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2: Guideline for Term Group Project


The aim of this group project is to provide you with an understanding of the annual reports. You should be able to critically analyze and evaluate various aspects of the financial statements, with emphasis on (but not limited to) the topics discussed in the course. Your group will assume the role of a financial analyst and conduct market research for a client (e.g., an individual investor). Your client has asked you to analyze the financial statements of one company and its competitors you may choose its major competitors from the same industry (two or three companies). Nonetheless, your analysis should focus on the chosen company. Besides, you need to compare its performance with its competitiors in the same industry.

Assessment and Submission The group project report carries 10% of the total marks of the course. It will be graded on the quality of the analyses. The due date and time for submission is on November 18th 2013 (Monday), 5pm. A hard copy report must be submitted at my office (SOA 5021). Please take note that late submission will be marked as zero. Company Selection Each group must select a company that is listed on the Singapore Stock Exchange (SGX). Format of the Group Report Ten pages maximum (excluding a cover page and appendix) Your report should include supporting analyses as appendices in addition to the ten-page main report (There is no page limit for the appendix). Your data should cover at least two years of the latest annual reports. Content The final report must include 1) a cover page, 2) executive summary, 3) analyses, and 4) conclusions. You are required to address all questions with (*) listed below. Feel free to address other listed questions in your report. Workings, if any, must be shown. You may use other sources of information (e.g. companys website, press release, newspaper clippings, etc) but they must be properly sourced and noted. Your report should not be just a bullet point list of answers. It must show a coherent flow and exhibit a cohesive examination of the company. You must discuss the subject firms profitability (including quality and persistence of earnings), effectiveness of asset utilization, debt servicing (liquidity, risk assessment), cash flows management, and overall performance where they are applicable.

Company and Industry Overview (*) What are the principal activities of the company? What is the geographical coverage of the company? (*) What are the major trends in the industry? (*) Who are the companies major competitors? Have any significant events happened at your companies that will be important to consider as you analyze their results? Income Statement Discussions (*)What were the companys total revenues for the year under review? State the composition of the revenues of the company, allocate according to products, locations, activities, etc where possible. (*)What are the bases of revenue recognition adopted by the company? Are they appropriate? (*)Looking at the revenue and net income in the three years presented in the annual report, would you say the company has had a good year? Provide evidence to justify your conclusion. (*)Draw up a common-sized statement for the year under review. Comment on the result. Current Assets and Current Liabilities (*)If your company has inventory, state which inventory cost flow assumption is used. State the composition of current assets and current liabilities for each year. (*)If your company has allowance for doubtful accounts, show how this allowance is determined. Long-Term Assets List by types and amounts the property, plant and equipment of the company. (*)What depreciation method does the company use for financial reporting? Is it appropriate? Long Term Debt and Equity Financing State the nature and amount of each liability in the long-term liabilities section of the balance sheet. (*)Considering your companys operating circumstances, which do you think is the best way to finance its purchase of long-term assets; through internally generated funds, shareholders contributions, or through long term borrowings?

Statement of Cash Flows (*)Compare the companys cash position for the year under review with that of the previous year. Comment on the improvement or deterioration of the companys cash position. (*) Which method (direct or indirect) did the company use in the preparation of its statement of cash flows? (*)State the main sources of cash inflow during the year and the main uses to which cash has been used. Financial Statements Analyses (*)Compute major financial ratios. (*)Calculate and comment on the efficiency ratios. (*)Calculate and comment on the profitability ratios. (*)Calculate and comment on the investment ratios. Useful references 1. Accounting Standards Council (ASC) : http://www.asc.gov.sg/ 2. Singapore Exchange (SGX): http://www.sgx.com/ (Annual reports are available for online download) 3. U.S. Securities and Exchange Commission (SEC): http://www.sec.gov/ 4. U.S. Financial Accounting Standards Board (FASB): http://www.fasb.org/ 5. New York Stock Exchange (NYSE): http://www.nyse.com/ 6. NASDAQ: http://www.nasdaq.com/ 7. MSN Money: http://money.msn.com/ 8. Yahoo Finance: http://finance.yahoo.com/ 9. Thomson ONE Banker and OneSource: Databases from SMU Library website