General Queries Topic 8

Hello trephena, As I prepare the appendices where I am copying the financial statements (from the annual reports) onto the spreadsheets, I have come across a problem (couldn't find an answer on the forum). I know we have to use restated figures for ex. if income statement figures in 2015 financial statements are different for the comparator year 2014 as compared to the figures previously reported in 2014 financial statements. BUT my problem is that now ( in the 2015 income statement) some items for the comparator year are completely MISSING when compared to the original figures 2014 income statement. For ex. in 2014 income statement we have a figure for "Income/(loss) from discontinued operations" but when I look at 2015 income statement (from which I am using the restated figures for 2014 as well) there is no "Income/(loss) from discontinued operations" for the year 2014. Now since I am using restated figures for 2014 (obtained from 2015 FSs), I am not writing this item in my appendices as well. Because if I do, it will be a problem (as balance sheet won't balance- the balance sheet figures have the same problem) and income statement figures will neither match restated nor the original ones. SO how do I account for this in my appendices and RAP? (for ex. if I need to discuss the missed item in my analysis how do I reference it?)

Well I suppose the short answer is to avoid talking about expenditure in detail. Mention the discontinued operations issue in your Limitations. Overall the best RAPs are those that have a good balance between the business and financial analyses e.g. in this instance consider what factors lie behind the operations that have been discontinued. What was the strategic decision that was made by the Board? Presumably it was producing heavy losses and it has either been terminated or the operation sold off? Try to focus on how the decision has effected profit. Even if in the short term it has contributed to losses the fact that these may have been stemmed by discontinuing it, may make the organisation better able to compete going forward (i.e. it has dealt with a weakness). Overall with Topic 8 students do a SWOT and PEST and then do ratio analysis without connecting the two. Whereas the reasons that lie behind financial performance are intricately linked to the business environment.

This has been discussed dozens of times on our forum - a three month difference is not an issue at all for the current Topic 8 business sectors (and only potentially affects industries where the operations are affected by seasonal fluctuations e.g. airlines, hotels etc.)

i have been following this platform, its been great here ,the way questions are answered. i am working on my Rap , on topic 8 ICB classification 2730( electrica goods ). i am from Pakistan, and really facing trouble in choosing competitor. My main company is Siemens Pakistan. i was working on Johnson&Philips as a competitor but problem is this company is in loss since last 5 years, and some one told me that comparison will not be fair. it will be really helpful if some can tell me which company i can use as competitor of Siemens Pakistan. waiting for the reply as deadline is getting near. any one doing Rap on the same sector in Pakistan ? thanks

Any one here Pls help me out? "i have been following this platform, its been great here ,the way questions are answered. i am working on my Rap , on topic 8 ICB classification 2730( electrica goods ). i am from Pakistan, and really facing trouble in choosing competitor. My main company is Siemens Pakistan. i was working on Johnson&Philips as a competitor but problem is this company is in loss since last 5 years, and some one told me that comparison will not be fair. it will be really helpful if some can tell me which company i can use as competitor of Siemens Pakistan. waiting for the reply as deadline is getting near. any one doing Rap on the same sector in Pakistan ?" thanks

Unfortunately I am not able to help with this as I am not in Pakistan and have no real knowledge of electronic companies. However there was a moderator, Ehsan, who I think is in Pakistan and may be able to help. I am not sure how often they visit the OBU forum these days so I suggest that you put your query in an email, contact our Admin and request that they forward it to them. ( Bear in mind that they may still be studying for exams so their time may be limited) The email address is admin@ followed by opentuition.com

Hello Trephena! For topic 8: 1- My mentor has told me to do the following: Profitability ratios (revenue growth, GP margin, NP margin and Return on Equity), Liquidity ratios (current and quick ratios) and Investor ratios (EPS and Price/earnings ratio). I wanted to do gearing ratios as well but that would be 10 ratios then and he says that would be too many ratios for the words. What do you suggest? 2- Some ratios I've copied from Financial Statements in the appendices sheets (e.g company given EPS). Some I've calculated myself from the figures (e.g gross profit margin). For P/E ratio I've taken figures from internet as well as financial statements (e.g closing stock price of company at a certain date taken from yahoofinance). How do I give reference for these sources? In excel sheet by making a column named "sources" next to the ratios calculated? and I will have to reference manually (unlike in RAP where MS.Word's own "insert citation" function takes all details and then generates reference list automatically when you want) so how do I provide references in the external reference list for the citation sI've given in MS.Excel sheet (do I make a new heading in reference list for the seperate document or what) It will be great if you please refer me to a sample/example for this (in-text and external citation for ms. excel).

@ehtasham you can take a look at PEL(Pak Elektron) vs Siemens Pakistan. Their product lines do match to an extent (power grid division of PEL vs Siemens). I am not a moderator for OT but before I changed my companies to General cable and encore wire (because I believe local pakistani companies have little information on the web) I was about to start working on PEL vs Siemens. I cannot guarantee whether its a perfect match but you can see for yourself (there is a 3 month gap in their reporting dates but that is insignificant and you can start working right away).

abidaca1 - first thank you for giving some advice to another student - these forums are not intended to be just for moderators answering questions - the spirit is that anyone who can offer good advice and help other students is most welcome to respond. Regarding your ratios I think you should have some commentary on gearing. It is not always particularly relevant to do both the current and quick ratio unless there is a lot of stock, so you could do just the current ratio if you feel 10 is enough. (It is not a case of how many ratios should be in the report but more their relevance and having good explanations). When it comes to referencing your ratios: Many companies often summarise about the last 5 years worth of signficant ratios in one table if you have taken some straight from the annual report like this you could write Source: Annual report XYZ 20XX and give a page number. Alternatively you could also copy and paste the table have it as an Appendix and refer the reader to the appropriate appendix. Investor ratios involving share prices are normally taken from the local stock exchange so you could show the source under the graph in the report, or perhaps as a separate subheading in your spreadsheet if you include this information at the bottom of the spreadsheet. (Web addresses in the report text are not acceptable however immediately under a graph introduced by the word 'Source' would be permitted), With referencing the marker is trying to ascertain that you know the basic rules on referencing. Normally just referencing to the Annual report in the report for most ratios will be sufficient as if you have calculated these from figures in the financial statements your formulae should show this in the spreadsheet. (Remember you are expected to have a spreadsheet that shows you have used formulae)

ok thanks for the guidance.

hey thank u , but i asked obu about PEL they said it doesnt fall in 2730 sector.

I'm resubmitting my project and didn't get any feedback on my conclusion section last time, assuming because it fell outside the word count. My original report included recommendations but upon reviewing the criteria for the project it says recommendations are only appropriate where specific to individuals. Is it appropriate to include recommendations in Topic 8 or would the words be better utilised elsewhere?

You obviously have word count issues so your words are better used elsewhere as you note. Recommendations are only really appropriate for topics where you work for the organisation and have usually collected primary data. Your conclusion should summarise how your findings met the research objectives. Another good place to start cutting words is Part 1 -as a former marker I can tell you we are not really bothered why you chose the topic (in spite of whatever it might say in the info pack) so you do not need to elaborate much -save all the deliberation and discussion about how it met your skill set for the SLS instead!

Hi, I wondered if you could help me please? I am starting my RAP to submit in May. I have chosen topic 8 and would like to use a local hospital and compare this to another hospital in the area. My questions relates to ratio analysis. As the hospitals are non-profit organisations, would it still be acceptable to look at profitability ratios to determine if the deficit has got worse? I could then look at different reasons why expenditure has increased (if so) having an impact on NP or why income has decreased (maybe less funding). I would also look at liquidity and gearing ratios and the reasons for the changes and what effect these have/ what they mean for the hospitals. Would you also write about the overall impact this could have on the economy as the government fund the hospitals? Thanks

Hi Katie You ask some interesting questions. It is a business and financial analysis and for that reason I think private hospitals would be more appropriate than NHS ones (for example how are you proposing to calculate the gearing ratio?) or perhaps you have selected two private organisations?? Or if of course, you have connections to the particular Trust you are looking at, it might be possible to find detailed information relating directly to it. Otherwise although you have some good ideas I think you might find it rather challenging to obtain sufficient information. Another fear here is that although your proposal to look at the impact on the economy, which in principle is commendable, as this probably really needs an in depth look at NHS funding, whether part way you might find through that you may have bitten off more than you can chew for a 7,500 word RAP. As a former experienced OBU RAP marker I have to say that personally I think the current prescribed industry sectors for Topic 8 (and 15) are rather dire and generally not very inspirational and did wonder why you had landed on Topic 8. You are obviously a diligent student and thought about what is involved in the report but I can't help thinking you would find it easier (and probably more satisfying) doing an alternative topic that would offer you more scope to get a good grade more readily and develop your thinking skills. Good luck though! Gillian

Hi Gillian, Thank you very much for your advice and help. The two main reasons for choosing Topic 8 are I really enjoyed financial and business performance analysis when studying my ACCA exams and I'm fairly certain i wouldn't be able to complete my project on the company i currently work for. Therefore I thought Topic 8 would be a wise choice. I was planning on looking at the gearing ratio for funds invested via tax payers equity compared to the borrowings the trusts have made and they pay dividends and interest. I will however have a look at private hospitals and see what information I can find out about these. Thanks Katie

Hi, looking for a little advice! Basically I was really enthusiastic about doing topic 2 and my tutor seemed really supportive of it at my first meeting - I had lots of ideas but needed some guidance on whether they addressed the topic but apparently she cant actually give me any help just point me in the direction of 'helpful advice'. As such when I voiced my concerns I was greeted with 'Fill in the template for topic 8 and see if you have any gaps or issues' so basically she's told me to do topic 8. My employer also agreed to fund my course for doing topic 2 (or one considered useful to the business) so now doing topic 8 means I'm self funding. Okay I took that on the chin given that I do not want to fail and I work full time with 2 young children under 5 so I have my hands full. I have literally spent about 2 hours a night looking for companies and suitable competitors etc and I think I have found two but have the following issues. The subject company is listed and the competitor is not - is this an issue given I wont be able to therefore compare the share price. The competitor has a different year end (which I gather is not an issue) however the last set of accounts is for a longer period! - Is this a major issue given that ratio's on the balance sheet show a point in time? Are profitability ratios still okay as they should average out still? I have my second meeting on 15th March so I need to have made some decisions and put pen to paper in the next 6 days to supply my drafts of section 1 and 2 to my tutor 48 hours before. I'm aware that the topic probably isn't right for me but I'm worried it's too late in the day to switch again given I put in lots of hours on topic 2 before it was rejected. How did anyone who previously submitted do in the end? From the thread I understand people are having the same issues. I'm also struggling with which research questions to choose given that I'm not really interested in the industries! - I know they limit the industries to make it more difficult but I do feel that it isn't a good idea because there would probably be more enthusiastic students out there if they could choose something they were interested in. I love the topic area just not the sectors! I would much rather use players in the industry that I'm involved in for interest and development. Thanks

Oh just found another more relevant thread I'll post this there too!

Oh dear Rebecca! This is such a shame you should be semi-enjoying producing your RAP not hating it right from the start. As a former marker I know that very few students submit on Topic 2 and unfortunately when it comes to choosing a topic, if your RAP is going to be successful, sometimes you have to stand back and consider not just what interests you but also what information is available. I think the current industry sectors for Topic 8 are dire and because I believe that a mentor and the student are in this together and both should derive a sense of achievement personally I have refused to mentor for T8. I really don't know what to advise at this stage - is there any possibility that you could defer to Period 39 and you choose a better topic - Topics 17,18 and 20 are all far more exciting than dull and boring Topic 8 (or would the mentor then want to charge you for deferring?) I am a bit appalled that you shelled out GBP 575 before you had actually settled on the topic and organisation as it is vital that you should have been happy about the topic before parting with your money (and a reputable mentor should have talked this through with you BEFORE expecting you to hand over your hard earned cash*). If I were having to do Topic 8 I would go for Canadian company Barrick Mining and their US rival Newmont Mining - both are in gold mining and I suppose that and diamond mining are about as exciting as it gets for this current lot of prescribed industry sectors. Good luck! *(PS I am not touting for business here as I have actually closed my list for new students for P38 as I already have sufficient)

When I am doing the financial analysis, I need to use the figures of the main company and the comparator from the balance sheet and income statement for 3 years. Question is, what if the company and/or comparator have restatements in the financials? ie previous years figures have changed, can I ignore this impact and mention it as my assumption in my RAP? So this way, I just take each year's annual report and take figures from each annual report

This is a nuisance and there is no hard and fast rule. It depends to a point on why they were restated and what was restated. You will need to work round it and point out any significant differences working with the latest figures. Any no, by way of example if doing 2016 - 2018 and 2017 were restated you would use the comparative figures in the 2018 annual report

Hi everyone, I am doing an analysis for Intel and the competitor is Micron. the most recent annual reports are 31 dec 2018 and 30 Aug 2018 respectively. Should this be ok? Thanks

Hi Trephena (and fellow OBU students!) - I have selected HCA health as my main co and UHS Inc as my comparator, both are holding cos and own and operate hospitals through their subsidiaries and as such will need to conduct my analysis on the consolidated statements. However, HCA is a lot larger in terms of the number of hospitals they own and operate and they also have other services which UHS does not. Further, UHS has more behavioural health hospitals than acute care hospitals unlike HCA. Would it be ok to compare these two orgs in this situation. Please please please help me with this. I would be immensely grateful! thank you in advance!

Hello everyone...so im doing my project for submission in may and my company of focus' year end is 31 december. so the latest 3 years i've been using are 2015, 2016 and 2017. and i have just learned recently that the 2018 results were made available 12 April 2019. Now my question is do i have to use these 2018 results for my analysis and so make it 2016, 2017 and 2018 or should i stick to the former since the release date was pretty recent? Please help im confused and panicking

No you don't have to use the 2018 financial statements

Thank you Trephena

Regarding Company and Comparator Selection: Q1: Do I have to select comparator based upon revenue figures for instance nearly similar amount of revenue or something? Q2: Is it OK to select a comparator which is following different accounting standard from principal company for instance I am doing topic 8 on a company which is following GAAP but the comparator company is following IFRS. Is that ok to take this comparator?

You should try to choose a comparator that is both within broadly the same business sector (has similar products on offer) and if possible within the same country. Their size does not have to be the same as the point about ratios is that absolute figures are not relevant for most of the comparisons e.g.you are mainly comparing profit percentages, inventory turnover, ROCE and liquidity ratios and the like. If their sizes are significantly different then this is something you should discuss when setting out your limitations. Ideallly they should both report under the same accounting reporting standards as the issue where these differ is that different bases may be used in arriving at the figures you use in your ratio calculations. If this is unavoidable where the figures you are using in your calculations have been affected by the standards used, you need to comment upon this in discussing the results and indicate that this may have limited the validity of the comparison.

Thank you for the information. I am planning to choose two Japanese automobile companies. Both are following Japanese generally accepted accounting principles (GAAP). would it be a problem if I choose different accounting based companies apart from IFRS and US GAAP for my RAP?

hi trephena, do candidates have to do adjustment on the figures if the company is a parent company?