This assessment aims to check on the understanding of concepts covered in topics from module 1-7 in the Business Analysis for Investment (FNCE2003) unit. This

•   Is a group assignment, each group should comprise 3-5 students;

•   Answer all the questions in parts A and B;

•   Represents 50% of the overall marks of this unit;

•    Should be submitted via Turnitin to the link provided on the Blackboard by due date listed in the unit outline;

•   Answer all the questions in the assignment, and don’t forget to provide detailed calculations/justifications;

•    Submit your answer script with the Assignment Cover Sheet, don’t forget to mention question members clearly and correctly;

•   Your report should be a readily comprehensible and condense report of your work. Accordingly, your report should be limited to 25 pages of A4 (Size  12 font, 1.5 spaced) including all tables and appendices. Please cite any sources used;

•    Submit only ONE copy per group;

•   You can use Excel for calculations. However, you are not allowed to submit Excel worksheets. Screenshot is allowed (as appendix);

•   If there are any problems with your group, you should inform your local instructor before week 8. Any dispute after week 8 will not be addressed. If you do not contribute equally to the completion of the project, then you will receive a penalty up to 50%.

I would also remind you of your obligations under the University rules on academic integrity; if you are unsure of your responsibilities then please check the relevant section of the Curtin website:http://academicintegrity.curtin.edu.au/.

This assessment (both Part A & Part B) requires you to conduct financial statement analysis of an Australian publicly listed company for the year 2023. By now, one of the following companies should be allocated by your local instructor (if not, please contact your local instructor ASAP).

•          Harvey Norman (Stock Code: HVN)

•          JB HI-FI (Stock Code: JBH)

An important element of this project is the requirement of identifying and obtaining relevant, publicly available information. Therefore, you should ensure that you are able to access sufficient information for your selected company. I have uploaded the relevant annual reports on Blackboard for your convenience.

Part A: Primary Investigation (15 marks)

Part A requires students to analyse the most recent annual report of the allocated firm (Harvey Norman or JB Hi-Fi). Please answer the following questions to demonstrate your understanding of financial statement analysis, financial reporting standards and principal financial statements of your allocated company.

Question 1

What is the name of the company that you/your group members were assigned for this project? In which industry does your company operate? What is the management’s view on the future outlook and performance of the company?  [0+1+1=2 Marks]

Question 2

Assume you are analysing the financial statements of your allocated company for the year 2023, where can you find the information to examine its performance? How would you comment on the performance of this firm for the year 2023? What additional information do you need to draw a reasonable conclusion about the performance of the firm?   [1+1+1=3 Marks]

Question 3

Identify two pieces of information not included in the major financial statements (but still within the annual report) that you think would be important to someone considering investing in the company. Discuss your reasons for believing that this information would be important in making an investment decision.  [1+1=2 marks]

Question 4

Using the latest annual report of your allocated firm, analyse the revenue streams of the firm as disclosed in its income statements. Discuss the primary sources of revenue for the company and any noted trends or changes from the previous fiscal year. Examine the structure of the balance sheet for the firm. Highlight the major categories of assets and liabilities, noting any significant components or unusual items.   [2+2=4 Marks]

Question 5

Analyse investing and financing activities of your allocated firm for the year 2023 as identified in the statement of cash flows, specifically identifying the two largest investing activities and the two largest financing activities. Evaluate the cash flow from operating activities of the firm. Specifically analyse whether the company is performing better over the  years. Discuss whether the cash flow from operating activities appears to be satisfactory, given the current business environment and the firm’s stage in its life cycle.   [1+1+2=4 Marks]

Part B: Evaluation and Recommendation (35 marks)

Part B is focused on the valuation and investment recommendation for a publicly listed company. This part requires students to employ various valuation methods to estimate the company's value.

Question 6

Assume that, as a credit analyst, you are evaluating your allocated company. Using the MOST appropriate ratios from the 2023 annual report, evaluate whether to provide long-term debt to this company. [Use at least 4 ratios]   [6 marks]

Question 7

Assume you are considering buying stock in this company. Use the MOST appropriate ratios from the annual report to evaluate whether this company is a suitable candidate for investment purposes. [Select and analyse a maximum of three ratios from each category you deem most relevant for the analysis.]   [6 marks]

Question 8

Perform a valuation of your allocated company using the Method of Comparables. Include at least two comparable firms, providing justification for your choices, and use at least three financial multiples in your analysis. Based on your findings, make an investment recommendation.    [10 marks]

Question 9

Perform a valuation of the company you have been allocated using the Free Cash Flow  (FCF) model. Use the provided template to assist in completing this process. Detail and justify the assumptions used for selecting inputs in your model, particularly focusing on the cost of equity. For simplicity, assume a growth rate of 12% for Stage 1 and define a  growth rate for Stage 2, justifying your chosen rate. Based on your valuation, make an investment recommendation. Indicate whether to buy, hold, or sell the company's stock, supporting your decision with the analysis conducted. [10 marks]

Question 10

Compare and contrast the valuations and investment recommendations for your assigned company using the Method of Comparables and the Free Cash Flow model. Conclude by choosing your preferred valuation method and justify your selection.   [3 marks]