Assessment Description

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Question 1      Market performance ratios (15 marks | Word limit: 300 words)

LO2: Explain how corporations are financed, the needs of their stakeholders and the calculation of dividend returns to various types of shareholders.

LO3: Calculate a company’s working capital, profitability and market performance ratios using its annual report.

(a)         Calculate both JB Hi-Fi and your chosen company’s 2016 market performance ratios (calculated to one decimal place):

1. P/E ratio (calculated to one decimal place) (5 marks)
2. after-tax dividend yields (as a percentage) for a superannuation fund where income is taxed at 15%.
   (Note: Students are to use 30 June 2016 closing prices in their calculations).

Show all workings. (5 marks)

(b)        Compare the P/E ratio and after-tax dividend yield, from the perspective of a shareholder, for the two companies. (5 marks)

              Note: All steps in after-tax dividend per share calculations (prior to calculating after-tax dividend yield) must be in cents to one (1) decimal place.

Criteria-based marking guide for Question 1(a)–(b)

Excellent (Mark range: 12–15 marks)	Satisfactory (Mark range: 8–11 marks)	Unsatisfactory (Mark range: 0–7 marks)
•   accurately calculates all aspects of the after-tax dividend yield and P/E ratio •   provides a clear conclusion and comparison of the impact on shareholders.	•   accurately calculates most aspects of the after-tax dividend yield and P/E ratio •   provides some assessment and comparison of the impact on shareholders.	•   makes little or no attempt to calculate the after-tax dividend yield and P/E ratio or inaccurately calculates, interprets or makes no attempt to interpret the results.

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End of answers to Question 1(a)–(b)

Question 2      Performance assessment (15 marks | Word limit: 600 words)

LO4: Assess the company’s performance using the results of the financial ratios calculated to make an investment recommendation.

Using your calculations and feedback from Assignment 2 as well as the market performance ratios calculated above, provide an evaluation of your chosen company’s overall financial performance.

Criteria-based marking guide for Question 2

Excellent (Mark range: 12–15 marks)	Satisfactory (Mark range: 8–11 marks)	Unsatisfactory (Mark range: 0–7 marks)
•   presents a detailed overview and evaluation of the company’s recent performance, demonstrates an expansive discussion of what specific conclusions have been drawn from analysing the statements •   expands upon all ratios calculated in Assignment 2 and links the explanation to discussion of company performance	•   provides some evaluation of the company’s recent performance and quality of earnings and provides an overall conclusion. However, the answer does not mention all key points •   expands upon most of the ratios calculated in Assignment 2 and links the explanation to discussion of company performance to some extent	•   makes no attempt to evaluate trends in the company’s recent performance and quality of earnings and/or provides irrelevant evaluation of the trends and overall conclusion •   makes little or no attempt to expand upon ratios calculated in Assignment 2, provides no link to discussion of company performance

Insert your answers to Question 2 below this line

End of answers to Question 2

Question 3      Company strategy (15 marks | Word limit: 500 words)

LO1: Explain the financial reporting framework, key accounting concepts and the components of financial statements.

LO4: Assess the company’s performance using the results of the financial ratios calculated to make an investment recommendation.

Referring to your research from Assignment 1 and calculations from Assignment 2, identify and evaluate any growth prospects of your chosen company given its recent performance and current issues.

Criteria-based marking guide for Question 3

Excellent (Mark range: 12–15 marks)	Satisfactory (Mark range: 8–11 marks)	Unsatisfactory (Mark range: 0–7 marks)
•   provides detailed links back to research from Assignment 1 and uses evaluation of ratios in previous question to conclude a view of growth for the company •   appropriately discusses future growth prospects given the analysis of the statements •   analysis and suggestion is accurate and informative with detailed explanations to support the view	•   links back to research from Assignment 1 to some extent and uses evaluation of ratios in previous question to conclude a view of growth for the company •   mentions future growth prospects and supports explanation with a few examples of analysis from the statements •   analysis and suggestion is mostly accurate and explanation is provided to support the view	•   makes little or no attempt to link back to research from Assignment 1 and does not use evaluation of ratios in previous question to conclude a view of growth for the company •   makes no attempt to discuss future growth prospects, or inaccurately relates future growth prospects to parts of the statements •   analysis and/or suggestion is inaccurate and no explanation is provided to support the view

Insert your answers to Question 3 below this line

End of answers to Question 3

Question 4      Valuation methodologies (20 marks | Word limit: 600 words)

LO5: Explain key valuation concepts and the valuation process

Discuss the valuation methodologies that can be used to determine your investment recommendation for your chosen company. In your answer, you are expected to include a discussion of the discounted cash flow model (DCF) as well as the capitalisation of earnings methodology as discussed in Topic 9.

Criteria-based marking guide for Question 4

Excellent (Mark range: 16–20 marks)	Satisfactory (Mark range: 10–15 marks)	Unsatisfactory (Mark range: 0–9 marks)
•   accurately compares and discusses the types of basic valuation methodologies •   describes in detail all aspects of the valuation process •   identifies charac teristics of the DCF model as well as the capitalisation of earnings methodology	•   compares and discusses some types of basic valuation methodologies •   describes most aspects of the valuation process •   identifies most characteristics of the DCF model as well as the capitalisation of earnings methodology to some extent	•   makes little or no attempt to compare and discuss the types of basic valuation methodologies •   makes no attempt to describe the valuation process •   makes little or no attempt to identify characteristics of the DCF model as well as the capitalisation of earnings methodology

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End of answers to Question 4

Question 5      Investment recommendation (35 marks | Word limit: 1000 words)

LO4: Assess the company’s performance using the results of the financial ratios calculated to make an investment recommendation.

LO5: Explain key valuation concepts and the valuation process

Using your discussion above to support your view, determine whether you would place a buy, hold or sell recommendation on your chosen company (assume current market price is the 30 June 2016 closing price).

In your response, and justifying your investment recommendation, you should:

• include your evaluation of the ratios calculated in both assignments
• discuss key qualitative factors (such as strategy and management) supporting your view
• discuss the key areas of potential downside (or risk factors)
• determine a fair share price value (or range) with reference to your expectations for future earnings and appropriate P/E level.

Criteria-based marking guide for Question 5

Excellent (Mark range: 27–35 marks)	Satisfactory (Mark range: 18–26 marks)	Unsatisfactory (Mark range: 0–17 marks)
•   provides sound analysis and conclusions drawn from: –  quantitative analysis (ratios calculated throughout the assignment) –  valuation metrics –  qualitative factors –  downside risks •   analysis and conclusions do not contain inaccuracies and/or irrelevant points •   includes the evaluation of the ratios covering all (or nearly all) key points •   fair price calculated correctly using reasonable estimates of earnings and P/E ratio •   recommendation is provided and is clearly supported and consistent with the analysis and conclusions	•   provides some analysis and conclusions drawn from: –  quantitative analysis (ratios calculated throughout the assignment) –  valuation metrics –  qualitative factors –  downside risks •   analysis/conclusions contain some inaccuracies and/or irrelevant points •   includes the evaluation of the ratios. However, the answer does not mention all key points or the evaluation contains some inaccurate and/or irrelevant analysis •   fair price calculated with some error or without reasonable estimates •   recommendation is provided and is largely supported and/or consistent with the analysis and conclusions	•   makes little or no attempt to provide analysis and conclusions drawn from: –  quantitative analysis (ratios calculated throughout the assignment) –  valuation metrics –  qualitative factors –  downside risks •   analysis/conclusion contains some incorrect points or incomplete •   makes no attempt to include the evaluation the ratios or provides inaccurate and/or irrelevant evaluation of the trends in the ratios •   fair price not calculated correctly •   recommendation is unclear or not provided

Insert your answers to Question 5 below this line