Assignment Instruction Using the information from the annual report** of your company (and from other sources (news/ media) as appropriate); provide a report, which include the following: ** The...

Assignment Instruction Using the information from the annual report** of your company (and from other sources (news/ media) as appropriate); provide a report, which include the following: ** The annual report consolidated figures only are to be used. Consolidated financial statements group together the parent company and its subsidiaries as one reporting entity. 1. The Business (10%) In this section, you will need to describe briefly about the business of your company and the general state of the company that you can infer from the Chairman Report in the annual report and other media about the company and/or industry. You will end this section by nominating whether the Chairman’s tone is optimistic or pessimistic about the future outlook of the company and your own opinion on that, based on the information you gathered such as from the media and other sources (before you do the analysis as instructed below). 2. Industry Sector and Financial Statements Characteristics a. Balance Sheet (20%) (1) Perform horizontal and vertical analysis on the balance sheet; select two accounts that are of interest to you (e.g. they have increased or fallen sharply compared to previous years, they are very significant compared with other balance sheet accounts). Explain why you have selected these accounts and discuss why they are significant; relate these with the current economic situation on the industry-sector (e.g. what may have caused them to increase or decrease compared to previous years). Hint: You are not to discuss every item in the Balance Sheet, but only the ones of interest. You need to understand the characteristics of your company’s industry sector. For example, if your company is a resource industry such as BHP Billiton, their asset accounts may be of particular interest; for an insurance company a key interest may be its liability account – the provision for insurance claim, etc.; If your company is in retail industry, then inventory is likely to be a significant item. Find out from the annual report (e.g. Chairman’s or CEO/CFO report) and the media if there were particular situations in recent years/ the years observed, affecting those items. For example, in the retail industry, recently there are talks in the media about the retail sector downturn in Australia/globally - how does this condition affect your company/ the retail industry financial position in general. b. Income Statement (20%) (1) Basically, do similarly as above for the Income Statement. Perform horizontal and vertical analysis on the income statement; select two accounts that are of interest to you (e.g. they have increased or fallen sharply compared to previous years, they are very significant compared with other income statement accounts). Explain why you have selected these accounts and discuss why they are significant; relate your discussion to the current economic situation of the industry-sector (e.g. what may have caused them to increase or decrease compared to previous years). Hint: Here you need to understand the characteristics of your company and its industry sector. You are not to discuss every item in the Income Statement, but only the ones of interest due to the type of industry sector. For example, if your company is a resource industry such as BHP Billiton, what are their main revenue and expenses accounts; how about if your company is a financial institution? Refer to the Chairman’s/CEO/CFO report and possibly other media for further information about recent issues. 3. Using income statement and balance sheet and the statement of cash flows for evaluation (35%) Use ratio analysis to show the company’s level of profitability, liquidity, financial flexibility and operating capability. Use the relevant ratios as you think are necessary to conduct your analysis and compare with benchmarks (compare between years and another company’s in the same industry sector) to be able to indicate the strengths and weaknesses of the company’s financial position. Choose financial ratios that fit to be used for your company’s industry sector. (Note that different industry sector may need different ratios; e.g. a service business may not use an inventory turnover ratio). The financial ratios may include and not limited to the following: Profitability Ratios:  Gross profit margin and Profit margin  Return on Owner’s equity Liquidity and Operating Capability Ratios:  Current Ratio and Quick Ratio  Inventory Turnover or Accounts Receivable Turnover Financial Flexibility Ratios:  Debt ratio Cash Flow Ratios:  Operating Cash Flow Margin  Cash Return on Owner’s Equity Market Performance Analysis:  Earnings Per Share Note: refer to the three-step process (see