Financial Analysis

Paper details:

Preamble:
1. Obtain the most recent Financial Statements of an unquoted company and submit these as
an appendix to your assignment.
2. Identify a comparable makeshift listed company.
Requirement:
Applying any three methods of valuing unquoted companies, place a value on the unquoted
company, to the extent that the information in the accounts provided would permit.
30%
In what particular circumstances would you suggest that each one of the three methods you have
chosen would be most appropriate? Briefly explain the limitations of each method.
10%
Explain the Efficient Market hypothesis and discuss its relevance to the valuation of companies.
10%
Total (50%)
TASK 2
Preamble:
Research into a recent (since 2005) acquisition case involving any two companies:
Requirement:
0 Explain the possible motivations that may have engendered the move to acquire. 10%
0 Explain the type of acquisition, e.g. vertical integration, horizontal integration or a
diversification, etc.
15%
Explain the defence strategies used or that could have been used by the target company to
frustrate the move by the acquirer to acquire.
(maximum of five strategies) 15%
0 Describe the extent to which the acquirer’s motivations to acquire have so far been satisfied
or not, giving examples.
10%
Total (50%)

Financial Analysis

Project description
This is an assignment on interpretation of financial information.At the end of this assignment you should be able to:-
Analyse simple financial statements
Prepare a report presenting your analysis using tabular and graphical means where useful
Make recommendations to a client based on the available evidence

The Problem

The Smithsons have been looking for businesses that they might purchase, as a means to expansion.

One such business has become available that interests them. The ChateauRedoubtable Hotelis set in its own grounds, in attractive countryside near the historic town of Quimper. The building has been converted into an apartment hotel, with 20 largely identical units. The company that owns the chateau is asking3.0m for the sale of the business. The latest financial accounts for the establishment are available.

Task
Write a 1000 word report to the Smithsons, using your analysis of the figures to answer the following questions.
1)What do the figures say about the proposed purchase in terms of current profitability, liquidity and solvency of the business?
2)Evaluate the asking price for the business in the light of the figures provided
3)What else would it be useful to know in order to make a firmer judgement?
4)What are your recommendations to the Smithsons?

This individual piece of work accounts for 10% of your Phase 3 marks.

What are we looking for?

To pass this assessment you MUST:
Answer all four questions with mostly accurate interpretation of the data, and sensible suggestions for additional information
Justify clearly any decision you recommend as to the purchase or not of the business, based upon evidence
Prepare a properly structured,illustrated and readable report, with any sources correctly referenced

To achieve a higher grade in this assessment you SHOULD:
Provide plausible recommendations, fully grounded in the data available
Make appropriate use of any or all of: financial statements; tabulations; graphs; and charts to illustrate and support your analysis
Broaden your report to include reasoned and supported (by evidence) suggestions for strategic, tactical or operational changes that might be considered to improve the performance of the business if it is purchased; these could include, for example: dealing with the overdraft; pricing; marketing more generally.

To achieve a grade at the highest level you COULD:
Model and illustrate a range of possible outcomes for the coming year(s), if the business is purchased, depending upon prices set and other recommendations you might wish to make.

There are 20 identical apartments, currently all rented out at the same price for any given week in each season in other words, no discounts have been offered to any customers, and the price set in advertising and other publicity material is the price charged, regardless of such factors as, for example, how early or late the booking is made, or evident likely occupancy rates as each new week approaches;
The only directly variable costsare sales commission (currently set at 100 per week sold), and cleaning and servicing of the apartments which is contracted out to a local firm (it charges 50 for each service); most other costs are relatively fixed, regardless of occupancy, and accrue evenly throughout the year;
It is thought that the relationship between price set and sales of weekly rentals is linear (in other words for a given change in price, the change in weeks sold will be the same higher price, fewer weeks sold; lower price, more weeks sold);
Trade debtors are mostly rental income owing from customers;
Trade creditors are mostly funds owing to suppliers.

Financial Analysis

Project description
This is an assignment on interpretation of financial information.At the end of this assignment you should be able to:-
Analyse simple financial statements
Prepare a report presenting your analysis using tabular and graphical means where useful
Make recommendations to a client based on the available evidence

The Problem

The Smithsons have been looking for businesses that they might purchase, as a means to expansion.

One such business has become available that interests them. The ChateauRedoubtable Hotelis set in its own grounds, in attractive countryside near the historic town of Quimper. The building has been converted into an apartment hotel, with 20 largely identical units. The company that owns the chateau is asking3.0m for the sale of the business. The latest financial accounts for the establishment are available.

Task
Write a 1000 word report to the Smithsons, using your analysis of the figures to answer the following questions.
1)What do the figures say about the proposed purchase in terms of current profitability, liquidity and solvency of the business?
2)Evaluate the asking price for the business in the light of the figures provided
3)What else would it be useful to know in order to make a firmer judgement?
4)What are your recommendations to the Smithsons?

This individual piece of work accounts for 10% of your Phase 3 marks.

What are we looking for?

To pass this assessment you MUST:
Answer all four questions with mostly accurate interpretation of the data, and sensible suggestions for additional information
Justify clearly any decision you recommend as to the purchase or not of the business, based upon evidence
Prepare a properly structured,illustrated and readable report, with any sources correctly referenced

To achieve a higher grade in this assessment you SHOULD:
Provide plausible recommendations, fully grounded in the data available
Make appropriate use of any or all of: financial statements; tabulations; graphs; and charts to illustrate and support your analysis
Broaden your report to include reasoned and supported (by evidence) suggestions for strategic, tactical or operational changes that might be considered to improve the performance of the business if it is purchased; these could include, for example: dealing with the overdraft; pricing; marketing more generally.

To achieve a grade at the highest level you COULD:
Model and illustrate a range of possible outcomes for the coming year(s), if the business is purchased, depending upon prices set and other recommendations you might wish to make.

There are 20 identical apartments, currently all rented out at the same price for any given week in each season in other words, no discounts have been offered to any customers, and the price set in advertising and other publicity material is the price charged, regardless of such factors as, for example, how early or late the booking is made, or evident likely occupancy rates as each new week approaches;
The only directly variable costsare sales commission (currently set at 100 per week sold), and cleaning and servicing of the apartments which is contracted out to a local firm (it charges 50 for each service); most other costs are relatively fixed, regardless of occupancy, and accrue evenly throughout the year;
It is thought that the relationship between price set and sales of weekly rentals is linear (in other words for a given change in price, the change in weeks sold will be the same higher price, fewer weeks sold; lower price, more weeks sold);
Trade debtors are mostly rental income owing from customers;
Trade creditors are mostly funds owing to suppliers.