Finance and Management

FNCE5006 Financial Statement Analysis

26 April 2023 13:20 PM | UPDATED 12 months ago

FNCE5006 Financial Statement Analysis :

FNCE5006 Financial Statement Analysis
FNCE5006 Financial Statement Analysis

Financial Statement Analysis (FNCE5006) – Assessment 1: Exercise (20%)

The purpose of this first assessment is to check on understanding of the basic concepts of financial statements we have covered in the first 3 weeks. Please submit this assessment as individual assessment.

This exercise represents 20% of the overall mark for this unit. Students should attempt all the questions. You only have to submit the electronic copy via Turnitin by the due date (Week 4: 24th March at 17:00 AWST). In answering the questions, students must show the detailed calculations/justifications.

I would also remind you of your obligations under the University rules on academic integrity; if you are unsure of your responsibilities then please check the relevant section of the Curtin website: http://academicintegrity.curtin.edu.au/.

Question 1

Assume that you are analysing the financial statements of BHP for the year 2022. Where can you find the information to examine its performance? How would you comment on the performance of BHP for the year 2022? What more information do you need to draw a reasonable conclusion about the performance of the firm? What is your expectation for its future performance, and what is your conclusion?

[1+2+2+1=6 marks]

[Check Blackboard assessment folder for a copy of the annual report].

Question 2

Assume that you are analysing the financial statements of ZIP for the year 2022. What information can you obtain from MD&A? How can it help you to evaluate the performance of ZIP?

[1+1=2 marks]

[Check Blackboard assessment folder for a copy of the annual report].

Question 3

During August, a firm’s inventory account included the following transactions:

August 1Inventory25 units @ $4.50
August 2Sold20 units @ $8.10
August 9Purchased30 units @ $4.55
August 16Purchased25 units @ $4.75
August 17Sold45 units @ $8.50
August 18Purchased25 units @ $4.75
August 25Purchased25 units @ $4.80
August 27Sold25 units @ $8.60

Compute the gross profit for August under FIFO and LIFO respectively.

[2+2=4 marks]

Calculate the company’s basic and diluted EPS for the year ended 30 June 2022 using the information below.

[2+2=4 marks]

Table  Description automatically generated with medium confidence
  • No. of shares outstanding on 01 July 2021                                            1,518 million
  • No. of shares issued on 01 December 2021                                           458 million
  • No. of shares repurchased on 01 April 2022                                          (93) million
  • No. of shares outstanding on 30 June 2022                                             1,883 million
  • The company does not pay any dividends to the common shareholders in the year ended 30 June 2022;
  • The company has 1.2 million shares of preferred stock outstanding for the entire year which are each convertible into 40 shares of common stock. There is no preferred dividend paid during the year. The company does not have other potentially dilutive security.

ABC Company reported net income of 2,125,000 for the year ended 30th June 2022. The company had a weighted average of 1,050,000 shares of common stock outstanding. In addition, the company has only one potentially dilutive security: a total number of 2,500 convertible bonds having face value of $100 each and coupon rate of 4.5%. Each convertible bond can be converted into 15 common shares. Assume a tax rate of 30%, calculate ABC’s basic and diluted EPS.

[2+2=4 marks]

Rubrics for Assessment 1-Assignment

 Below expectations (0 – 49%)Meets expectations (50 – 69%)Exceeds expectations (70 – 100%)
Performance Analysis (30%)Did not correctly identify the correct statements;Failed to comment on the performance;Did not identify the information to draw conclusion about the performance of the firm;Did not illustrate the expectation for the future performance of the firm.Identified the correct statements, but didn’t link to the respective performance;Commented on the performance of the firm, but didn’t provide detailed analysis to support the comments;Identified the correct information, but did not justify;Showed the expectation with little analysis.Identified the correct statements, and analysed the respective performance;Commented on the performance of the firm, and provided detailed analysis to support the comments;Identified the correct information, and justified the information;Showed the expectation with detailed analysis.
MD&A (10%)Did not identify the correct information;Failed to illustrate the function of managers’ report.Identified the correct information, but didn’t provide detailed analysis;Illustrated the function of managers’ report, but didn’t link to the performance analysis.Identified the correct information, and provided detailed analysis;Illustrated     the                    function                    of managers’ report, and linked to the performance analysis.
Expense Recognition (20%)Made mistakes in the calculation of gross profit using FIFO and LIFO.Made some mistakes for the calculation of gross profit using FIFO and LIFO.No error or only minor mistake in the calculation of gross profit using FIFO and LIFO.
EPS-convertible preferred shares (20%)Made lots of mistakes calculating basic and diluted EPS, eg. no. shares outstanding, numerators           and denominators for the EPSs.Made some mistakes calculating basic and diluted EPS, eg. no. shares outstanding, numerators           and denominators for the EPSs.Did not make any or only a few mistakes calculating basic and diluted EPS.
EPS-convertible bonds (20%)Made lots of mistakes calculating basic and diluted EPS, eg. no. shares outstanding, numerators           and denominators for the EPSs.Made some mistakes calculating basic and diluted EPS, eg. no. shares outstanding, numerators           and denominators for the EPSs.Did not make any or only a few mistakes calculating basic and diluted EPS. ·

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