: Financial Analysis of Blackmores


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.


Group assignment 

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


• 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!!)


Individual Assignment 

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

3. Application 

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!

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