PACC6000 Financial Statement Analysis

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PACC6000

Trimester 2, 2024

INDIVIDUAL WRITTEN REPORT (worth 20%)

Due 5:00 pm on Tuesday 16 July 2024 (Week 10)

PURPOSE

Financial Statement Analysis:

1. To calculate and analyse financial ratios using actual reported data.

2. Evaluate data and information from a variety of sources and perspectives through research, integration, and analysis.

REQUIRED

Given the financial statements and the additional information, analyse and discuss the financial performance and position of Premier Investments Limited (ASX:PMV). Your analysis should be supported by profitability, liquidity, gearing and other appropriate ratios from Chapter 18 of the prescribed textbook.

INSTRUCTIONS

Obtain financial statements

Obtain the company’s past 3 years’ annual reports from either the Premier Investments Limited webpage or the relevant ASX webpage. You are required to use Excel to gather and analyse the financial statements. You can download the company's financials, including Income Statements and Balance Sheets in Excel from the IBISWorld databases available at the Library (see instruction video on Canvas). The financial statement figures are needed to calculate the ratios (where there are consolidated accounts, use the consolidated amounts). In addition, you are strongly advised to:

} perform horizontal and vertical analyses of the Statements of Financial Position (Balance Sheets) and Statements of Profit or Loss (Income Statements)

} refer to the notes to the financial statements and the Director’s Report for further details and clarifications of changes in the financial statements. (You may find the Full Year Results CEO & CFO Presentation useful for this assignment).

} read all parts of the Annual Reports

Calculate and analyse financial ratios (ratio analysis)

You should calculate* and analyse the following ratios, in clearly identified separate sections:

Profitability

Gross profit margin

Profit margin

Return on assets

Asset turnover

Rate of return on ordinary shareholders’ equity

Earnings per share (given in the Annual Report)

Liquidity

Current ratio and quick ratio

Inventory turnover and average days in inventory

Receivable turnover and average collection period

Solvency

Debt ratio (Debt to total assets ratio)

Debt to equity ratio

Times interest earned

Show the formula and detailed calculations in an Excel file and present tables, charts, and/or diagrams in Appendices of the written report in Word.

Report on your analyses

} Your analysis should include Year-to-year (example 2023 and 2022; 2022 and 2021) comparisons. Use the Director’s Report and the Notes to the Accounts to further justify your answer.

} Wherever possible, tabulate your comparative data and show them in an appendix and cross-reference them in your written report.

} The components of each ratio should be investigated to determine the significant or determining factors in changes to the ratio.

} These significant factors should then be investigated to determine (to the extent possible) the cause and sustainability of their change (refer to the example below).

Example of current ratio analysis: Company X current ratio increased from 1.2 to 4.3. The company increased its ability to pay its debts in the short-term. The main reasons for the increase were a 22% increase in cash and a 14% decrease in trade payables. The increase in cash and the decrease in trade payables were both a result of reductions in purchases of inventory. This is unlikely to continue as the company was depleting a previous overstock.

Each ratio analysis will be marked on the correctness of the comparisons and the identification of the determining factors. The depth and correctness of analyses of the factors will be the primary criteria for grade differentials in this assignment. The determining factors need not be confined to the annual reports, but they must be relevant to your analyses.

A marking rubric is also attached at the end of this document. The marking rubric details what is required in the report in each section. Note that this assessment will be discussed further in class.

Administrative Details

} You are required to submit two documents. One is an Excel file that contains detailed calculations. The other one is the written report in a Word file presenting the findings of your analyses.

} The written report must be typewritten and double-spaced. A copy should always be kept by the student.

} The assignment (both the written report and the Excel file) should be lodged through the Turnitin Assignment submission link on Canvas by 5:00 pm on Tuesday 16 July 2024.

} LATE SUBMISSION PENALTY APPLIES. The policies on late submission of assignments and plagiarism are provided in the Course Outline. Extensions with valid reasons will only be considered if the application is made 48 hours prior to submission.

} Length: This report should not exceed 2,000 words (excluding Executive Summary and appendices). The word count does not include words in the Excel file.

Checklist before submission