BUSN9226 FINANCIAL STATEMENT ANALYSIS

Aim

This assignment requires you to analyse the recent financial reports of these two major networks and provide a report to advise potential investors as to which company would be the best investment.

Please note: The Ten Network has a financial year that ends on 31 August and the Nine Network has a financial year that ends on 30 June. PLEASE IGNORE THE DATES FOR THE PURPOSES OF THIS ASSIGNMENT. When completing the assignment please just use and compare the relevant years for both companies – ie 2016, 2015 and 2014.

Learning Outcomes
The course Learning Outcomes assessed by this assessment task are:
LO2. Analyse and interpret information about financial position and performance;

LO3. Apply management accounting and financial management principles to basic business transactions and business decision making.

LO5. Use financial accounting data to analyse a simple investment decision

Resources
You can find the financial reports of the two Networks at the URL’s shown below.

Ten Network Holdings

YE 31 August 2016

https://images.tenplay.com.au/~/media/Corporate%20Site%20Media/Files/Annual%20Reports/ 2016%20Annual%20Report.pdf

YE 31 August 2015

https://images.tenplay.com.au/~/media/Corporate%20Site%20Media/Files/Results/20 15/TNHL%20Appendix%204E%20and%20Annual%20Report.pdf

YE 31st August 2014

https://images.tenplay.com.au/~/media/Corporate%20Site%20Media/Files/Results/20 14/TNHL%202014%20Annual%20Report.pdf

Nine Entertainment Co

YE 30 June 2014

http://www.nineentertainment.com.au/media/3771/NEC-Annual-Report-2014-web-.pdf

YE 30 June 2016

http://prod.static9.net.au/_/media/Network/NineEntertainmentCo/PDF-Downloads/NEC- Annual-Report-2016.pdf

REQUIRED:

PART 1: HISTORICAL FINANCIAL ANALYSIS AND INTERPRETATION

You are required to provide information for potential investors of the Ten Network (Ten Network Holdings) and the Nine Entertainment Co, who are considering which of these companies would be the better investment.

Prepare an evaluation report comparing the two companies using the following analytical tools. Set out below are the tasks you are required to carry out and include in your report.

TASK NUMBER 1 – PREPARE THE ANALYTICAL DATA

1. VERTICAL ANALYSIS 6 Marks

For both companies, prepare a Vertical Analysis of the following reports covering the years 2014, 2015 and 2016 (Refer to the Birt Text page 341 for guidance on how to prepare a Vertical Analysis).

(a) Balance Sheet
(b) Income Statement

2. TREND ANALYSIS 6 marks

For both companies, prepare a Trend Analysis of the following reports covering the years 2014, 2015 and 2016 (Refer to the Birt Text page 340 for guidance on how to prepare a Trend Analysis).

(a) Statement of Cash Flows (b) Income Statement

3. RATIO ANALYSIS*

Identify ONE key financial ratio in each of the areas of
(a) Profitability,
(b) Liquidity, and
(c) Capital Structure (ie 3 ratios in total) to be calculated and analysed for both companies, and show:

• The name of the ratio (eg Current ratio)
• The mathematical formula for the ratio (eg Current Assets/Current Liabilities)
• A definition of the ratio (ie. “This ratio may be defined as .../ represents............)

3 Marks

Now calculate the ratios you selected above for each company for the years 2014, 2015 and 2016 (remember – use the same three key ratios in each area for both companies).

Show details of your calculations.
*Hint – refer to ratios in the textbook; undertake an Internet search; refer to the

Appendix attached to this assignment:
TASK NUMBER 2 – ANALYSE AND INTERPRET THE DATA

1. VERTICAL ANALYSIS 10 Marks

From the Vertical Analysis above; identify and comment on any significant trends you can identify between 2014 and 2016 for EACH COMPANY SEPARATELY.

For example – in your opinion, has any item in the Balance Sheet or Income Statement changed significantly over the period or is maybe inconsistent with other trends?

6 Marks

If so:
o Describe the change;

o Explain why you think this has happened, and/or describe what you think is happening to the company?
o Do you think this trend is good or bad? Say why.

2. TREND ANALYSIS 10 Marks

From the Trend Analysis above; identify and comment on any significant trends you can identify between 2014 and 2016 for EACH COMPANY SEPARATELY. (For example – has any item in the Income Statement of a company shown an upward or downward trend? Why have balances or certain types of inflows or outflows in the Cash Flow Statement been increasing or decreasing?) . For the changes you identify:

o Describe the change;
o Explain why you think this has happened, and/or describe what you think is happening to the company?
o Do you think this trend is good or bad? Say why.

Don’t forget: You can use Internet research or IBISWorld etc for both your vertical and trend analyses to try to explain what happened to the Companies and help to explain trends and movements. You can also examine the Non-financial and other information in the annual reports to see if you can identify and explain some of the trends. Good research will be rewarded in the marking.

3. RATIO ANALYSIS 9 Marks

Based on your calculations of the ratios above for both companies comment on the trends between 2014 and 2016 for EACH ratio for

• NETWORK TEN, and then
• NINE ENTERTAINMENT CO.

(i.e is the ratio better or worse in 2016 than it was in 2015 and/or 2014 for each company separately?; briefly explain what you think this means based on the definition of the ratio you included above)

4. YOUR INVESTMENT RECOMMENDATION: COMPARE THE TWO COMPANIES

Using the Vertical, Trend and Ratio Analyses above, prepare a strong argument for a potential investor recommending that they invest in EITHER Network Ten OR Nine Entertainment Co. Ensure you clearly support your recommendation with facts from your analyses above.

10 Marks

TASK NUMBER 3 – USE RESEARCH TO DEVELOP RECOMMENDATIONS (Maximum Words for this part – 500 words)

Examine the financial reports and any other financial information relevant to Network 10 and Nine Entertainment Co. for the time period since their 2016 annual reports were prepared (ie between 2015 and October 2016). You will need to use your research skills to find information that represents the financial performance of both companies since 2016 (eg Share price movements; business press reports, information available from share analysts; performance graphs etc), and answer the following question:

Using research, develop an argument and form a conclusion as to which company you believe has performed better since 2014, stating clearly why you have formed that conclusion.**

**PLEASE NOTE: You must use Internet research to support and supplement your conclusions. In-text referencing is critical to the assignment. Good use of Internet research is encouraged and will be rewarded. At least three references are expected.

30 Marks

TASK NUMBER 4 – ENSURE THE QUALITY OF THE PRESENTATION OF YOUR REPORT

Marks will be awarded for presentation and structure; in-text-referencing (Harvard referencing system MUST be used – particularly in Part 2); spelling; grammar; and a

reference list.

THE FORMAT OF YOUR REPORT
1. Task number 1 – prepare the analytical data
2. Task number 2 – analyse and interpret the data
3. Task number 3 – use research to develop recommendations 4. Format of Report and Reference List

Some references that might help” Nine Entertainment Co Corporate website http://www.nineentertainment.com.au/

10 Marks

You can also call up financial analysis of network 10 or nine on google and see what you can find.

ASSESSMENT CRITERIA

Assessment Criteria

Description of

Standard (Generally there is no penalty for carried forward errors)

Weighting

Comments by Marker

TASK NUMBER 1 ANALYTICAL DATA

   
Vertical Analysis 2012-2014 Network10
Nine Entertainment

Data tabulated correctly

3 Marks each for B/Sheet and 3 Marks for Income Statement

 
Trend Analysis 2012-2014 Network10
Nine Entertainment

Data tabulated correctly

3 Marks each for C/Flow Statement and 3 Marks for Income Statement

 
Ratios x 3 Name/formula/statement about ratio

Simple descriptions – 3 ratios 1 mark for each

3 Marks

 
Ratio calculations

Calculations – 1 Mark for each calculation x 2 companies

6 Marks

 
 
TOTAL TASK 1

21 Marks

 
TASK NUMBER 2 – ANALYSE AND INTERPRET

THE DATA

   
Vertical Analysis – Significant trends between 2012 and 2014

Brief description of changes and effects – 5 Marks for each company

10 Marks

 
Trend Analysis – Significant trends between 2012 and 2014

Brief description of changes and effects – 5 Marks for each company

10 Marks

 
Ratio Analysis - Explain trends between 2012 and 2014

1.5 Marks for each comment x 6 (3 for each company)

9 marks

 
Your Investment Recommendation

Argument consistent with analysis and conclusion. Clearly supported conclusion.

10 Marks

 
 
TOTAL TASK 2

39 Marks

 
Task 3

 
TASK NUMBER 3 – USE RESEARCH TO

DEVELOP RECOMMENDATIONS

   
Research undertaken to support conclusion as to which company has performed better since 2014.

Clear argument, evidence of research, conclusion logical and supported. At least three Internet references showing quality research of the two companies.

30 Marks

 
 
TOTAL TASK 3

30 Marks

 
    
TASK NUMBER 4 – ENSURE THE QUALITY OF THE PRESENTATION OF YOUR REPORT

   
Presentation in general, +In-text referencing + Spelling and grammar

Good structure/

8 Marks

 
Reference list present and properly prepared

Harvard referencing

2 Marks

 
 
TOTAL TASK 4

10 Marks

 
    
Assignment Total

 
100 Marks

 
 


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