August 29, 2014 at 8:43 am
I also forgot to ask do I need to analyse why comparator is showing better results?August 29, 2014 at 9:11 am
@fatema Thank you for posting your query here and helping keep our forums organised 🙂 I have renamed another Forum that had some information relating to your query to ‘RAP- Part 3 Findings & Analysis’ and I will answer your query there.
I realise reading through the other posts already on that particular forum that an article on Evaluation & Analysis is long over due – so I am currently in the process of putting together something that I hope will deal with what ‘Evaluation & Analysis’ in connection with Part 3 means in general and in particular how to approach it with Topic 8.
In the meantime bear with me – I hope the article may be ready by the end of next week. (I have been engaged on a work project over the summer which has taken up most of my time but now it is finally finished I can focus more on the important topic of Evaluation & Analysis as this is critical for passing the RAP) 🙂August 29, 2014 at 10:09 am
@fatema First Part 3 is the most important part of your RAP and will ultimately dictate your grade (or indeed whether you will pass or fail) as it shows what you are able to bring to the ‘party’. Here is a paragraph in the Info Pack that is critical:
“In order to produce a successful RAP you have to evaluate and / or analyse
information from a range of sources. This means creating some meaning of what
you have found, or making a judgment or coming to a conclusion. If you only report
the information that you have found or generated, you will not pass the RAP. The
ability to evaluate and / or analyse information is a very important graduate attribute
and the grade that you are awarded for your RAP will be significantly influenced by
‘how well’ you demonstrate your evaluative and/or analytical skills in your RAP.”
First have you done your SWOT & PESTLE? The reason I ask this is that the business and financial analyses are inter-connected – how the company has performed in the period is directly related to the market and environmental conditions that prevailed.
Second have you read the CEO/ Directors’ reports for your two companies? The reason for this is that usually management will comment briefly on some of the environmental (PESTLE) factors that they have had to contend with. They will also mention what strategies they have used – they will talk about how they built on their strengths and seized opportunities – probably not in these exact words but if you go through it you will start to realise that this is what most of their report is usually about. This then gives you a good foundation upon which to build your financial analysis. Go over these for the 3 year period of your study as some of these factors may (a) affect more than one year and (b) some strategies have a time lag, so the results may not kick in until the following year.
So you first of all you could look at the revenue/turnover of your two companies – usually it is better to look at the companies ‘side by side’ – which it sounds as if you are doing – so well done for that 🙂 . When you look at these figures and re-read the above reports, does anything strike you? Had the company moved into a new market/ expanded production / brought in a new product etc? Has this been reflected in the figures? This then gives you something to discuss. At this point you should try to look at articles from the business press / trade journals or whatever as the business pages often report or comment on the company performance.
For example just today I have found this on the BBC website in connection with Tesco:
“Tesco said it would cut costs. Spending on the business for the current financial year will be no more than £2.1bn, which is £400m less than planned and £600m less than last year. IT will be affected and plans to refurbish its stores will be slowed. The Board’s priority is to improve the performance of the Group. ‘We have taken prudent and decisive action solely to that end. The actions announced today regarding capital expenditure and, in particular, dividends have not been taken lightly. They are considered steps which enable us to retain a strong financial position.’ (Tesco CEO 29.08.14)”
So for anyone doing Tesco next year this will account for many of the changes that will occur and will probably be reflected in a number of areas: revenue growth will probably show sluggish growth in 2014/15, cost of sales may be slightly reduced as they squeeze suppliers. a significant impact should be seen in the factors affecting net profit margin – IT cost and other admin are likely to show reductions or be static. By the end of the financial year (about Feb 2015) Tesco will be hoping that the NPM will not be down too much. Then there is the impact on dividends (and possibly share price – today it is significantly down but if the margins have improved by the year end it will start to bounce back). Tesco was the leading UK supermarket but sinceTerry ‘Leahy CEO left about 2 years ago the company has been struggling and its performance over the last 3 years (a) presents an interesting study and (b) shows the ‘dynamism’ any company faces. A company can be a market leader but if they take their eye off the ball, their position could very quickly slip.
So in your evaluation you HAVE TO take a broad view and bring lots of threads together to make your analysis valid and reliable.
You have made a good start @fatema – you comment on inflation costs and so that is very relevant and it is this sort of ‘tie-in’ back to the SWOT that the markers will be looking for. What they want is a sensible and reasoned analysis that is based on facts and demonstrates that the student has thought about the topic and researched (used articles not just relied exclusively on the annual reports – even though these will be important) – it is how you link all the information that shows whether you are analysing properly. You do not have to go into quite so much detail with your comparator but the trend I am picking up from marker feedback is that they need more than just comments that company A has performed better than company B or that Company B’s GP was 5% more than Company A’s – they want something that explains WHY this should be so….
(The worst thing students do is just do heavy number crunching and throw in lots of figures at the marker with no real explanations, or make statements that sound like they are straight from a text book or from the notes to the accounts – this is NOT and never will be satisfactory to meet the assessment criteria for a pass).
Have a quick look at my posts made in April / May mentioned above as well – I will be doing an article shortly and I will attempt to put all of these points in one place but hope this gives you some idea of how to proceed 😀August 29, 2014 at 12:34 pm
@pinkmonkey Most of the Limitations are in connection with the information gathering and the techniques used and you normally discuss these in Part 2
Part 3 is the evaluation section where you EXPLAIN rather than describe the results (see my post above where I have answered most of this on my post today to @fatema).September 1, 2014 at 9:15 pm
I’m stuck in part three. when doing business analysis, should I analyse both the company of study and the chosen comparator? or the comparator will only come in when doing a financial analysis?
Thanks for your help.September 1, 2014 at 9:38 pm
Another question please, do I have to make graphs for each ratio? e.g Gross profit margin with a graph, again ROCE with a graph?
Thanks for your help.September 1, 2014 at 11:01 pm
@jofayo The business analysis is normally confined to the main company (but remember that the PESTLE is likely to be more or less the same for both companies). When looking at the business analysis you will need to explain the differences in their performances (not just describe by how much one exceeds the other). This is the main thing students do wrong – they fail to explain and think all they ever need to do is talk in numbers. The business& financial analyses are connected and the financial analysis is not just about numbers.
Graphs! Graphs! And more graphs! Words should be used to furnish proper explanations. Good clear graphs show the trends so throwing more numbers in is not going to add anything as it does not advance or enhance the analysis unless there is something really worthwhile in doing so.September 1, 2014 at 11:51 pm
Thank You Trephena. I am really trying my best to conquer part 3 and your answer helps tremendously. I think the difficulty for me is linking all the information together because there is so much and it is conflicting.
I am currently analysing ROCE for both companies. My company calculates ROCE using PAT and the comparator uses underlying operating profit. Capital employed is calculated differently as well. It would not be a meaningful comparison. Shall I calculate ROCE using information from SOCI and SOFP, or shall I use ‘their’ figures.
Forever GratefulSeptember 2, 2014 at 9:02 am
@fatema If they are using different bases then this is one case when you would have to adopt one commonly accepted formula for ROCE and apply to both. In the end it is what you make of the figures that counts – on its own ROCE is of limited use – it is the trend in it that is more significant and the component parts e.g. whether there has been a material change in the capital base.
So rather than tie yourself in knots on this look at gearing, changes in share issues (or repurchase of shares) and focus on the funding side and the strategies the companies are using. The two areas you really need to focus on are Profitability and the Investor ratios. There is a very limited amount you can say about ROCE on its own.
Linking the info is the hard part which is why well linked RAPs are the ones that get the better grades. However try to see how the companies are building on their strengths and employ both equity and debt to manage their strategies (investing in New markets/ products or expanding) and how they deal with the challenges from the environment (PESTLE factors) rather than taking a ‘text book’ approach.
I am not saying this is easy but this is what you need to try to do. Sadly I’ll bet my boots in 3 weeks time we will have students on here puzzled as to why they failed on analysis. The short answer will be that they took the wrong approach – crunched lots of numbers, just described movements (increases & decreases) did not explain anything except in terms of yet more numbers and mistakenly thought this was ‘Evaluation & Analysis’!September 2, 2014 at 11:29 am
I have taken your advice and have started a SWOT and PESTLE analysis of both companies as I had not started this before the financial analysis. There are some you tube videos from business analysts who have done SWOTs for both companies. I am using this as a basis for my analysis. How do show this? Do I, after my analysis copy the www link to the videos, or do I actually write down that these ideas are from so and so… I don’t want to be accused of plagiarism!
Also do I do separate analyses for each company and end with a conclusion or do one SWOT/PESTLE and compare the strengths of one with the other and do the same for other factors.
RegardsSeptember 3, 2014 at 9:43 pm
Thanks for your help, Trephena, I really appreciate.September 4, 2014 at 1:00 pm
@fatema OK let’s work our way through this:
1. Well done for finding some relevant SWOT / PESTLE analysis. First you only need to put the ones for the main company in the RAP (but hang on to the comparator one to help with the evaluation & if you have already done it how about having it as an appendix?)
2. Don’ t depend just on this one source for the SWOT etc. try to find another source or two and certainly don’t copy and paste extensively. Although you always have to reference, using long passages from other people’s work is considered to be bad academic practice and lazy scholarship so try to avoid this. You must discuss the ideas rather than expect the marker to access the link.
3. The reference in the text would be e.g. (Vimeo.com, n.d) but put the link in the reference list. If there is a date put it in.
4. Try to link the SWOT & PESTLE when doing the financial analysis and as mentioned as you have done one for the comparator you can draw on this too. It is this type of reasoned and thoughtful analysis which will get you a pass and hopefully a good gradeSeptember 4, 2014 at 1:21 pm
Thanks for replying.
Would it be ok for me to email you part 3 to just have a look at after I have finished it?
Just to get an opinion.
Kind RegardsSeptember 4, 2014 at 3:49 pm
@fatema Unfortunately this puts me in a difficult position as I have to be both impartial in dealing with students and independent. I cannot favour one student over another but try to adopt a position where I will try to answer queries and help students on the forum regardless of race, religion and gender etc but for transparency reasons cannot deal with email requests.
I don’t know if you have a mentor yet but this would be something a good mentor would do for you.
At OT we have recognised that finding a good mentor is a problem and we fear that the requirement to have an OBU listed mentor from P31 will not prevent unsuitable people from acting as mentors in the short-term. We are are so concerned about this that we have decided that we will be producing a list of OT ‘recommended’ mentors and are hoping very shortly to announce who our hand-picked mentors are. As your forum moderator, students can rest assured that our list will only include the very best as I will only endorse those who have an exceptional reputation and have been vetted.September 4, 2014 at 5:28 pm
No problem I thought that was the case, but as I have not found a mentor yeti just thought I would ask.
RegardsSeptember 5, 2014 at 2:26 pm
I am currently analysing investor ratios. What should I be looking for apart from the fact that eps is falling because of declining profits
RegardsSeptember 5, 2014 at 4:02 pm
@fatema you may be able to look at trends in dividends and dividend policy (there may be some comments on this in the CEO Report). Also look at changes in long term debt and gearing. Are profits falling because the interest charges have risen? Is this all part of a longer term strategy e.g. to take on more debt (or issue more shares) to fund future plans (product development or expansion for example)?
You have to try to stand back and see the big picture and how everything is usually inter-connectedSeptember 10, 2014 at 12:57 pm
@fatema re my post of 29 August 2014
We have now included an article on How to approach Evaluation & Analysis on our home page.
Part I deals with hints on how to tackle this for Topic 8
Part II deals with the other topics (briefly) and Primary data collectionSeptember 10, 2014 at 3:32 pm
Thank you for the article which I will be reading.
I just wanted to ask another question. I am currently on part 3 and it is challenging.
I have already asked you about the ROCE figures for my companies which are calculated on a different bases. I know you advised better ratios to analyse but I really would like to explain the change in Roce for both companies.
Instead of calculating my own ROCE figures can I mention that both companies have used different formulae to calculate ROCE in my limitations in part 2, and mention that I am analysing the trend rather than the actual figures? Or is this not a good idea? Or shall I just calculate my own ratiosSeptember 11, 2014 at 1:40 pm
My dear @fatema I think you are starting to obsess about this and putting far too much emphasis on it than it requires. The danger of ratio analysis is that you start to tie yourself in knots about it and fail to see the wood for the trees… you need to stand back and take a few deep breaths 🙂 .
If they are using different bases then you either have to use the same formula for each or alternatively, as the trends are just as important, plot the trends for each company on graphs and make comparisons that way e.g. how each’s trend has moved in relation to the other’s trend.
GP and NP and investor ratios are far more important in the grand scheme of things. By all means mention your concerns about ROCE in the Limitations section. However I really think you need to read how to approach Evaluation before you proceed further otherwise I fear that you are going to end up with what I call the ‘dreaded sea of figures’ that does not usually enhance your analysis and evaluation. When it comes to the latter there is probably an inverse relationship between the number and density of figures calculated and presented and the actual quality of the analysis. It is: Explanation! Explanation! and explanation! that provides the necessary quality to meet the assessment critera 🙂September 20, 2014 at 10:21 am
Question for part three: In the conclusions I have given a brief summary of the company’s overall performance and mentioned their current performance based on interim results, is that ok?
In the recommendations I am stumped. I have already recommended actions the company can take in the opportunities section of the SWOT. Shall I just repeat these? Also the company was already in the process of making these changes in the current financial year. What do you think?
RegardsSeptember 20, 2014 at 5:46 pm
Mine is about SLS, since its uploaded separately, do we include a title page as well with our names and ACCA numbers? If yes does it count towards the word count?
@ Fatema thanks for those questions i don’t need to ask again..September 20, 2014 at 7:23 pm
@fatema – Recommendations section is not mandatory – it is probably more relevant for some of the other topics so do not worry as long as you have done a good evaluation. And if any recommendations are elsewhere as part of your SWOT then that is fine. The Conclusions section should be a summary of your main findings and if possible try to link back to your objectives so that you briefly show how you have covered them. No don’t repeat too much information unnecessarily as it does not add any value to your work and just wastes words. If you are referring to the company having implemented the changes after your period of study then you do not have to mention it as it is not actually within your brief as it outside your reference years.
@lamech311 – A title page and contents for the SLS are not mandatory but if produced will be captured by the word count. If you have sufficient words left you can do them if you want. Otherwise if words are tight why not do your name and Reg No as a header as I don’t think headers (or footers for that matter) are included by Microsoft Word in the word count?October 1, 2014 at 9:26 pm
I’d appreciate getting your suggestions regarding application of Porter’s five forces model.
My understanding is that this is to be done on a single SBU (strategic business unit) like a particular line of products of a particular industry. So let’s say the company I chose provides majorly telecomm services and a minor transport business too. Does that mean the 5 Forces are to be based on the telecomm part of the business (since major revenue is from there)? What’s the best approach to go about this?
Lastly, in a single RAP, it is possible to do PEST, SWOT and Porter’s 5 forces?
I mean realistically speaking I know I’ll be constraint on word count…last thing I want is for any of the model application to be inadequate just because I was trying to squeeze in all three. My PEST and SWOT are going well so far. But during the process I thought 5F could have potentially added more value. I’m just concerned about the industry-focus bit since the company has diversified products in different industries (while core activities are in one industry and that counts for the lion share of the revenue). I’m not that clear on how to apply the 5F in this case. Any tried and tested suggestions?
Thanks a lot!
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