future for your business? (sustainability)
4. Accounting Analysis
Assess the degree to which the firm’s accounting reflects the underlying business
reality. Identify any accounting distortions and evaluate their impact on profits and
the sustainability of profits.
• Use the 6 steps discussed in class (and in your text book).
• If you find anything and note it in step 5, you MUST fix it in step 6.
• There is every likelihood that you will find nothing! (audit!!)
Part 1: Write-up is limited to 2 pages of text with 2 pages of supporting materials,
i.e. the reformatting, as an appendix. Please use a font size of 12 and 2.5cm
Due: Lecture 7
1. Reformatted Financial Statements and Financial Analysis (10 marks)
Reformat at least the last 5 years of your company’s financial statements. Use ratio
analysis and cash flow analysis to evaluate the current and past performance of the
business and assess its sustainability.
• Reformat at least 5 years
• Prepare 4 years of ratios
• Prepare risk ratios for cash flow analysis
• WRITE UP – what happened AND WHY the ratios/ cash flow changed
Part 2&3: Write-up limited to 10 pages of text with 10 pages of supporting
tables. Please use a font size of 12 and 2.5cm margins.
Due: Lecture 11
2. Prospective Analysis
Forecast future financial performance. Use the four valuation models outlined in
class to produce an estimate of firm value, and compare to stock price. Perform
sensitivity analysis and discuss the results.
• Prepare your forecasts and write up the reasons for your forecast
• Prepare your valuations and write up just the $ answers to your 4 models, as
well as include share price on the date of your valuation (the date of your last
set of reformatted financial statements (table 1)
• For all of your forecasting and cost of capital assumptions1, write up your
reasons for your optimistic and pessimistic outcomes (best and worst they
ever did in last 5 years perhaps?) and calculate your sensitivity analysis. Only
use the AOI model and Table 2 reports your sensitivity results. Again compare
to share price and discuss your results
Using your sensitivity analysis, and as a potential management consultant to your
chosen firm, provide a discussion as to the possible opportunities for improvement,
and potential challenges for your firm. Provide remedies for these concerns. You
should be quite specific in any recommendations you make.
• Your sensitivity testing will show you that your firm will be more sensitive to
one of: sales growth/cost of capital, PM, AO.
• Depending on which of the three above is most important to your firm, come
up with some ideas for specific things that your firm can do. For example, if
sales growth matters don’t just say “increase sales”. You need to come up
with creative ideas for your firm to increase sales. You never know, yours may
be the next assignment sent on to your firm!