General Queries Topic 8

Can I do topic 8 without having comparator (Competitor financial statements)? By only analyzing the single company financial statements for three years?

No, do not go there! I am a former marker and I can reliably inform you that if there are no comparisons with either another company or significant benchmarking to the industry averages you will automatically fail. So don't even attempt this as you will be wasting GBP 340 submitting. Incidentally the comparisons have to be more than just a year otherwise the grade, if passed, is normally limited to a C grade

Hello when making comparisons to my comparator do I limit the comparison to just profitability ratios? Or do I also need to compare my SWOT/PEST to that of my comparator too. Furthermore when doing investor analysis do I also need to make comparisons here to. In a nutshell, what are the areas I need to make comparisons with my comparator company?

You need to do far more than just a comparison of the companies' profitability ratios. Comparisons of liquidity position and working capital, gearing and investor ratios (for example EPS and P/E ratio or some reference to dividends) are also necessary Whilst you wouldn't conduct a direct comparison of the companies' SWOT and PEST a good analysis when explaining the differences in performance might draw on particular competitive advantages (or conversely comparative weaknesses) that lie behind this in relation to the SWOT/PEST factors. Please start Part 3 with the application of the models as they are supposed to guide the analysis. Many T8s fail because students do not appreciate the important connections that exist between performance and strengths and weaknesses etc. as identified in the application of the SWOT and how factors from the business environment will have influenced and impacted on management strategic decisions. Doing the application first should help you focus on these important connections.

Thanks very much ma. That will help, but one more thing, I'm not sure about how to go about drawing a connection between my financial analysis and business analysis. Do I just write for example when doing Sales analysis "as mentioned in my analysis of the SWOT of ABC with regards to its strengths (Largest producer of xxx in the world) the reason behind the increase in sales revenue of ABC plc over the three years in review is because ABC plc has been the world's largest producer of xxx product in the last 5 years which accounts for 90% of its total revenue." Is this acceptable please?

Yes that is the sort of thing you need to do. Don't waste words telling the marker what we can already see from the graphs. We want interesting commentary that does not throw so many figures at us that we find ourselves drowning in an ocean of percentages and figures. When you are faced with reading dozens of Topic 8 reports (like markers are) you want to read a sensibly reasoned analysis that shows how the student recognises that companies formulate strategies by doing what you have shown here -building on a strength (possibly also they are able to benefit by having a virtual monopoly too? e.g. High prices and/or economies of scale and are exploiting their competitive advantages?) When you look at the results instead of just reporting them (which on its own will never get a pass) ask yourself how has it achieved this? The same applies with poor results -what has the company done wrong? If you bear this in mind and approach it this way you are more likely to pass Evaluation and Analysis (Assessment Criterion 3) which is the most common area failed.

Okay great, thank you so much

Alright thank you!!!

Hello please what about an online article where another person was quoted in. Do I use the name of the original person that was quoted in the article or the author of the article? For instance An article written by Mr ABC in 2017 has a statement that was made by Mr XYZ. Do I write (ABC, 2017) or (XYZ, 2017)?

That's assuming I want to reference that statement

Please note this topic thread is specifically about TOPIC 8 - we have a dedicates thread about Referencing and that is where all of these queries on referencing need to be posted. Thanks

For topic 8 i have chosen mining companies, i want my analysis to focus on Hwange colliery a coal mining company. Im now faced with the challenge of deciding on which company to use as my comparator. On the one hand i have Bindura Nickel Corp which mines nickel and has a year end of 31 March while Hwange Colliery has a year end of 31 December. How feasible is it then to make comparisons of the two when they both have different financial year ends? On the other hand i have RioZim which mines gold, nickel, diamonds and coal. So it does not mine only one mineral. Is it then possible to use it as a comparator regardless of the multiple minerals that it mines? RioZim has a year end of 31 December.

The first thing that strikes me about your choice is why do you think a company mining coal is comparable with a company mining metals (Bindura Nickel Corp)? Their business environments are likely to be very different e.g. coal though its by-products may be used in some manufacturing processes, is mainly a product for producing energy whereas metals are solely used in manufacturing. Their customers and markets are therefore likely to be completely different (and possibly also their extraction methods?). Whilst RioZm may mine multi minerals, it would seem that Bindura Nickel Corp and RioZm would be a more appropriate pairing unless you have sound business reasons for behind your choice of using Hwange Colliery as your main company. The whole reason for using a comparator for the selected company is to put it into an appropriate business context so that valid comparisons can be made. So unless their business environments share some similarities then if you want to use Hwange Colliery then this is best compared with another organisation operating in the field of extracting coal. If you read through previous posts you will find that a 6-month difference is not a major concern unless the organisations are affected by seasonal variations in their operations and certainly given a choice of matching business environments or reporting periods then the former should take precedence.

Okay thank you. Then there is another company Falcon gold which is into gold mining but it seems as if its small in size compared to RioZim i.e. looking at revenues and other operations. Is it still possible to compare the two regardless of size?

You would mention this in your limitations - that RioZm is much larger and possibly when comparing the ratios, where appropriate, that it benefits from some economies of scale. However it is better to match the type of operations so this would seem to be a better pairing as they are competing in a similar market

Ok thank you.very helpful

Gross profit Please how do I calculate the gross profit of my company, this figure is not given. The revenue is 40 030b , and I am supposed to take out the "cost of sold products". But there isn't any. Does that mean that the Gross profit is indeed 40.030b ?

It is highly UNLIKELY that an organisation will have no direct costs associated with its turnover unless the figure stated already has taken this into account -in which case it is normally called 'net revenue'. Direct costs may be called 'costs of production' the term 'cost of sales' is not necessarily used by every organisation. Mining companies I would expect to deduct direct production costs to arrive at gross profit and electronic companies to have manufacturing costs so it is a case that you need to read the notes to the accounts and study the figures carefully before making any assumptions.

Hello Trephena, I have still not been able to make a reasonable assumptions on what my company's cost of sales/ direct production cost figure is because for instance in the income statement an item of cost that is not a direct cost is added to other direct cost and given one figure making it difficult to ascertain the exact cost of the non direct cost item. Labour, materials and admin cost - $7.66b. Now where the exact value of admin is not given even in the notes, how do I get around this?

My profitability ratios are Net profit margin, return on sales, return on capital employed and gross profit margin, since I'm having a hard time getting a correct figure for gross profit margin, should I make do with the three other ratios and GNP and record this in my limitations?

I mean "drop GNP" and say why I dropped it in my limitations?

Hello Trephena, Is it ok to use subsidiary companies instead of their parent companies especially if their total materiality to the parent is immaterial. The companies I selected are subsidiaries of much larger companies. Also, the size of both parent companies, with regards to market share and revenue, vary significantly. However their respective local operations, here in my country of residence, are of similar size (market share, revenue, profits etc). Can I go ahead and use the subsidiaries.

Hi, i plan to submit my project in period 38 and the organisation i am looking to choose is under the category of Electronic Equipment Manufacturers and distributors of electronic products used in different industries. I have identified Gemalto as the main organisation and Giesecke & Devrient as its competetiors, could these work because they provide security services mainly although they deal in digital securities as their main business.

Hello opentuition team! First of all, I apologize because this may get long but I am desperately trying to start off my project to be able to finish it by the deadline. I am currently trying to choose companies for my RAP submission in period 37. The problem is that when I tried choosing a local company in the electronics sector (because there were no feasible local options in the other two industry sectors), enough data (e.g articles or analysis reports) were not available except companies' annual reports (and this would limit info sources and my analysis). And then I looked at the healthcare sector in the UK (I am going to select an international or foreign company now because of media coverage and information available as compared to my local ones) and finally came up with Spire Healthcare Plc as the perfect company except that it had no competitors (except Hospital Corporation America the revenue for which is $42 billion compared to Spire's $1 billion- making the comparison apples to oranges) except for the non-profit ones (like Bupa or Nuffield) hence not comparable. I was also strictly making sure that both my companies were headquartered and operating in the same region i.e UK (while if I choose Hospital Corp America as primary company it is operating in US and UK both). And then I left the UK company search to move to US companies. My mentor (who rarely replies to my queries) told me to go with General Cable and Encorewire (both NYSE listed and worldwide operations) but I could not understand their annual reports (form 10k). I don't know where's the Chairman's statement located (or other such as the content list is very confusing for US companies) and then these financial statements are prepared in conformance with US GAAP (not familiar with how to deal with that in RAP). I even felt some interest in looking at Intel or Nvidia/AMD (all semiconductor manufacturers- do these fall in electronic equipment sector applicable for P37?) but the same problem rose that these are NYSE listed and their statements prepared in US GAAP while annual report contents very confusing and not interactive at all as compared to UK listed annual reports. Summarising my issues: 1- Can I compare Spire healthcare with a non-profit competitor (e.g Nuffield Health)? 2- Can I compare Spire (primary) with Hospital Corp. America (secondary- or vice versa) given their revenues and regions of operation as well as the fact that HCA plc will not have seperate financial statements or reports for their UK based operations? 3- Do Intel, AMD and Nvidia (semi-conductor manufacturers) fall in applicable industry sectors? 4- Is it fine to select US listed companies given their reporting differences (US GAAP) and are there any adjustments to be made in ratio analysis or such if chosen? 5- Is it fine to select high revenue (e.g $5 and $10 billion for AMD and Nvidia respectively) organisations which are very dynamic as well (media coverage for these companies is huge- you'll get some news for the companies on daily basis)? Will it be HARD to get my head around their operations (due to dynamic environment) and perform my analysis (although definitely annual reports will give me direction)? * Tonight I am going to read an annual report from AMD to familiarise myself with the contents (and find the CEO and Chairman comments alongwith other assessments). Plus I searched for mining companies but rejected them because their operations are very wide and global ( and so their revenues e.g $40 billion for Rio Tinto). I am afraid of choosing Intel as well because of the same reason (operations very wide/global and figures insanely high). I HOPE TO GET SOME DIRECTION FROM THE MODERATORS SO THAT I CAN FINALLY START OFF THE PROJECT (VERY EXCITED BUT VERY NAIVE). Thank you.

I am going to comply with your plea for a reply although at the moment I fear it is not the answer you are looking for. As a former senior marker who has assessed and read and produced feedback on probably thousands of Topic 8 RAPs, I regret to say I am not very enamoured by any of the industry sectors for P37 & P38 for the types of reasons (basically amounting to difficulty in making valid comparisons and exactly what 'electronic components' comprises) that you state. So much so in fact that I am actually reluctant to take on students for mentoring for Topic 8. To be totally honest I always found Topic 8 as a marker to be uninspiring as to my mind it is very same-old, same-old, mundane and quite frankly, boring. I realise this does not help you and is merely my own opinion and therefore I shall run your query by one of my contacts to see if there is any advice I can glean for you. Meanwhile I would suggest generally that other topics such as 17,18 and 20 are not only more dynamic but in my experience had higher pass rates and may in the current circumstances offer less frustration when choosing a company. However I recognise that as Topic 8 is by far the most frequently chosen topic this advice is unlikely to be what students and many mentors want to hear. As I say I will see what I can do to help though..... And hope to get back with more constructive advice as soon as I can

@abidaca1 - regarding what constitutes electronics companies if you use these links to find appropriate companies: https://www.companyreporting.com/category/read-more-companies-icb-industry-classification/2000-industrials/2700-industrial-goods-ser-2 https://www.companyreporting.com/category/read-more-companies-icb-industry-classification/2000-industrials/2700-industrial-goods-se-10 My contact at OBU will answer your queries on Topic 8. Email me your email address via my contact details on my website absolutementoring.uk and I'll forward her address to you

Thank you for the help mam. I have sent you an email and am looking forward to have my issues dealt with. I have checked out the webpage links you have provided and if it happens that I am not able to choose one of the previously stated companies, I will surely select from the options given there. You have helped much. I thank you again :)

This is my general advice to students who do Topic 8. It is based on years of experience of marking this topic and the most common area failed (evaluation and analysis) and why the Marking Team fail this. If you approach it the way suggested below you are more likely to be successful. Also remember if Englsh is not your first language. Most European Languages are read from left to right and therefore your graphs should similarly run from left to right in your report (the brain reads it the same way as text) I suggest that you ensure you start Part 3 with a SWOT and PEST and really consider how the factors you have identified have influenced management strategic decisions (probably by building on the company strengths and seizing opportunities). Think about the SWOT and PEST factor influences and how these and those strategic decisions have impacted on the financial results. You will need to read up on the CEO/ Chairman's reports and Directors reports in the financial statements and also by reading articles on the companies in the business news pages. This will then help you understand what has gone on in the companies. A common fault is for students to present lots of figures and percentages in the text. Usually most of these are unnecessary and it is hard work for the marker to keep up with all the numbers - so aim to show the position via a graph/ chart and use the words instead to 'tell the story' of what has gone on focusing only on any percentages that are exceptionally significant and cannot already be seen from the graph. Markers expect to see that there is a connection between the application of models (the business analysis) and the financial analysis and therefore you need to demonstrate how the models link to performance ( looking at SWOT and PEST factors provides the sort of connections and helps explain performance, which is what markers want to see). PLEASE DO NOT JUST GIVE NUMBERS -MARKERS WANT MORE EXPLANATIONS AND FAR FEWER PERCENTAGES IN THE WRITTEN TEXT

I have selected General Cable and Encore wire as the companies to base my project upon. Both companies (infact most of the organisations that were available) are groups and have their subsidiaries worldwide. I need to know if I need to tackle these groups (as they only have consolidated financial statements) differently as compared to individual companies. And whether something special needs to be kept it mind (and in analysis). N.B. This has been asked before by multiple people on the forum but the replies were from other participators and I think it would be better if someone from the opentuition team answered it (or if I should contact acca obu department).

You really are best off getting the information straight from [email protected] -they set the rules and therefore are the best ones to give you reliable answers when it comes to the detail like this