NANYANG POLYTECHNIC School of Business Management

BM0075 Essentials of Financial & Management Accounting

2011/12 Semester 2 ICA 2 Project Guidelines

Date of issue: Monday, 14 Nov 2011 Date of submission: Friday, 16 Dec 2011, 2pm

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CONTENTS

1. Project guidelines 1.1 1.2 1.3 1.4 1.5 Outline Objectives Administrative guidelines Submission Grading

2. Project case notes

3. Project requirements

4. Assessment criteria

5. Declaration form

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1.

Project guidelines

1.1

Outline

This project mainly covers the topics Published Financial Statements Financial Analysis and Statement of Cash Flow taught in this semester. Students will submit on a group basis a type-written report including a CD-Rom containing the spreadsheet computations. This project is designed for you to be resourceful and analytical. The ability to work in a team is important. Report writing and ability to integrate the various financial concepts and topics will reflect the level of understanding of the module. 1.2 Objectives

This project seeks to provide the following learning objectives: (a) Compute, interpret & analyse published financial statements for decisionmaking. Use spreadsheet functions and compute ratios. Report and communicate the analysed accounting information. Research using online data retrieval systems like Reuters, Bloomberg or Dow Jones and the Internet to obtain key business information on the company, its industry, as well as the countrys economic indicators.

(b) (c) (d)

1.3

Administrative guidelines

1.3.1 This project is to be completed by each project group, comprising 4 to 5 students. Grouping of students will be randomised by drawing lots, under the supervision of your tutor. 1.3.2 You are to use the financial statements of a private limited company (referred to as private company) and the financial statements of a company listed on the Stock Exchange (referred to as listed company) to do the project. The financial statements of the private company will be published in CMS on 14 Nov 2011. You tutor will announce the information on the listed company and inform you the assigned private company during your tutorial session in the week beginning 14 Nov 2011. 1.3.3 You are given approximately 5 weeks to complete the project.

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1.3.4 You must submit your project report and CD-Rom on Friday, 16 Dec 2011, by 2pm to your respective tutors. Any late submission will have 10 marks deducted from the report for each day of delay. 1.3.5 You are to quote all sources of information and references in the appendix. Any group(s) found to have plagiarised their report/or parts of their report will be penalised heavily and be dealt with the appropriate disciplinary actions. A project declaration form, duly signed by all members is to be attached and submitted together with the report. 1.4 Submission

Your submission should include: 1.4.1 A written report, maximum 10 pages, excluding appendices. Use font size 12 with single spacing. 1.4.2. Appendix to the written report. 1.4.3. A CD-Rom containing the Excel spreadsheets on: (a) the financial ratios of the private and listed company; and (b) the Statement of Comprehensive Income and the Statement of Financial Position of the private and listed company. Please ensure that your CD-Rom is clearly labelled with your module group, group number and team members names. Refer to Section 3, under Project requirements for the detailed requirements on the content of the written report and Excel spreadsheets. 1.5 Grading The project will be graded as follows: Project Report & Excel spreadsheets *Peer/tutor evaluation % 80% 20% 100% Evaluation basis Group Individual

*In peer evaluation, students will consider their team members attitudes, sense of responsibility, contribution and participation for the whole project. The peer evaluation will be conducted during the tutorial session. Instructions will be given by your tutor on the day of the peer evaluation. It is strongly advised that the presence of any inactive member must be brought to the attention of your tutor immediately at the start of the project for appropriate action to be taken.

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2.

Project case notes

Assume that your parents have just recently received a substantial sum of money from the en-bloc sale of their investment property. They plan to invest the monies by purchasing shares in a company. Your parents told you that they have been approached by a relative who owns a family business, offering them an opportunity to invest in his company. They gave you this companys financial statements for analysis. (referred to as the private company) They have also selected a company listed on the Singapore Exchange (SGX) (referred to as the public listed company) which they are considering to invest in and need your help to obtain the latest annual report of the company (from SGX website) for analysis. You will perform the following: (i) An analysis of the financial statements of both companies by calculating and interpreting the appropriate financial ratios for two years (current and preceding year i.e. Financial Year (FY) 2011 and 2010), and (ii) Compare the financial performance of both companies and make the appropriate recommendation to your parents based on the financial ratios analysis, giving three reasons to support your recommendation. Your parents informed you that they are only interested to invest solely in either the private or the listed company. (iii) You should also include a brief introduction of the listed company and research any available information relating to the listed company, including the relevant industry and the economic conditions which may be helpful in your analysis and decision making. In making your recommendations, you should also consider qualitative factors and limitations of the financial statement analysis, if any. You may also make the appropriate assumptions regarding the private company in your analysis and recommendations.

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3.

Project requirements

Part 1 of Report: 1.

Description

Cover page Name of listed company & private company, group members (including admin numbers) & module group Table of contents A list of tasks performed by each student

2. 3.

Part 2 of Report: 1. Introduction

Financial Statement Analysis

Background of project and brief explanation of your approach and state appropriate assumptions adopted, if any. 2. (a) Contents Computation of financial ratios (i) Transcribe (i.e. data-entry) the Statement of Comprehensive Income and Statement of Financial Position of both the private and listed companies for the latest 2 years (i.e. FY 2011 and 2010) (Note: as per printed hard copy from sources) in Excel spreadsheets. For the listed company, the Statement of Comprehensive Income and Statement of Financial Position can be retrieved from the annual report of the company, available in the Singapore Exchange Limited (SGX) website. Extract only Group figures from the Statement of Comprehensive Income and Statement of Financial Position to prepare your Excel spreadsheets. (ii) Use the Excel spreadsheets of the Statement of Comprehensive Income and Statement of Financial Position that you have prepared above to compute the financial ratios for both companies for the last 2 years (i.e. FY 2011 and 2010) using formulae. Include all ratios (subject to the availability of information) for the following: Profitability Liquidity Activity or Efficiency Debt

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You are to state the formulae and compute all available ratios of the current and previous years by showing all the workings in the spreadsheets. Marks will be deducted if workings are not shown and the Excel spreadsheets on the financial ratios are not according to the format below. Example of Excel spreadsheet on financial ratios
Name of Private/Listed Company Ratio Current Ratio Formula Current Assets/Current Liabilities
Extracted from the Statement of Financial Position of the private/listed company

2011

2010

$ 2,000,000 $ 1,000,000 = 2 =

$1,500,000 $1,000,000 1.5

Quick Ratio etc

Attach the Excel spreadsheets on the financial ratios in your written report. (b) Analysis of financial ratios In your written report, compute, analyse and interpret the financial ratios for each company based on the comparison of the financial statements for the latest two years (i.e. FY 2011 and 2010). You are not required to define each ratio. You should interpret and analyse each financial ratio. E.g. comment if the current ratio is better or worse off compared to prior year and give reasons to support your observation. Your analysis should not be generic and reasons given should be relevant to the industry in which your listed company operates. Relevant quotations from the annual report such as the Chairmans statement or/and summary of results are highly encouraged. (c) Recommendations & Conclusions Conclude on the overall financial strength of the two companies. Based on the ratio analysis, recommend your parents as to which company to invest in and give three reasons to support your recommendation. You should support your recommendations with both quantitative and qualitative factors of the companies. You should also highlight any limitations of your analysis.

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Part 3 of Report:

Statement of Cash Flow Analysis

For the listed company only, you are required to: Give an analysis of the statements of cash flow for the two years (i.e. FY2011 and 2010) and conclude if the cash flows have improved over this two-year period. You are NOT required to prepare a Cash Flow statement.

Part 4 of Report: 1. 2.

Appendices

Quote of all sources of information and references. Hardcopies of the Excel spreadsheets on the Statement of Comprehensive Income and Statement of Financial Position of both the private and listed companies. Hardcopies of the annual report (relevant pages) of the selected listed company. Only relevant pages need to be submitted and they must at least include the Statement of Comprehensive Income, Statement of Financial Position and Statement of Cash Flow. Hardcopies of the financial statements of the private company. Project declaration form.

3.

4. 5.

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4.

Assessment criteria

Assessment will be based on the following: Written Report ( 80% ) Title page Table of contents Introduction List of task performed by each student Contents: Computation of financial ratios for two companies for 2 years Analysis & interpretation of financial ratios Recommendations & Conclusion Statement of Cash Flow Analysis Appendices 5 marks

30 marks 20 marks 10 marks

10 marks 5 marks ________ 80 marks

Peer & Tutor Evaluation ( 20%) Tutor evaluation Peer evaluation 10 marks 10 marks 20 marks

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Nanyang Polytechnic School of Business Management BM0075 EFMA 2011/2012 Semester 2 Project Declaration Form

Declaration by Students We declare that this project has been based entirely on our own effort. We understand that if we are suspected of plagiarism or any form of cheating, we will be dealt with under the rules of the Polytechnic.

Date: Students signature Name : Adm No.:

Date: Students signature Name : Adm No.:

Date: Students signature Name : Adm No.:

Date: Students signature Name : Adm No.:

Date: Students signature Name : Adm No.:

Please attach this form in the appendices of your project report.

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