RAP – Part 3 Findings, Analysis + Business Models

Sorry period would be 01 April 2011 till 31 March 2014….

your title would be “An Evaluation of the Business and Financial Performance of XXX between 01 April 2011 to 31 March 2014.

Please refer pg. 26 (Section 7.b) of Information Pack as this aspect explained there.

Hi trephena

I am doing a SWOT and Value Chain Analysis for the main company and calculating ratios for both companies.

Is this a good combination?

@trephena
is it necessary to write on limitations in part 3 after doing the analysis?

i am aware of the limitations being covered in part 2 under info gathering and accounting/business techniques

under info gathering i talked about- time limitations and excessive info online

under accounting/business techniques i talked about- general limitations of ratio analysis, pest and swot.

but what i mean is, for example, something along the lines of not being able to find info on current ratio/payables/recievables due to info being little to none in annual reports or online, and it being internal to the company. therefore not being able to write much on this aspect. or something like that

is it required to do so? im already struggling with word count, but im worried about failing on the account of not self reflecting in the RAP. i have read that it is important to self reflect on both SLS and RAP.

please advise.

@pallavirai & Trephena

While not directed to us, do allow us to contribute our thoughts in addressing your concern on limitations and reflection. Hopefully it helps. Trephena could then add on with her expertise and smooth out whatever rough edges we have 🙂

1) When it comes to limitations of ratios, we find that a superior form of reflection is considering whether the conclusion you derive from the ratio is strong. It may rest on certain assumptions or it could be interpreted in another way. It would then be good to recognize that as a limitation – this would show both reflection and analysis.

E.g. The Asset Turnover ratio has been low for the past years of 2012 and 2013. A possible reason is that the huge investment made 2011 for new retail stores are slowly gaining momentum. New investments need time to generate sales/returns. However, another interpretation is that the 2011 investments were not good ones, maybe they were in sectors where competition is damagingly high. The bad investments thus drag the Asset Turnover downwards.
A student might thus conclude that while he finds the trend worrying and it does look like bad investments were made, more time is needed to fully see the consequences of the investments.

2) While, it is understandable (and common) that information is not available, we usually do not encourage the frequent statement of that (once or twice is fine). The student will have to give his opinion on what the ratio means to him and try his best to find information from industry or the economy to back it up.

If really NOTHING can be found on that ratio, ask yourself: Is it really necessary for my report? Maybe nothing can be found because that ratio is not a relevant one for my industry? E.g. service industries (e.g. consulting) would not be concerned about inventory turnover. Words could then be better dedicated to other ratios which have more information available.

Again, hope this helps!

The Learning Luminarium

@ trephna, can you help with these questions?
Can one ignore the table of contents to limit the word count, if so can one still number the headings in the RAP?
2 Can one shorten the name of the company used in the RAP after being used so many times e.g Mobil Oil Nigeria PLc as MON Plc?

@Blowy

Answers:

1. Don’t ignore table of content as it is required as per suggested structure provide in Information Pack (ref: section 7.d.xi pg.43)

2. yes you can shorten name of your company must provide complete name with abbreviation in bracket. e.g.Mobil Oil Nigeria PLc (MON Plc)

Some tips to reduce overall words in RAP are as follows:

? Don’t write FY 2011 as you can write simple 2011 or FY2011(without space).
? 1.2 % (with space) can write as 1.2% (without space)
? Try to merge long paras into small paras.
? Try to remove spaces in references or other words like USD 50 can write as USD50 etc.

Thanks,

I am having a problem , My financial statements do not breakdown NCA and CA, its an insurance company the problem has come with classifying held to maturity investments, Available for sale investments and financial assets at fvtpl.

And also another issue is on assets held for sale, were do i include these on my ration calculation???/

If specific information not provided on FS then you can use many other ratios. Your main objective under financial analysis is to analyse performance of the company rather then analyzing it under specific ratios. Better to choose any other ratio to analyse it.

Thanks.

@Blowy – your evaluation and analysis is far more important than a contents page – if you are going to skimp on one make sure it is the latter. I have never seen a student failed for not having one but it is possible if the rest of their Presentation of Findings is poor the marker could pick up on this.

By contrast more than 50% of the fails are on E & A – so the facts speak for themselves 🙁

@trephena within SWOT analysis. can we construct points based on our opinion and view? for e.g: my co. has invested its surplus cash in govt. securities and bonds, can i criticise this with the tone such as “although the investment is almost risk free, i believe management needs to build up its risk appetite and invest into more rewarding opportunities” and reasoning my statement with facts that inflation and devaluation of Pak ruppees with major currencies breakevens the return earned from govt. securities.
and later in final part of RAP, in recomendations i can give management advice to hold foriegn currencies as devaluation of local curency plus 80% of raw materials have to be imported.
My ROCE is not coming accurate to what it is in Annual reports for both primary and comparator company, whereas I have looked into notes tried to make adjustments but no way those ratios turn up to be accurate. I have also tried various other methods of calculating ROCE and its denominations ,such as replacing numerator with operating profit and Net Profit. Deriving Capital employed from Total assets less current liabilities OR Equity plus Non Current Liability.
Should I proceed with minor differences of 1-2% in my ROCE or not?

Please your comments on this would be very helpful.

@Amarain – usually you exclude exceptional items as by definition they tend to distort the figures making year on year comparisons impossible and trend lines meaningless. Mention prob in your limitations

Focus on profitability and Investor ratios in depth. For the others pick the most important/ relevant -it depends largely on the organisation (e.g. the acid test/ quick ratio is useless for a service industry like an airline as they sell a service and therefore don’t hold much inventory, liquidity is hugely important for banks) Far more important that calculating ratios is actually interpreting them in the context of the organisation being studied together with good relevant explanations from business articles – that is what gets the pass and grade