Assessment title:                   Business Report                       Size or length of assessment: 1800 to 2000 words (no +/- 10% to be used)   What is required to do on this assessment? You are required to obtain and compare the last available 2 years’ annual report of a public limited company (Arsenal Holdings Limited)

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Assessment title:                   Business Report                      

Size or length of assessment: 1800 to 2000 words (no +/- 10% to be used)

 

What is required to do on this assessment?

You are required to obtain and compare the last available 2 years’ annual report of a public limited company (Arsenal Holdings Limited). You want to find out as much information about the financial management decision making style of the company from these reports. 

You only need to print off the three main accounts contained within the annual report. These accounts are The Income Statement, Statement of Financial Position (or Balance Sheet) and Statement of Cash Flow. Using the information contained within these accounts for the last two years, and with reference to relevant theories you are required to do the following:

 

1. Discuss the different long-term sources of finance available to companies and theories that discuss their risk/return characteristics and optimum capital structure. With reference to the accounts then discuss the long-term capital structure of the chosen company and what this may indicate about the company’s attitude to risk. You may need to refer to the specific note in the notes to the accounts to get detailed information on this.  Part of your answer to this question should include calculation of a suitable gearing ratio.
2. Discuss relevant working capital management theories. Then calculate suitable working capital ratios and discuss how efficiently the company is managing its short-term sources of finance.
3. Discuss the range of dividend policies available to companies, why certain companies may choose certain policies and what sort of dividend policy the directors of the company seem to be following and possible reasons for this.
4. Assess the profitability and risk of the company and how attractive it appears to be to potential investors, in doing so make use of market structure analysis internal to the industry. Your answer should include some evaluation of the type of external economic environment of the company and the business models used.   

 

Your mark will reflect

1. The extent to which your essay demonstrates an understanding of underlying financial and economic theories; and
2. The degree to which you are able to apply such theories in a real-world context.

Please note: You are not being asked to undertake a financial analysis of the company.
The expected outcome of this assignment is a discussion of the different possible theories and their application to the case study in order to identify the risk/return characteristics of the company and the industry. You are expected to be able to demonstrate that you have read and are able to synthesise academic literature.

Any corporate finance textbook will be helpful for background reading. However, you may find the following textbooks particularly helpful.

• Corporate Financial Management by Glen Arnold
• Fundamentals of Corporate Finance by Richard Brealey
• Corporate Finance and Investment by Richard Pike and Bill Neale
• Corporate Finance: Principles and Practice by Denzil Watson and Antony Head

Higher marks will also be gained by correct referencing to seminal articles. UWE Harvard system of referencing should be used.

 

Marking Scheme for the Financial Decision-Making coursework

 

Area	Marks
Section One: Discussion of the risk/return characteristics of internal equity, loans, market debt, convertible debt and shares, Critical evaluation and synthesis of Pecking Order and Static Trade Off theories. Discussion of the different sources of finance used by the company and its application to the relevant theories. Calculation and evaluation of gearing ratio.  Marks out of 20
Section Two: Critical evaluation of aggressive to conservative working capital management theories Calculation and evaluation of current ratio, liquid ratio, inventory days, receivable days, payable days and cash conversion cycle. Marks out of 20.
Section Three: Critical evaluation and synthesis of at least dividend irrelevance, Clientele, Bird in the Hand and Signalling theories. Application of the chosen company to the theories. Marks out of 20
Section Four: Calculation and evaluation of suitable profitability ratios Evaluation of return in relation to risk through discussion and application of Capital Asset Pricing Model. Discussion of the external economic environment of the company either using PEST analysis or an analysis of its particular business model. Marks out of 30
Conclusion and how it is presented in the document. Marks out of 10
Total mark out of 100

 

How do I achieve high marks in this assessment?

Your mark will reflect

1. The extent to which your essay demonstrates an understanding of underlying financial and economic theories introduced in the module; and 
2. The degree to which you are able to apply such theories in a real-world context.

 

Please note: You are not being asked to undertake a financial analysis of the company.