You must complete the assessment task requirements on the companies in the order they are allocated to you. These are the company that you have to choose one as your competitor and one as your company.
APE AP Eagers Limited
AHG Automotive Holdings Group Limited
- You are required to calculate key financial ratios for an ASX listed company and its competitor and interpret this information in the context of your allocated competitor company over time.
- Your boss has asked you to calculate and assess the company’s key (your boss’s opinion) ratios relative to that of its competitor and provide recommendations for improvement if required.
- The key ratios you need to calculate for your company and your competitor are net profit margin, asset turnover, current ratio, quick ratio and debt ratio. Your boss also wants you to calculate the cash cycles. All workings for ratios and the cash cycles are required.
- You focus your analysis and commentary on the companies’ 2017, 2018 and 2019 ratios mentioned above firstly in terms of their trend changes and also in comparison to your competitors ratios and benchmarks wherever possible. Recommendations for improvements if considered necessary should also be made.
- In making your assessment also consider potential differences between your company and its competitor that could explain divergent results. Where relevant, these should be noted. (For example, although the companies may compete in some of the same markets, they may also have different areas of business).
- explain a) the issues involved and relevance of using ratios, b) benchmarking and c) the relevance of your particular identified ratios as part of your discussion.
- To undertake this task you will need to get some background information on the companies and collect some data to create ratios.
- This report should be up to 1,000 words
- Note also as follows –
- 1. The report should be presented as follows. At the very beginning of your report should be a Table with headings as depicted below. You should place (complete) each of your ratio outcomes in the table below using the relevant headings in Table form so the reader/marker can initially see the actual ratio numbers you have arrived at. See also the marking guide where we demonstrate a similarly headed table.
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- At the end in the appendix (not counted in word count) there should be another table which demonstrates formulas, completed workings (calculations) and ratio outcome for each ratio for both companies.
- Your Appendix table could use the same headings this time with the ratio name including the formula and the years 2017, 2018, 2019 having the calculated formula numbers used and the final ratio.
- Returning to the body of the report you should after the initial table have headings (with subsequent discussion) as follows –
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- • Introduction
- • Financial Analysis of Ratios – Begin with sub – heading for each ratio. Here is where you demonstrate an understanding of ratios by describing the meaningfulness of these ratio calculations firstly theoretically (text book chapter 8 helps here) and then actually. Next relate the ratio findings to their company and in contrast to their competitor company. Discuss trends. Then wherever possible discuss industry or accepted ratio standards which might assist your companies contrast as well. This demonstrates an ability to assess and apply knowledge to calculated outcomes.
- • Recommendations - outline possible company improvements highlighted by each ratio outcomes and cash cycle calculations and comment on any weaknesses in using ratios. If you find that some of your calculated ratios are within appropriate benchmarks you can say that.
- • Conclusion.
- It is essential that you set your report up as prescribed by note 1 above.
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- 2. The Cash Cycle can be a little confusing and some text books use different methodologies for calculating the three elements of the Cash Cycle. For your convenience the formulas are a) Inventory being Current Inventory / Operating Revenue * 365 = ???? b) Accounts Receivables being Debtors / Operating Revenue * 365 = ???? c) Accounts Payables being Creditors / Operating Revenue * 365 = ??? Note that you still need to work out the cash cycle from these calculations.
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- 3. For the net profit margin ratio use Net profit after tax before abnormals as the numerator.
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- 4. This is a Turnitin assessment so while we acknowledge that some Turnitin score will relate to the cover page and calculations which may be common to some other students you need to take due care with the actual original (yours) commentary of the report. This includes putting into your own words some theoretical discussion of the ratios which you may originally derive from the text book. If concerned then by all means use Harvard referencing.
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- 5. Use the Discussion Board forum to raise any issues you may have with this assessment. This method ensures that students and tutors can get an idea of any questions that students may have. Try not to publish answers to your assessment if at all possible.
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- 6. Note that your assessment will not be marked if you do not do your allocated companies and in the order they are given to you.
Your Company Ratio
Write your company name here Competitor Company Ratio
Write Competitor company name here
Ratio Name 2017 2018 2019 2017 2018 2019
(Net) Profit margin
Asset turnover
Current ratio
Quick ratio
Debt (to assets) ratio
Days Inventory
Days Debtors
Days Creditors
Cash Cycle Result