Real-World Annual Reports

This assignment is divided into four main parts:

Part 1: Introduction to Company Annual Report and Financial Statements

Part II: Financial Statements

Part III: Financial Statement Analysis Tools

Part IV: Comparative analysis essay

Attention:

1. Parts 1-3, all serve the purpose of Part 4. In this assignment, I need you not only to submit the report for Part 4 to me, but also to send me a separate document with the completed contents of the previous three parts. (The answers given to me for the previous three parts can be generalized)

2. references need to be 13-15

3. make graphs and charts in your essay when necessary.

4. the document contains: a detailed request (important!)

Reports of four different companies for the years 2021-2023 and financial data corresponding to one copy for each company (4*3+4*1=16)

Introduction to Real-World Annual Reports
Table of Contents:
Overview: …………………………………………………………………………………………………. 2
Part 1 – Introduction to Company Annual Report and Financial Statements …….. 2
Part 2 – Financial Statements ……………………………………………………………………… 3
Part 3 – Financial Statement Analysis Tools ………………………………………………….. 5
Part 4 – Financial analysis essay ………………………………………………………………….. 9
Overview:
The workbook consists of;
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Part 1 – develop a background of the company and an overview of the company’s corporate
governance principles.
Part 2 – familiarise students with the published annual reports and identify differences between
results over a period of time.
Part 3 – conduct ratio analysis on the company annual report.
Part 4 – prepare a comparative essay of the companies assigned to each member of the group,
summarise the findings and present with a supporting appendix to the investor.
Resources:
Students will be provided with the following information:
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Workbook.
Company Annual Reports for the past 3 years.
Company financial data (excel spreadsheet) – to conduct ratio analysis.
Part 1 – Introduction to Company Annual Report and Financial Statements
The purpose of part 1 is to begin your exploration of your company’s annual report and corporate
governance structure.
Part 1 – Question 1:
Write a background summary of four companies including the following:
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When and why did your company first commence operation?
What is the main or core business of the company?
Some companies are diversified and have investments in other industries, for example, Wesfarmers
has diverse business operations that cover supermarkets, department stores, home improvement
and office supplies; coal production and export; chemicals, energy and fertilisers; and industrial and
safety products. Is your assigned company diversified? What industries does the company operate
in?
Does your assigned company operate solely within Australia, other countries or does it operate
internationally? Identify the operational locations.
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Part 1 – Question 2:
What are the headings and sub-headings of the discussion on corporate governance? Note, if not
presented in the Company Annual Report, review the Company website.
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Part 1 – Question 3:
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What are the page references for the discussion on corporate governance? (Hint – try the table of contents
at the beginning of the annual report or review the Company website.) Briefly list the information included
in the company’s corporate governance report. Does this information differ from the corporate
governance information covered in the content and required reading for topic 2?
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Part 1 – Question 4:
What position was held and what was the composition and total remuneration of the highest paid board
member? (Hint – try the Directors’ Report.)
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Part 1 – Question 5:
How many “subsidiary companies” or “controlled entities” are in the group? (Hint; try looking towards the
end of the financial statements, near the end of the report). Are the subsidiaries/controlled entities located
domestically and or internationally? Identify where they are located. This will give insight into how
widespread the company’s operations are and may assist you with your background information.
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Part 2 – Financial Statements
The purpose of part 2 is to not only introduce your to an actual set of financial statements of a publicly
listed company, but to also identify information that may be significant for ratio analysis which will be
conducted in Part 3. The financial statements are presented in the financial report section of the
company’s annual report. For this section you may find it easier to refer to the Excel spreadsheets to
obtain the financial data. The Excel spreadsheet will contain the financial information for the past 10 years;
however, you will only need to refer the data for the past four years in your spreadsheet, (the past three
years and the fourth may be required to create averages for some of the ratios in part 3). This will make it
easier to refer to the financial data for several years in one excel worksheet.
Part 2 – Question 1 (Statement of Financial Position):
What is the amount invested by the company in net assets for the current year? (Hint use total assets
minus total liabilities). How does this amount differ from the value of net assets for each of the previous
three years? Can you identify any reason for the changes? (Hint: look at the individual amounts that make
up both the total assets and total liabilities, are there any changes to individual items over this three-year
period? Alternatively, you could perhaps look at the notes to the financial statements in the annual report
to see if there are any changes in the breakdown of individual items in the reports.) Discuss.
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Part 2 – Question 2 (Statement of Financial Position):
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How much was the total equity for the current year? How does this differ from the total equity in each of
the previous three years? Can you identify any reason if there are any changes? Discuss.
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Part 2 – Question 3 (Statement of Financial Position):
How much was the total current assets for the current year and what are the components classified under
this heading? Is there any difference in the value of total current assets for each of the previous three
years? Can you identify any reason if there are any changes? Discuss. (Hint: you may need to refer to the
notes to the financial statements in the annual report to review more detailed information.)
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Part 2 – Question 4 (Statement of Financial Position):
What are the items listed under non-current liabilities? Are there any new non-current liabilities in the
current year that were not there in the previous three years? (Hint: you will need to look in the notes to the
accounts to see the breakdown of non-current liabilities).
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Part 2 – Question 5 (Statement of Profit or Loss):
How much was net profit for the current year? How does this compare to the net profit for each of the
previous three years? Can you identify any particular revenues or expenses that may have led to changes
in the profit figures over the three-year period? Discuss.
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Part 2– Question 6 (Statement of Profit or Loss)
Is the total revenue in the current year greater or less than the total annual revenue recorded in each of
the previous three years? Discuss.
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Part 2 – Question 7 (Statement of Cash Flow):
How much was the cash flows from operating activities for the current year? What was the largest inflow
item and the largest outflow item in the operating activities section? Does this differ from the previous
three years? Discuss.
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Part 2 – Question 8 (Statement of Cash Flow):
How much was the cash flow from investing activities in the current year? Has the company had any new
investing cash flows in the current year compared to the previous three years? If they did, list the activities
(Hint: it may be necessary to look in the notes to the accounts).
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Part 2 – Question 9 (Statement of Cash Flow):
What was the net change in cash flows in the current year? How does this change compare to the previous
three years? Discuss.
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Part 3 – Financial Statement Analysis Tools
The purpose of part 3 is to introduce you to using financial statement analysis tools covered in topic 7.
Hopefully your answers to questions in part 2 may have flagged monetary differences that you can now
compare based on percentages using ratio analysis. Ensure you include your calculations in your answer
and more importantly, try and identify why percentage changes may have occurred. It is this analysis that
is most important in this exercise, trying to identify “why” changes have occurred. The more analysis
provided in the answers to the questions in this workbook, the more information you will have to draw on
when preparing your financial analysis essay.
Prepare the ratio calculations first and then attempt to analyse the results. When performing ratio analysis,
you should analyse each of the ratios on the basis of:
1. Describe the change
2. Explain the change
3. Suggest a cause
The pre-recorded lecture recordings present each ratio calculation. The supporting demonstration
recordings provide a step-by-step process to complete the ratio calculations and the analysis of the
exemplar company presents an approach to analyse and explain the ratio results. These recordings may
assist you with the analysis of your assigned company.
Part 3 – Question 1 (Horizontal Analysis):
Conduct a horizontal analysis of the Statement of Profit or Loss (Income Statement) for the past 3 years.
Comment on any trends.
Perform horizontal analysis on the Statement of Profit or Loss to identify changes to support your ratio
analysis
Part 3 – Question 2 (Horizontal Analysis):
Conduct a horizontal analysis of the Statement of Financial Position (Balance Sheet) for the past 3 years.
Comment on any trends.
Perform horizontal analysis on the Statement of Financial Position to identify changes to support your ratio
analysis
Part 3 – Question 3 (Vertical Analysis):
Conduct a vertical analysis of the Statement of Profit or Loss (Income Statement) for the past 3 years.
Comment on any trends.
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Perform vertical analysis on the Statement of Profit or Loss to identify changes to support your ratio
analysis
Part 3 – Question 4 (Vertical Analysis):
Conduct a vertical analysis of the Statement of Financial Position (Balance Sheet) for the past 3 years.
Comment on any trends.
Perform vertical analysis on the Statement of Financial Position to identify changes to support your ratio
analysis
Note: Horizontal and vertical analysis can be used as a point of reference to assist in identifying percentage
changes of individual items that appear in the financial statements. When conducting ratio analysis, over a
period of time, you may find it easier to not only identify the change in the numerator and denominator of
the formula, but to also use horizontal and vertical analysis to identify the individual components that make
up the numerator and denominator of the formula.
Part 3 – Question 5 (Trend Analysis):
Conduct a trend analysis of the Statement of Profit or Loss (Income Statement) for the past 3 years.
Comment on any trends.
Perform trend analysis on the Statement of Profit or Loss to identify changes to support your ratio analysis
Part 3 – Question 6 (Trend Analysis):
Conduct a trend analysis of the Statement of Financial Position (Balance Sheet) for the past 3 years.
Comment on any trends.
Perform trend analysis on the Statement of Financial Position to identify changes to support your ratio
analysis
From the lecture PowerPoint slides and in the exemplar company information, when performing ratio
analysis, you should analyse each of the ratios on the basis of:
4. Describe the change
5. Explain the change
6. Suggest a cause
Part 3 – Question 7 (Profitability):
Can you identify a trend in the return on equity ratio over the past three years? Comment on the trend.
Briefly discuss possible reasons for this trend.
Describe the change:
Explain the change:
Suggest a cause:
Part 3 – Question 8 (Profitability):
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Has the Return on Assets changed over the past 3 years? What may have caused the change?
Describe the change:
Explain the change:
Suggest a cause:
Part 3 – Question 9 (Profitability):
Has the profit margin and gross profit margin, if applicable, changed over the past three years? Is this a
good result for the company? Briefly discuss what the change indicates. (Hint: as mentioned above, refer
to your horizontal and vertical analysis of the Statement of Profit or Loss and Statement of Financial
Position to assist in your analysis of this ratio.)
Describe the change:
Explain the change:
Suggest a cause:
Part 3 – Question 10 (Asset efficiency):
Identify if the asset turnover ratio increased or decreased over the past three years? Is this a good result for
the company? Briefly discuss what the change indicates.
Describe the change:
Explain the change:
Suggest a cause:
Part 3 – Question 11 (Asset efficiency):
The inventory turnover ratio is only applicable to retail businesses. If your assigned company is a retail
business, has the Inventory turnover changed over the past three years? Is this a good result for the
company? Briefly discuss what the change indicates. Note you might find it useful to also convert to the
number of days.
Describe the change:
Explain the change:
Suggest a cause:
Part 3 – Question 12 (Asset efficiency):
Has the receivables turnover changed over the past three years? Is this a good result for the company?
Briefly discuss what the change indicates. Note you might find it useful to also convert to the number of
days.
Describe the change:
Explain the change:
Suggest a cause:
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Part 3 – Question 13 (Liquidity):
Has the current ratio increased or decreased over the past three years? Is this a good result for the
company? Briefly discuss what the change indicates.
Describe the change:
Explain the change:
Suggest a cause:
Part 3 – Question 14 (Liquidity):
Has the quick ratio increased or decreased over the past three years? Is this a good result for the
company? Briefly discuss what the change indicates.
Describe the change:
Explain the change:
Suggest a cause:
Part 3 – Question 15 (Capital structure/Gearing):
Has the debt-to-equity ratio increased or decreased over the past three years? Is this a good result for the
company? Briefly discuss what the change indicates.
Describe the change:
Explain the change:
Suggest a cause:
Part 3 – Question 16 (Capital structure/Gearing):
Has the debt ratio increased or decreased over the past three years? Is this a good result for the company?
Briefly discuss what the change indicates.
Describe the change:
Explain the change:
Suggest a cause:
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Part 4 – Comparative analysis essay
Task: The Group is required to prepare a comparative essay of no more than 4 pages or (2 000 words)
analysing and comparing the companies. The group will need to reach a consensus and nominate, with
support, which of the assigned companies would provide the best investment opportunity for the investor.
To do this, each group member will be required to complete the workbook questions for their assigned
company. The comparative essay will be prepared by drawing information for each assigned company from
the completed workbooks.
Task Question:
An investor is contemplating a potential investment opportunity in one of four companies. The investor has
asked your group to provide a four-page comparative essay discussing the profitability, liquidity, asset
efficiency and gearing of the companies assigned to your group and recommend the company that provides
the best investment opportunity.
Structure – Financial analysis essay
Your essay should be structured as follows
1. Introduction – approx. 250 words
Introduce the aim (task) of the paper in one sentence. Next briefly introduce each of the assigned
companies and the purpose of the essay.
2. Body
In the body you should provide a brief comparative analysis of the key factors of each company in separate
paragraphs. This is an overall summary drawn from the individual analysis completed by each group
member on their assigned company. The group should also identify which company is stronger in each
category.
Paragraph 1: Overall Profitability Analysis – approx. 250 – 280 words
Compare the overall profitability of the assigned companies, do not discuss individual profitability ratios
unless they are standout results.
Paragraph 2: Overall Asset Efficiency Analysis – approx. 250 – 280 words
Compare the overall asset efficiency of the assigned companies, do not discuss individual asset efficiency
ratios unless they are standout results.
Paragraph 3: Overall Liquidity Analysis – approx. 250 – 280 words
Compare the overall liquidity of the assigned companies, do not discuss individual asset efficiency ratios
unless they are standout results.
Paragraph 4: Overall Capital Structure Analysis – approx. 250 – 280 words
Compare the overall capital structure of the assigned companies, do not discuss individual asset efficiency
ratios unless they are standout results.
Paragraph 5: Limitations of Analysis – approx. 250 words
Identify any limitations encountered in conducting the comparative analysis. This may include things like
insufficient or old data sources and so on.
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3. Conclusion – approx. 200 words
Repeat the main findings/analysis of your report in summary format. Very clearly explain the status of all
companies.
4. Recommendations – approx. 180 words
Make a very clear recommendation for the investor. Explain which company is the best option and use the
findings you have presented in the body to support your stance.
Page 5: References
Include the bibliographic details of any references you have used. You must use APA 7th format. Check the
Library Guides here for correct usage: https://libguides.jcu.edu.au/apa
You can only use appropriate reputable sources such as journals, textbooks, newspaper articles, or
published reports. You cannot use online sources such as Investopedia or Wikipedia.
Page 6 onwards: Appendix
The appendix is not included in the word count or page requirements. This means there is no page
restriction here. For each area of analysis, you must put screenshots or copies of the data from your Excel
Financial Data Spreadsheet of your assigned company and include your analysis for each ratio from part 3
of the workbook. Do not include the whole workbook in the appendix. You may use the following template
to prepare the appendix to support your financial analysis essay.
Include the following opening statement:
This financial analysis essay has been developed based on reference to Birt et al. (2020), the [insert the
name of your assigned company] annual reports from 2019 to 2021 and company financial data obtained
from the Data analysis Database (Morningstar, 2022).
The individual calculations and analysis for each ratio should be presented for your assigned company as
follows:
EACH ASSIGNED COMPANY SHOULD HAVE THE FOLLOWING INFORMATION PRESENTED IN THE
APPENDIX:
COMPANY NAME:
PROFITABILITY
Return on Equity:
Copy and paste, or take a screen image of the ratio calculations from the Excel spreadsheet, i.e.
Copy your analysis from Part 3 – Q1, but remove the prompts ‘Describe the change’, ‘Explain the change’
and ‘Suggest a cause’
Return on Assets:
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Copy and paste, or take a screen image of the ratio calculations from the Excel spreadsheet
Copy your analysis from Part 3 – Q2, but remove the prompts ‘Describe the change’, ‘Explain the change’
and ‘Suggest a cause’
Profit Margin:
Copy and paste, or take a screen image of the ratio calculations from the Excel spreadsheet
Copy your analysis from Part 3 – Q3, but remove the prompts ‘Describe the change’, ‘Explain the change’
and ‘Suggest a cause’
Gross Profit Margin (if applicable):
Copy and paste, or take a screen image of the ratio calculations from the Excel spreadsheet
Copy your analysis from Part 3 – Q3, but remove the prompts ‘Describe the change’, ‘Explain the change’
and ‘Suggest a cause’
ASSET EFFICIENCY
Asset Turnover:
Copy and paste, or take a screen image of the ratio calculations from the Excel spreadsheet
Copy your analysis from Part 3 – Q4, but remove the prompts ‘Describe the change’, ‘Explain the change’
and ‘Suggest a cause’
Inventory Turnover (days and times p.a):
Copy and paste, or take a screen image of the ratio calculations from the Excel spreadsheet
Copy your analysis from Part 3 – Q5, but remove the prompts ‘Describe the change’, ‘Explain the change’
and ‘Suggest a cause’
Receivables Turnover (days and times p.a):
Copy and paste, or take a screen image of the ratio calculations from the Excel spreadsheet
Copy your analysis from Part 3 – Q6, but remove the prompts ‘Describe the change’, ‘Explain the change’
and ‘Suggest a cause’
LIQUIDITY
Current Ratio:
Copy and paste, or take a screen image of the ratio calculations from the Excel spreadsheet
Copy your analysis from Part 3 – Q7, but remove the prompts ‘Describe the change’, ‘Explain the change’
and ‘Suggest a cause’
Quick Ratio:
Copy and paste, or take a screen image of the ratio calculations from the Excel spreadsheet
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Copy your analysis from Part 3 – Q8, but remove the prompts ‘Describe the change’, ‘Explain the change’
and ‘Suggest a cause’
CAPITAL STRUCTURE / GEARING
Debt to Equity Ratio:
Copy and paste, or take a screen image of the ratio calculations from the Excel spreadsheet
Copy your analysis from Part 3 – Q10, but remove the prompts ‘Describe the change’, ‘Explain the change’
and ‘Suggest a cause’
Debt Ratio and Equity Ratio:
Copy and paste, or take a screen image of the ratio calculations from the Excel spreadsheet
Copy your analysis from Part 3 – Q11, but remove the prompts ‘Describe the change’, ‘Explain the change’
and ‘Suggest a cause’
HORIZONTAL ANALYSIS
Copy and paste, or take a screen image of the horizontal analysis of the Statement of Profit or Loss (Income
Statement) from the Excel spreadsheet
Copy and paste, or take a screen image of the horizontal analysis of the Statement of Financial Position
(Balance Sheet) from the Excel spreadsheet
VERTICAL ANALYSIS
Copy and paste, or take a screen image of the vertical analysis of the Statement of Profit or Loss (Income
Statement) from the Excel spreadsheet
Copy and paste, or take a screen image of the vertical analysis of the Statement of Financial Position
(Balance Sheet) from the Excel spreadsheet
TREND ANALYSIS
Copy and paste, or take a screen image of the trend analysis of the Statement of Profit or Loss (Income
Statement) from the Excel spreadsheet
Copy and paste, or take a screen image of the trend analysis of the Statement of Financial Position (Balance
Sheet) from the Excel spreadsheet
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