[SOLUTION] Finance Report
Assessment brief 010: case study After several rounds of interview, you are successfully appointed as the CFO of the Company. The Company has enjoyed considerable success in recent years and the board of directors have decided to adopt a growth strategy by making further investment in their current production line and acquiring an existing company in their industry. As the newly appointed CFO of the Company, you are tasked to evaluate the performance of the Company and prepare a report to the board of directors with evaluation of the potential investment opportunities. The first investment under consideration is to make further investment in their current product, which needs initial investment between £40,000,000 and £50,000,000 and has a life of 10 years. The finance department appraised some other similar investments before using different investment appraisal techniques. At the same time, the Company plans to acquire another company in the same industry in the near future. However, the board of directors require more information for the potential target. You are tasked with the responsibility of identifying a potential target company and preparing a report to the board of directors justifying the choice of a target company and potential implications from mergers and acquisitions. Required: Suppose you are successfully appointed as the CFO for ONE of the listed companies below. ? The Berkeley Group Holdings plc ? InterContinental Hotels Group ? Marks & Spencer Group plc ? GlaxoSmithKline ? Burberry Group PLC ? Aviva As the newly appointed CFO of your chosen company, you are required to write a report to the senior management team – fully referenced, and address the following: 1. Evaluate financial performance: Choose FOUR categories from the list of five categories of financial ratios below and use ONE financial ratio from each category to assess the financial health of your chosen company using past 5-year financial information: a. Profitability b. Efficiency c. Liquidity d. Financial gearing e. Investment Note: Analyse your chosen financial ratios using information from financial statements. Considering word limit, please choose ONE financial ratio from FOUR different categories listed above; therefore, you should focus on four ratios in total in this part of analysis. Critical analysis of the four ratios under four categories is required for a good work. Please critically evaluate past five-year firm performance, i.e., 2015-2019, using your chosen ratios and discuss the problems and limitations of financial ratios as a tool of financial analysis before make recommendation to the board of directors. Create your own small tables, diagrams and charts in your analysis and present professionally. Financial ratios can be collected using Osiris and Fame through ARU library (https://anglia.libguides.com/az.php?a=o), annual reports or other professional resources. Compare with competitors and industry will be helpful. Suggested word: 750-850 words. 2. Investment appraisal: You plan to use NPV and IRR techniques to evaluate the project. Critically discuss NPV and IRR techniques and the implications of the investment on the Company. Risk and uncertainty in investment appraisal should be considered before you make recommendation. The discount rate is 12% for the Company (Ignore inflation and taxation). Note: Please present NPV and IRR results using small tables. You need to make decision on which investment appraisal format that you will choose. The project will be based on your chosen company, therefore, you have the flexibility to decide the project using your ESTIMATE. The investment should be around £40m to £50m, but how the money is invested would depend on the nature of the investment. Sensitivity analysis will be helpful to analyse different scenarios for the appraisal. Suggested word: 600-750 words. 3. Potential acquisition: After you identify a potential target company, you will address the following in your report to the senior management team: a. Rationale for choosing the target company b. The synergistic gain of the acquisition for the Company c. Proposed deal value and finance of the acquisition d. The potential implications of such acquisition on firm performance e. Challenges and risk assessment of the acquisition Note: Based on analyses of your chosen company, please identify a target company in the real business world. Good work will provide critical analysis of the deal, rather than provide some general discussion without in-depth analysis. Good work will also link potential implications from the deal with your chosen financial ratios discussed in the financial performance section. Suggested word: 800- 900 words. 4. Appendix: Supporting information to help the senior management team make their final decision. Present your own tables and do NOT copy and paste annual report in your appendix.
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