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ACCT7106 Financial Statement Analysis – Individual Project Semester 2, 2024
PROJECT OVERVIEW AND ADMINISTRATION
Objective
The project provides students with an important opportunity to ‘learn by doing’. You will be asked to apply most of the analysis from the first five seminars to an Australian public company.
Start working on the project early. Leaving it to the last minute will be stressful and may result in poor performance.
Company
You need to analyse the financial statements of Universal Store Holdings (ASX ticker: UNI). The financial statements and notes in Excel format and the annual reports for Universal Store Holdings for FY 20, FY 21, FY 22 and FY23 will be shared with you on Learn.UQ.
Deliverables
The project consists of both short answer questions and Excel spreadsheet work. Please submit answers to short answer questions in one Word or PDF document (PDF document is recommended) and answers to spreadsheet questions in one Excel workbook, as indicated in the questions.
Page Limits
I have specified page limits for the questions that are to be answered in the Word document. These are maximum page limits. I will enforce maximum page limits by simply not marking any material that appears beyond the page limit for a particular question. You do not necessarily need to write as much as the page limit if you can provide a correct, but succinct, answer.
Cover pages and references lists are not counted towards the page limit.
Formatting
Your written answers should be in A4 page size, in Times New Roman font, 12pt font size, at least single line-spacing, margins at least 2cm on all sides.
Please clearly separate and label your written answers to each question.
Your Excel file should be formatted neatly and following the conventions described in class.
Marking Guide
A marking guide is provided at the end of the document. This contains the number of marks assigned to each part of the project.
Frequently Asked Questions (FAQ)
I will issue, and may update, an FAQ addressing frequently asked questions about the project. Please ensure that you check the Assessment tab on Learn.UQ on a regular basis.
Submission of the Project
The project is to be completed individually.
The due date for the project is 13:00 (Monday) September 9, 2024.
Cover Page
Please include a cover page at the beginning of your Word or PDF document with your name and student number. This is not strictly necessary, as Learn.UQ manages assignment submissions and matches them to students, but it provides a useful backup for me to identify the author of each submission.
Please include your name and student number in the excel file as well in “Student Details” worksheet.
Project Submissions Instructions
For the project, please submit two files by the submission date/time:
- Your written answers must be submitted through the Turnitin link on Learn.UQ. Please use a format that Turnitin can accept, such as a Word document or PDF.- Your Excel file must be submitted through the Blackboard submission link on Learn.UQ.
Note that both your written report and Excel workings must be submitted to achieve any marks. This is because I need to see your workings for financial calculations.
Retention of Submission Receipts
Please keep all submission receipt numbers provided by submission systems such as Turnitin and Learn.UQ as proof of your submission.
Email Backstop
If you encounter any problems with the submission systems (Turnitin and Learn.UQ), please alert technical support and me of the problem. (You may email me a copy of your assignment if you have trouble submitting through the normal systems and if you are concerned about incurring a late penalty due to technical problems. 1 )
Late Submission of Assessment
Unless you have an approved extension, you will lose 10% of your assessed grade for the assignment for each 24-hour period (or part thereof) after the designated due date-time that yoursubmission remains outstanding. 2 Your submission time is based on the later of when your written component is submitted and when your Excel file is submitted, so please make sure to submit both on time. To be clear, you will incur a late submission penalty even if one component is submitted on time and the other component is submitted late. Please note that the 10% penalty rate for submission are set by UQ policy, not by me.
Multiple Submission ‘Attempts’
Some submission systems, e.g. Learn.UQ, allow students to submit multiple ‘attempts’ at an assessment before the due date. Only the most recently submitted attempt will be graded, unless otherwise agreed between the course coordinator and the student involved.
For the avoidance of doubt, in the event that a student submits the assignment on time and then submits a different version of their assignment late, I will mark the late submission applying the normal late penalty.
Applying for an Extension
I do not decide on extensions. These are decided by UQ professional staff. Please see the instructions in Section 5 of the ACCT7106 ECP.
Getting Started
To help you, I will provide my spreadsheet for JB Hi-Fi, which you can adapt to the allocated company.
DETAILED PROJECT INSTRUCTIONS AND MARKING GUIDE
Complete the following tasks in your Word document or Excel workbook as indicated in the question.
A. Reformulation and Accounting Analysis (Classes 2-4)
You will be given an Excel file with the raw financial statements and notes for the company, which you should use as inputs in the reformulation. This information was obtained from the 2021, 2022 and 2023 annual reports of the company. These annual reports have been shared with you on Learn.UQ under
Assessment tab. You should go through the annual reports carefully to better understand the company’s accounting.
Answer the following in your Excel workbook in the indicated worksheet/tab:
A1 Balance Sheet Reformulation (Excel worksheet: BS_R)
• Reformulate the Balance Sheet (including any relevant information in the notes), following the approach taught in class, for FY203 , FY21, FY22 and FY23.
• For ambiguous accounts, state any assumptions you made with justifications in the Excel file next to the relevant account (in red text). You should consult the annual reports to help you to interpret the accounts.
• Ensure you provide workings for how you separated operating and financing cash.
• Ensure you utilise any relevant information from the notes to the financial statements.
A2 Income Statement Reformulation (Excel worksheet: IS_R)
• Reformulate the Income Statement/Statement of Comprehensive Income (including any relevant information in the notes), following the approach taught in class, for FY21, FY22 and FY23.
• For ambiguous accounts, state assumptions you made with justifications in the Excel file next to the relevant account (in red text). You should consult the annual reports to help you to interpret the accounts.
• Ensure you utilise any relevant information from the notes to the financial statements.
A3 Equity Statement Reformulation (Excel worksheet: EQ_R)
• Reformulate the Equity Statement (including any relevant information in the notes), following the approach taught in class, for FY21, FY22 and FY23.
• For ambiguous accounts, state assumptions you made with justifications in the Excel file next to the relevant account (in red text). You should consult the annual reports to help you to interpret the accounts.
A4 Cash Flow Statement Reformulation (Excel worksheet: CF_R)
• Reformulate the Cash Flow Statement (including any relevant information in the notes), following the approach taught in class, for FY21, FY22 and FY23.
• For ambiguous accounts, state assumptions you made with justifications in the Excel file next to the relevant account (in red text). You should consult the annual reports to help you to interpret the accounts.
3 ‘FY’ is an abbreviation of ‘financial year’, e.g. ‘FY23’ indicates the company’s financial year ending in 2023.
A5 Check Financial Statement Relations (Excel worksheet: Relations)
• Calculate FCF = OI (after tax) – ∆ NOA for all four years using inputs from your reformulated Income Statement and Balance Sheet.
• Calculate FCF = NFE (after tax) – ∆ NFO + d for all four years using inputs from your reformulated Income Statement, Balance Sheet and Equity Statement.
• Calculate ∆ CSE for all four years using data from your reformulated Balance Sheet.
• Calculate ∆ CSE = CI – d using data from your reformulated Income Statement and Equity Statement.
• If your two FCF calculations produce different numbers, double-check that your reformulation is correct. If it is correct, explain why there is a difference between the two FCF numbers.
o Hint: this may be due to dirty surplus gains/losses recognised directly in equity.
• If your two ∆ CSE calculations produce different numbers, double-check that your reformulation is correct. If it is correct, explain why there is a difference between the two FCF numbers.
o Hint: this may be due to dirty surplus gains/losses recognised directly in equity.
Tips: Follow the approach in Classes 2-4 and my JB Hi-Fi example spreadsheet. Use the Penman (2013) textbook as an additional source, but note that we are not doing everything described in the textbook.
Please follow the Excel formatting convention described in class and in the document ‘ACCT7106
Excel Formatting Conventions’. There are marks allocated for correct Excel formatting.
B. Ratio Analysis (Class 5)
Answer the following in your Excel workbook. Please label the Excel worksheet as indicated in each
part of the question:
B1 Ratio calculations (Excel worksheet: Ratios)
• Calculate RNOA and ROCE for 2021, 2022 and 2023 following the approach taught in class.
Use averages in the denominators, e.g. average NOA and average CSE.
• First-level break-down: Calculate FLEV, NBC and SPREAD for 2021, 2022 and 2023. Show
that: ROCE = RNOA + FLEV x SPREAD.
• Second-level break-down: Calculate PM and ATO for 2021, 2022 and 2023. Show that: RNOA
= PM x ATO.
• Break-down PM into different components of OI (after tax): Calculate Core Sales PM as Core
OI from Sales (after tax)/Sales. Also, calculate the other components of PM as Core Other OI
(after tax)/Sales, Unusual OI (after tax)/Sales, and Operating OCI (after tax)/Sales.
Show that:
PM = Core Sales PM + Core Other OI (after-tax)/Sales
+ Unusual OI (after-tax)/Sales + Operating OCI (after-tax)/Sales
• Break-down RNOA into different components of OI (after tax): Calculate Core RNOA from
Sales as Core OI from Sales (after tax)/AvgNOA. Also, calculate the other components of
RNOA as Core Other OI (after tax)/AvgNOA, Unusual OI (after tax)/AvgNOA, and Operating
OCI (after tax)/AvgNOA.
Show that:
RNOA = Core RNOA from Sales + Core Other OI (after-tax)/AvgNOA
+ Unusual OI (after-tax)/AvgNOA + Operating OCI (after-tax)/AvgNOAACCT7106
Financial Statement Analysis – Individual Project Semester 2, 2024
6
• Third-level break-down: Break-down core sales PM and FLEV into their individual accounts.
• Change in ROCE: Decompose ∆ ROCE using the following relation:
∆ ROCE = ∆ RNOA + ∆ SPREAD x FLEV (beginning) + ∆ FLEV x SPREAD (ending)
Answer the following in your Word document.
B2 PM interpretation
• Explain the reasons for changes in PM over the period FY21-FY23. You will need to research
what happened to the company over this period to understand the major causes of changes in
PM. Refer to your calculations in B1 [the breakdown of PM and third-level break-down of core
sales PM] to support your answer, e.g. “gross margin up 27 basis points to 22.2%, driven by a
combination of lower discounting and continued buying improvements” (2021 Earnings
Conference Call Transcripts)”.
• Your explanations must be supported by evidence. Make sure to include in-text references or
footnotes to your sources of information. Make sure to provide answer in your own words.
B3 RNOA interpretation
• Explain the operational factors/reasons for changes in RNOA over the period FY21-FY23. You
will need to research what happened to the company over this period to understand the major
causes of changes in RNOA [e.g. “the company opened ten new stores, driving an increase in
sales (2023 Annual Report)”]. Refer to your calculations in B1 to support your answer, e.g. the
breakdown of RNOA & PM.
• Your explanations must be supported by evidence. Make sure to include in-text references or
footnotes to your sources of information. Make sure to provide answer in your own words.
B4 ROCE interpretation
• Consider the first-level break-down: ROCE = RNOA + FLEV x SPREAD. How does financial
leverage affect the company’s ROCE over the period FY21-FY23? Has FLEV increased or
decreased ROCE compared to RNOA? Why? If there have been significant changes in FLEV,
discuss why they occurred. How much of the change in ROCE during FY21-FY23 is due to
operative activities and how much is due to financing activities? Make sure to assess and discuss
the effects that changes in accounting standards may have had. Refer to your calculations in B1
to support your answer, e.g. the breakdown of FLEV and the decomposition of ∆ROCE.
• Your explanations must be supported by evidence. Make sure to include in-text references or
footnotes to your sources of information. Make sure to provide answer in your own words.
You may need to refer to the commentary at the beginning of the company’s annual report, company’s
investor presentation, earnings conference call transcripts or newspaper articles to discover the cause
of changes in the company’s performance and financial leverage.
Total Page limit (For B2, B3 and B4 combined): 3 pages (A4; Font: Times New Roman 12pt)
Tips: Consult Class 5 to help you. You do not have to do the third-level break-down of ATO as
discussed in Class 5 and Penman (2013) Chapter 12.ACCT7106
Financial Statement Analysis – Individual Project Semester 2, 2024
7
All Parts of the Assignment:
• Marks will be awarded for clear and correct English expression. Please ensure your Word
document is carefully proof-read.
• Marks will be awarded for ensuring your Excel file is correctly formatted and clearly presented.
Please follow the Excel conventions described at the end of Class 2 and applied throughout the
course.
• Marks will be awarded for correct and complete referencing of sources. See below for
referencing requirements.
• Note that the use of AI technologies to develop responses is strictly prohibited and may
constitute student misconduct under the Student Code of Conduct.
Referencing and Research Requirements
Some parts of this assignment require students to conduct relevant research about the company. For
written answers, evidence of appropriate research and understanding of the company is included in the
marks allocated to the question. Appropriate references help to provide evidence that you have
conducted research to support your answers. There are also a small number of marks allocated to proper
referencing formats/conventions.
Research
I expect you to conduct research into the company and its operating environment. To be clear, I do not want you to reference academic research (e.g. journal articles), unless they are highly relevant to the company or the point you are making. This is a practical course, not an academic research course. The emphasis of your research should be on practical materials, such as, annual reports, investor presentations, earnings conference call transcripts, company websites, industry reports, newspaper articles, analyst reports etc.
Source of information should be credible. For example, materials produced by a company, by a major financial institution, by a financial data platform (e.g. Morningstar or CapitalIQ), or by a mainstream newspaper are credible sources of information. Examples of low credibility sources include (but are not limited to): obscure websites not associated with a credible source, and articles from obscure news organisations. To be clear, references to low credibility sources will not be taken as evidence of research and will generally result in low grades. In addition, much of the information available from low credibility sources is also low-quality and so relying on this information will usually result in low grades.
Referencing
Proper referencing is crucial for two reasons:
• To comply with plagiarism rules.
• To provide evidence that you have conducted research in answering your questions.
You must follow one of the following two approaches to referencing for the project:
• Brief in-text references AND a reference list. The in-text reference should be brief but clear, while the reference list should provide sufficient detail for me to locate the source information.
Use one consolidated reference list for the whole project, rather than a reference list for each answer.
• Footnote references with similar detail to a reference list. You may use standard footnote referencing conventions like ‘ibid’ if you like.ACCT7106
Financial Statement Analysis – Individual Project Semester 2, 2024
8
In-text references and footnotes should be included in every sentence where you make a claim that requires supporting evidence. Do not simply put one reference at the end of an entire paragraph or page.
Please include the page number or numbers when referencing a lengthy document, such as an annual report or investor presentation document. If you are referring to a note to the financial statements, you can also mention the note number instead of a page number.
References are essential for direct quotes, for example:
JB Hi-Fi describesits one of the competitive advantages asfollows: “#1 playerin the Australian
market with the opportunity for further consolidation” (2020 Annual Report, p. 19).
References should also be used when you make a claim about a company that requires some evidence to support it, for example:
Most of JB Hi-Fi’s revenue is generated in Australia (2020 Annual Report, p. 70).
The following is an example of what to avoid:
In the future, more and more people will choose to travel by air, or prefer aircraft as the main long-distance transportation.
This is a claim without any evidence to support it. Who says that ‘more and more people will choose to travel by air’? A statement like this needs to be supported by a reference or by a surrounding sentence which provides evidence.
Certain claims are so self-evident or obvious that they don’t need a supporting reference. However, note that these should generally form only a small part of your answer. For example:
Qantas faces virtually no threat of substitutes on most of its international flights, as Australia’s
major population centres are geographically distance from most overseas destinations, so that
travelling by other means (e.g. by ship) would take a prohibitively long time.
It is obvious the Australia is geographically isolated from most overseas destinations, so no reference
would be needed for this claim. But be careful with relying on a statement being obvious. It is generally
better to provide a reference.
There is also no need to put a reference if you are citing the class PowerPoint or the textbook, unless
you are directly quoting.
The following is a guide to how you might reference some typical sources:ACCT7106
Financial Statement Analysis – Individual Project Semester 2, 2024
9
Source
Example In-Text Reference
(Brief)
Example Reference List
Entry (Detailed)
Company annual reports for
the company you are
analysing
(2020 Annual Report, p. X)
JB Hi-Fi 2020 Annual Report.
Company annual report for
another company
(2020 Harvey Norman Annual
Report, p. X)
Harvey Norman 2020 Annual
Report.
Company investor
presentations for the company
you are analysing
(FY20 Investor Presentation, p.
X)
JB Hi-Fi FY20 Investor
Presentation, 17 August 2020.
A company announcement,
other than the annual report or
investor presentation
(ASX announcement, 4 August
2020) 4
JB Hi-Fi ASX Announcement,
4 August 2020, “Temporary
closure of metropolitan
Melbourne stores”.
News reports
Newspaper + date,
e.g.
(Australian Financial
Review, 12 June 2020) 4
You may abbreviate Australian
Financial Review to AFR if
you like.
Australian Financial Review, 12
June 2020, “JB Hi-Fi set for
biggest profit growth in years”.
Website
(JB Hi-Fi investor website)5
JB Hi-Fi investor relations
website,
https://www.jbhifi.com.au/.
Notes:
• For sources not listed in the table, use your common sense, but make sure you provide enough information for me to clearly identify the source.
• If you provide footnotes instead of in-text references + a reference list, then please provide as much detail as the ‘Example Reference List Entry’ column of the table.
4 This is a short document, so no page number would be needed.
5 Page numbers generally do not make sense for websites and so are not needed.ACCT7106
Financial Statement Analysis – Individual Project Semester 2, 2024
10
Project Marking Guide
Question
Max
Marks
High Effort Answer
Characteristics
Low Effort Answer
Characteristics
A1. BS Reformulation
8
Cash & cash equivalents has been
correctly divided between
operating and financing cash. All
assets have been appropriately
divided into OAs and FAs. All
liabilities have been appropriately
dividend into OLs and FOs. CSE
has been adjusted if necessary.
Information from relevant
financial statement notes has been
appropriately utilised. Appropriate
justifications have been included
where assumptions have been
made.
Major errors or evidence of lack of
effort in the reformulation, such as
obvious misclassifications of
assets/liabilities, no or very poor
quality separation of cash & cash
equivalents into operating and
financing cash. Relevant notes
have not been utilised
appropriately. Justifications are
absent or inadequate where they
are needed.
A2. IS Reformulation
8
Revenues and expenses have been
appropriately divided into the
correct categories. Income tax
expense has been appropriately
allocated. Other comprehensive
income has been appropriately
divided between Operating OCI
and Financing OCI. Subtotals and
totals are correct. Information from
relevant financial statement notes
has been appropriately utilised.
Appropriate justifications have
been included where you have
made assumptions.
Major errors or evidence of lack of
effort in the reformulation, such as
obvious misclassifications of
revenues/expenses, incorrect tax
allocation, or obvious
misclassification of OCI. Relevant
notes have not been utilised
appropriately. Justifications are
absent or inadequate where they
are needed.
A3. EQ Reformulation
4
Beginning and closing balances are
correct and correspond to the
reformulated Balance Sheet. CI
and d are correctly calculated. If
necessary, proper adjustment has
been made for restatements of
equity, preference shares,
preference dividends, dividends
payable, etc.
Major errors in the reformulation.
No adjustments or incorrect
adjustments for restatements of
equity, preference shares,
preference dividends, dividends
payable, etc, where needed.
A4. CF Reformulation
8
Sources of Free Cash Flow (C-I) =
Uses of Free Cash Flow (F+d). C
has been correctly adjusted for net
interest paid/received (after tax). I
has been correctly adjusted for
transactions in FAs/FOs.
Transactions in FAs/FOs have
been correctly allocated to F.
Transactions with equity have been
correctly allocated to d. Investment
Sources and Uses of FCF do not
balance. Major errors or evidence
of lack of effort in the
reformulationACCT7106
Financial Statement Analysis – Individual Project Semester 2, 2024
11
in operating cash and investment
in financial cash have been
correctly incorporated.
Adjustments for non-cash items
have been made. Appropriate
justifications have been included
where you have made
assumptions.
A5.
Check
Financial
Statement Relations
4
Change in CSE from the
reformulated Balance Sheet is the
same as Change in CSE = CI – d
(from the reformulated Income and
Equity Statements), or a good
explanation for any difference is
provided. FCF = OI-Change in
NOA is the same as FCF = NFE
Change in NFO +d), or a good
explanation for any difference is
provided. All cell
references/formulae are correct
The relations do not equate and an
adequate explanation has not been
provided, and/or there are
many/serious errors in cell
references and/or formulae
B1. Ratio Calculations
8
All of the formulas are correct and
reference the correct cells
Most of the ratios have been
incorrectly calculated/not
calculated or reference incorrect
cells
B2. PM Interpretation
8
Sufficiently detailed and logically
coherent discussion with evidence
of significant, relevant research,
including appropriate references
Insufficiently detailed or logically
incoherent discussion, and/or little
or no evidence of research
B3. RNOA Interpretation
10
Sufficiently detailed and logically
coherent discussion with evidence
of significant, relevant research,
including appropriate references
Insufficiently detailed or logically
incoherent discussion, and/or little
or no evidence of research
B4. ROCE Interpretation
10
Sufficiently detailed and logically
coherent discussion with evidence
of significant, relevant research,
including appropriate references
Insufficiently detailed or logically
incoherent discussion, and/or little
or no evidence of research
Proper Excel spreadsheet
conventions
4
Virtually all cells in the Excel
workbook are correctly coloured,
i.e. between blue/red/blue/green.
The correct number formats have
been used in virtually all cells.
Tabs are correctly named. Excel
formatting is generally
professional and clear.
Most cells are incorrectly coloured
and do not have the correct number
formats; and/or tabs not clearly
named; and/or formatting is
sloppy.
Proper referencing
4
References are complete, clear and understandable
No proper referencing or incoherent referencing
English expression
4
The written answers have been proof-read and are largely free
The written answers have many deficiencies in expression, from obvious typos or sentences that are unclear/badly expressed grammar and/or spelling, and/or are difficult to understand
Total
80
Note:
• The table shows the characteristics of a high effort/high-grade answer and a low effort/low-grade answer for each question. Answers that fall in between these extremes will receive grades in between full marks and no marks for that question.
• English expression, grammar and spelling is worth only 4 marks, but poor English expression, grammar and spelling may also affect my ability to understand answers to other written answers.
• The 4 marks for ‘Proper referencing’ refer to the overall standard of referencing. Evidence of research is also part of the marking criteria for many questions, e.g. B2, B3 and B4.
PLAGIARISM WARNING
A NOTE ON PLAGIARISM
‘Plagiarism’ is a broad term referring to the practice of appropriating someone else’s ideas or work and presenting them as your own without acknowledgment. Plagiarism is literary or intellectual theft. It can take a number of forms, including:
• copying the work of another student or Team, whether that student or Team is in the same class, from an earlier year of the same course, or from another tertiary institution altogether;
• copying any section, no matter how brief, from a book, journal, article or other written source, without duly acknowledging it as a quotation;
• copying any map, diagram or table of figures without duly acknowledging the source; or
• paraphrasing or otherwise using the ideas of another author without duly acknowledging the source.
Whatever the form, plagiarism is unacceptable both academically and professionally. By plagiarising, you are both stealing the work of another person and cheating by representing it as your own. Any instances of plagiarism can therefore be expected to draw potentially severe penalties.
Cheating means to defraud or swindle. Students who seek to gain an advantage by unfair means such as copying another student’s work, or in any other way misleading a lecturer about their knowledge or ability or the amount of work they have done, are guilty of cheating. Students who condone plagiarism by allowing their work to be copied will also be subject to disciplinary action.