Workshop Workbook

BMAN20081 and BMAN20611 Workshop workbook completed with answers
BMAN20081 and BMAN20611

Workshop Workbook
Your name:-
Workshop leader:-
Day & Time of workshop:-
Workshop location:-
Workshops run on weeks 2-5 and 7-10.
Group presentation assessments will be held in week 7.
Group number:-
1 Introduction
Contents
Introduction ................................................................................................................................................................................................................. 5
Workshop 1 Week 2 Introduction and Profitability Ratios ....................................................................................................................................... 6
(a) Shell Annual Report Quiz .................................................................................................................................................................................... 6
(b) Profitability Ratio Calculations ........................................................................................................................................................................... 8
(c) Comments ........................................................................................................................................................................................................... 9
(d) Key Skills ........................................................................................................................................................................................................... 10
(e) One thing I have learnt is.. ............................................................................................................................................................................. 10
Workshop 2 Week 3 Working Capital Management .............................................................................................................................................. 11
(a) Solvency and Capital Structure ......................................................................................................................................................................... 11
(b) Working Capital Ratios ..................................................................................................................................................................................... 13
(c) Findings summary ............................................................................................................................................................................................. 15
(d) Key Skills ........................................................................................................................................................................................................... 16
Workshop 3 Week 4 Strategy Issues....................................................................................................................................................................... 17
(a) Porters 5 Forces ................................................................................................................................................................................................ 17
(b) How does this help? ......................................................................................................................................................................................... 21
(c) Shells Strategy .................................................................................................................................................................................................. 22
(d) Key Skills ........................................................................................................................................................................................................... 23
Workshop 4, Week 5 Stakeholders and Sustainability .............................................................................................................................................. 24
2 Introduction
(a) Sustainability..................................................................................................................................................................................................... 24
(b) Shells Sustainability ......................................................................................................................................................................................... 25
(c) Stakeholders ..................................................................................................................................................................................................... 26
(d) Key Skills ........................................................................................................................................................................................................... 27
Workshop 5, Week 7 Group Assessments .............................................................................................................................................................. 28
(d) Key Skills ........................................................................................................................................................................................................... 28
Workshop 6, Week 8 - Considering the Audit. .......................................................................................................................................................... 30
(a) Audit Purpose ................................................................................................................................................................................................... 30
(b) Shell Audit Report ............................................................................................................................................................................................. 31
(c) Shell Audit for Investors .................................................................................................................................................................................... 32
(d) Key Skills ........................................................................................................................................................................................................... 33
Workshop 7, Week 9 Industry Analysis ..................................................................................................................................................................... 34
(a) Comparative industry analysis.......................................................................................................................................................................... 34
(b) Common sized Income Statements .................................................................................................................................................................. 35
(c) Comment on your findings from the comparables analysis and the common size income statement .......................................................... 37
(d) Key Skills ........................................................................................................................................................................................................... 38
3 Introduction
Workshop 8, Week 10 Conclusions ........................................................................................................................................................................... 39

(a) Viewpoints of Shell ........................................................................................................................................................................................... 39
(b) Relevance & Reliability ..................................................................................................................................................................................... 40
(c) Highlights .......................................................................................................................................................................................................... 41
(d) Key Skills ........................................................................................................................................................................................................... 41
4 Introduction
Introduction
Welcome to your workshop workbook.
This workbook has been designed to give you details of the work you need to do before workshops each week for your course on Financial
Statement Analysis.
The Student Charter states that As a student I will Attend, and prepare for, all my scheduled teaching sessions and other learning events,
such as induction and meetings with academic advisors.
You are expected to prepare for workshop questions in advance of workshops. Evidence of preparation will be recorded each week by your
workshop leader. To be able to get a good mark in the exam and create a positive learning environment you are expected to complete all three
sections (a), (b) and (c) each week before coming to class. Preparation is intended to take around 1 -2 hours per week. If you are having
difficulties completing the work we expect you to contact your workshop leader at least 24 hours in advance of the workshop.
We have enhanced the workbook to include an on going record of the employability skills you are able to develop on this module. The
definition of the skills and the guidance is from the ICAEW professional development ladder. Details of the ladder can be found here. Each
week, for part (d) you will need to explain an example of how you demonstrated that skill in that week. The first skill in week 1 has been
completed for you as an example. This will give you a complete list of skill descriptions which can be used on application forms, in your CV or in
interviews. The more details and specific you are the more useful it will be to you.
In addition to preparing for workshops you need to attend every week and arrive on time. Slides which are used by the workshop leaders will
be available at the end of each week, however these generally contain numerical answers only, not the vital discussion points you will need to
enable you to score highly in the exam. You will need to attend and actively participate in workshops to be able to know how to answer this
style of question in the exam. If you are unable to attend workshops you need to discuss this with your workshop leader and arrange with
them to attend another workshop for that week. Your attendance and evidence of preparation will be recorded by your workshop leader. At
the end of each workshops you should complete part (e ) which details something you have learnt that week.
If you have any questions or feedback on your workshop material, please contact your workshop leader or Anne Stafford.
5 Introduction
Workshop 1 Week 2 Introduction and Profitability Ratios

Throughout this semester we will be focusing on the Shell Annual Report. You will need a copy of the December 2015 report which can be
found online by searching for Shell Annual Report 2015. You should use the consolidated financial statements.
(a) Shell Annual Report Quiz

Answer each of the questions below using information found in the Shell Annual Report 2015
Q Page Question Answer Implication

1. 6 What is the focus of the BG Group plc
acquisition?
2. 7 How many people died whilst working

at Shell in 2015?
3. 7 How much was distributed to

Shareholders?
4. 10 What % of third party revenue is

attributable to upstream (exploration)
activities?
5. 18 What amount of third party earnings
or losses are attributable to upstream
activities?
6. 16 What was the Brent oil price per barrel
year average at 31 December 2015?
And today?
6 Workshop 1 Week 2 Introduction and Profitability Ratios

7. 16 What was the Henry Hub price per

MMBtu year average at 31 December
2015? And today?
8 16 What is the reason for reduced oil
prices according to Shell?
And according to others?
9. 26 How many notable discoveries were
made
10 48 Do Shell have 3rd party insurers?

(b) Profitability Ratio Calculations

Calculate the ratios given below for Shell. Formulas have been given to you in the lectures in week 1. Some of the ratios are not
straightforward to calculate, so make a note of any assumptions used.
Calculations:-
Ratio Formula Calculation and total Variance Increasing or

2015 2014 decreasing?
$m $m
Operating profit
margin
Return on
Shareholders
equity
ROCE

Any assumptions noted:-
(c) Comments
Explain what each of the ratios measure and how and why it might have changed since the previous year
Ratio What does it measure? Improving or Why might it have changed?

worsening?
Significant or
Slight?
Operating
profit margin
Return on
Shareholders
equity
Return on
capital
employed

(d) Key Skills
How were you able to.. Guidance on specific examples Examples demonstrating your skills
development to date
Problem solve analyse a problem and Defining the problem after evaluating Finding real world definitions in the Shell
identify all options business objectives. Persevering in enquiry to Financial Statements for the elements of
ensure completeness, all within an ethical each ratios. Using other data (eg Google
framework. search) to find complete reasons for eg the
oil price movement
Technical Competence use research tools Searching via the internet or other sources to
to create a positive outcome expand technical knowledge and solve a
problem.
(e) One thing I have learnt is..
Project reminder: You need to email a list of the members in your group for the group project to your workshop leader by the end of the day
after workshop 1.

Workshop 2 Week 3 Working Capital Management

(a) Solvency and Capital Structure
Calculate the ratios given below for Shell and explain what each of the ratios measure and how and why it might have changed since the
previous year.
The formulas have been given to you in the lectures. Some of the ratios are not straightforward to calculate, so make a note of any ass
umptions used.
Ratio Formula Calculation and total Varian Increasing or

2015 2014 ce decreasing?
Interest Cover
Dividend Cover
Capital Gearing (1)
Capital Gearing (2)
11 Workshop 2 Week 3 Working Capital Management

Hint: Also look at Shells gearing calculation on page 134 of their financial statements. Why is this different?

worsening?
Significant or
slight?
Interest Cover
Dividend Cover
Capital Gearing
Capital Gearing
according to
Shell report
page 134

(b) Working Capital Ratios

Calculate the ratios given below for Shell and explain what each of the ratios measure and how and why it might have changed since the
previous year.
Formulas have been given to you in the lectures in week 1. Some of the ratios are not straightforward to calculate, so make a note of any
assumptions used.
Ratio Formula Calculation and total Variance Increasing or

2015 2014 decreasing?
Net Asset
Turnover
Inventory Days
Trade Receivables
Days
Trade payables
Days


worsening?
Significant or
slight?
Net Asset
Turnover
Inventory Days
Trade
Receivables
Days
Trade payables
Days

(c) Findings summary

Imagine you are an existing Shell Lenders. Summarise your findings on Shells short term liquidity

(d) Key Skills
development to date
Problem solve express a view that was Using independent thought and spirit.
appreciated by others
Team working Allocating resources in order Budgeting and planning time. Deciding
to make a project work priorities to meet deadlines
Project reminder: Your weekly questions start this week see your project workbook. You should answer these questions for your own
allocated company each week then you will share this information with your group later on, so dont let your group down! You should also
meet as a group to schedule meetings and deadlines to ensure that your group presentation is prepared well in advance of the deadline.
Workshop tip Youll find out this week how to access reports on the Manchester University library which will help you with next weeks
workshop preparation.

Workshop 3 Week 4 Strategy Issues

Imagine you are a new CEO at Shell who wants to know more about the forces affecting Shell and its strategy.
(a) Porters 5 Forces

Complete the following diagram with each of Porters 5 forces for Shell, stating whether each force is low, medium or high. Also provide an
overall summary explaining how you will build a strong, sustainable (ie long term) Shell strategy.
Use one of the librarys databases, Business Source Premier, and use the searching interface to locate a Marketline report on Shell:
Go to library home page http://www.library.manchester.ac.uk

In search resources in the top left of the screen select Search Resources
Select Databases A-Z
Click on B on the A-Z list, then on Business Source Premier, which is at the very end of the B page
Click Business Source Premier
If you need to login (off campus) the region is UK Higher Education and then scroll down to the University of Manchester,
use your regular log in details (mz and password)
In the search box Type Royal Dutch Shell in the Title box
Scroll down to find a SWOT analysis of Shell from Marketline. To open the document select PDF Full text from the left hand
menu.
Use this report, along with your knowledge from lectures and material from the Shell Annual Report, to prepare your answer.
17 Workshop 3 Week 4 Strategy Issues

Force 1: Force 2

Force 3 Force 4:.

Force 5: Overall & Recommendation

(b) How does this help?

How can this activity add to an effective interpretation of Shells financial statement information? How would it help you as new CEO?

(c) Shells Strategy

Summarise Shells existing strategy in a diagram format, As new CEO where would you focus Shells efforts?
Hint have a look at Shells website About Shell or see page 15 of the Annual Report.

(d) Key Skills
development to date
Communicate use persuasion to change Appreciating both sides being forceful and Eg persuading others of your viewpoint as
anothers point of view, whilst persuasive, rather than passive CEO.
demonstrating an understanding of their
views.
Decision making analyse and use data in Being decisive and using independent
order to predict future outcomes. thought.
Supporting reasoning with evidence .. and
the consideration of alternative views.
Project reminder: 1. You should be able to get your allocated group number from your workshop leader this week. If you are unsure about
which group you are in must email your workshop leader as soon as possible.
Project reminder 2: Use your weekly questions to consider these points for your assigned company. You should also meet with your group this
week to come up with an investor and devise a set of criteria for that investor.

Workshop 4, Week 5 Stakeholders and Sustainability

This week you will be able to practise your presentation skills in your group. To prepare for this presentation make notes on the following
questions.
(a) Sustainability
Explain what is meant by sustainability. Also identify the three aspects of sustainability.
Hint: See your lecture notes and for further information read Chapter 6 in your course textbook:-
24 Workshop 4, Week 5 Stakeholders and Sustainability

(b) Shells Sustainability

In what ways is Shell sustainable and demonstrating long term solvency think about Shells long term strategy and the definition and three
aspects of sustainability from part (a)

(c) Stakeholders
Identify different stakeholders for Shell and their consideration of Shells sustainability. Make notes suitable for you to be able to briefly
present to the board of Shell. Hint: See your course text book for help on identifying stakeholders.
Stakeholder Main focus Why is Sustainability Important How Shell can address stakeholder needs
to them?
Each group will be required to present as if to the Shell board on one stakeholder group (chosen at random!)

(d) Key Skills
development to date
Communicate share information and Oral presentation skills
knowledge that helped others succeed
Consideration demonstrate an awareness Sustainability. Understanding your (or

of social or environmental responsibility Shells) impact on the environment not just
in terms of waste, energy etc but also
socially.
Project reminder: Make sure you have some time booked with your group before the next workshop (in week 7), where you will be presenting
your investment recommendation.

Workshop 5, Week 7 Group Assessments
You will need to print and bring along a legible 1 page print out of your 6 slides and the completed assessment sheet (see your project
workbook).
Your presentation should last 7.5 minutes, if you overrun you may be stopped!
Any queries should be sent to your workshop leader with details of your workshop number and group number.
Good luck!
(d) Key Skills
development to date
Communication use available resources to Presenting formally and in an appropriate
present information formally to a group style, in order to persuade an audience
Team working use a team structure to Collaborating with peers and operating to a
meet performance objectives brief in a structured situation.
28 Workshop 5, Week 7 Group Assessments

29 Workshop 5, Week 7 Group Assessments

Workshop 6, Week 8 - Considering the Audit.

(a) Audit Purpose
What is the purpose of an audit? What are the issues with independence? How has the extended auditors report helped with auditor
independence and transparency? Do Shell have an issue with auditor independence?
Have a look at these articles to help you
Auditor Independence and Audit Quality: A Literature Review
FRC survey 'Extended auditors reports: A further review of experience (link to survey on right hand side)
Auditor Conflict at Shell
These articles are also linked on Blackboard in workshop 6, Week 8
30 Workshop 6, Week 8 - Considering the Audit.

(b) Shell Audit Report

Identify the main sections of the audit report and explain why they are included. Secondly What are the audit risks for Shell? (hint: See audit
report) How does this help potential investors?
Section Why included

What are the audit risks for Shell? (hint: See audit report) How does this help potential investors?
(c) Shell Audit for Investors

As an investor in Shell, if you created a new kind of audit report what would you like to see an auditor sign off on eg a guarantee on the share
price?
We will use these in class to debate if auditors could provide these assurances.

(d) Key Skills
development to date
Add value use creativity to solve a problem Finding a creative solution to a problem.
or create an opportunity Using an open-minded and adaptable
approach to find a new or better way of
doing something
Decision making stand your ground and Taking decisions and carrying them through.
maintain your position under pressure Handling pressure. Standing up for yourself

Workshop 7, Week 9 Industry Analysis

(a) Comparative industry analysis
Obtain a comparative industry analysis for Shell from Thompson One
Hint: This is done more easily on campus and needs to be done using Internet Explorer (not Google Chrome)
Go to library home page http://www.library.manchester.ac.uk

In search resources in the menu in the top right of the screen select Search Databases
Click on T on the A-Z list, then on Thomson One, Click Thomson One
In the search box Type Royal Dutch Shell in the Search box
Select RDSA-AE Royal Dutch Shell plc
From the drop down menus select: Fundamentals Comparables
Click on the down arrow on the peers band
Select Global from the locations and currency USD
Select Key financials and effectiveness for comparative ratios
For more detailed instructions see workshop slides from workshop 6, week 8, or go along to the PC cluster in the Dover Street building. The
staff there will be more than happy to help you.
34 Workshop 7, Week 9 Industry Analysis

(b) Common sized Income Statements

Calculate a common sized income statement for Shell and for BP 2014.
Hint see chapter 2 for help and to find BPs financial statements simply search for BP on the internet.
Shell BP
Common-size consolidated income Shell
2015 2015 2015 2015
statement vs BP
$m CS% $m CS% CS%
Revenue
Share of profit of equity-accounted
investments
Interest and other income including
gains on sales of businesses
Total revenue and other income
Purchases
Production and manufacturing
expenses and taxes
Selling, distribution and administrative
Research and development
Exploration

Depreciation, depletion and

amortisation & impairment
Interest expense/ Finance Cost
Fair value gain
Income before taxation
Taxation
Income for the period

(c) Comment on your findings from the comparables analysis and the common size income statement

(d) Key Skills
development to date
Technical competence show proficiency in Using more complex applications
a range of software applications
Decision making analyse and use data in Assessing and using data from multiple
order to predict future outcomes sources, including research and current
conditions to predict the future for planning

Workshop 8, Week 10 Conclusions

(a) Viewpoints of Shell
Consider alternative viewpoints of Shells business by comparing what Shell might want you to see from their published reports and an
alternative viewpoint. Consider all sources of information Financial Statements, Analysts reports, additional information provided by Shell to
satisfy stakeholders
Consider alternative viewpoints of Shells business by comparing what Shell might want you to see from their published reports and an
alternative viewpoint.
What Shell might want you Source of this information Alternative view point
to see
39 Workshop 8, Week 10 Conclusions

(b) Relevance & Reliability

Analysts produce forecasts of accounting earnings along with other forward-looking information. This information has strengths and
weaknesses versus financial statement information.
i) Discuss whether you believe analysts forecasts are more relevant for business decision making than financial statement
information.
ii) Discuss whether you believe analysts forecasts are more reliable than financial statement information.
Which characteristic do you think has carried more weight in the preparation of Shells balance sheet? Give reasons for your opinion.
Note: In class you will swap your answer and it will be marked by your peers so please provide a full answer as if you were answering it in the
exam.

(c) Highlights
If your Grandma wanted to buy shares in a company which 3 things would you tell her to look out for in the financial statements and why?
Be prepared to justify your answer in the workshop.
(d) Key Skills
development to date
Communication show an appreciation for Keeping and open mind. Demonstrating
both sides of the argument listening skills. Showing diplomacy and
compromise
Adding values show an understanding of Showing good business awareness. Adapting
customer (stakeholder eg your Grandma)s to business circumstances
needs

Top tip: Look out for the lecture on a practical example of advanced interpretation and the clinic session where you can raise any queries with
lecturers in week 11 next week.
Top tip: You need to research the company you have been given for your exam to find additional information which can be used in the exam.
Revision alone will not be sufficient for this exam you are expected to draw on external sources of information about the exam company.

Workshop Workbook

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BMAN20081 and BMAN20611 Workshop workbook completed with answers

BMAN20081 and BMAN20611

Workshops run on weeks 2-5 and 7-10.

Group presentation assessments will be held in week 7.

Workshop 8, Week 10 Conclusions ........................................................................................................................................................................... 39

Workshop 1 Week 2 Introduction and Profitability Ratios

(a) Shell Annual Report Quiz

Q Page Question Answer Implication

2. 7 How many people died whilst working

3. 7 How much was distributed to

4. 10 What % of third party revenue is

6 Workshop 1 Week 2 Introduction and Profitability Ratios

7. 16 What was the Henry Hub price per

10 48 Do Shell have 3rd party insurers?

7 Workshop 1 Week 2 Introduction and Profitability Ratios

(b) Profitability Ratio Calculations

Ratio Formula Calculation and total Variance Increasing or

8 Workshop 1 Week 2 Introduction and Profitability Ratios

Any assumptions noted:-

Ratio What does it measure? Improving or Why might it have changed?

9 Workshop 1 Week 2 Introduction and Profitability Ratios

(d) Key Skills

(e) One thing I have learnt is..

10 Workshop 1 Week 2 Introduction and Profitability Ratios

Workshop 2 Week 3 Working Capital Management

Ratio Formula Calculation and total Varian Increasing or

Capital Gearing (1)

Capital Gearing (2)

11 Workshop 2 Week 3 Working Capital Management

Ratio What does it measure? Improving or Why might it have changed?

12 Workshop 2 Week 3 Working Capital Management

(b) Working Capital Ratios

Ratio Formula Calculation and total Variance Increasing or

13 Workshop 2 Week 3 Working Capital Management

Ratio What does it measure? Improving or Why might it have changed?

14 Workshop 2 Week 3 Working Capital Management

Any assumptions noted:-

(c) Findings summary

15 Workshop 2 Week 3 Working Capital Management

(d) Key Skills

(e) One thing I have learnt is..

16 Workshop 2 Week 3 Working Capital Management

Workshop 3 Week 4 Strategy Issues

(a) Porters 5 Forces

Go to library home page http://www.library.manchester.ac.uk

17 Workshop 3 Week 4 Strategy Issues

18 Workshop 3 Week 4 Strategy Issues

Force 3 Force 4:.

19 Workshop 3 Week 4 Strategy Issues

Force 5: Overall & Recommendation

20 Workshop 3 Week 4 Strategy Issues

(b) How does this help?

21 Workshop 3 Week 4 Strategy Issues

(c) Shells Strategy

22 Workshop 3 Week 4 Strategy Issues

(d) Key Skills

(e) One thing I have learnt is..

23 Workshop 3 Week 4 Strategy Issues

Workshop 4, Week 5 Stakeholders and Sustainability

24 Workshop 4, Week 5 Stakeholders and Sustainability

(b) Shells Sustainability

25 Workshop 4, Week 5 Stakeholders and Sustainability

26 Workshop 4, Week 5 Stakeholders and Sustainability

(d) Key Skills