Topic 8 Financial Statements

Thank you for your response. Please I am not trying to argue but I want to understand this. I am actually researching on a pharmaceutical company. Is it wrong to use a single company as main company of research and a group (exactly 75% pharmaceutical, and the rest food and beverage) as a comparator? Thank you.

Hi there i choose for my topic Ryanair and Flybe. On their financial statements the two airlines are assinged as Ryanair Holdings Ltd and Flybe Group PLC. Is it any problem to use their consolidated financial statements from their annuals reports? Thank you.

@esg2011 did u get the response to your question because i am also facing the same challenge. the company im doing has a financial year ending march whilst the comparator's year end in december. so which financials do i use for both

esg2011 - this problem has been discussed several times before on https://opentuition.com/topic/quick-clarification-financial-year-results/ The main issue here is whether your industry sector is seasonal. So if you are doing telecommunications or pharmaceuticals this is not a real problem. With airlines there are two definite high seasons (July -August and then December) and so it is advisable to use statements that cover the same high seasons for airlines. So a year end for one of Dec 2015 and a year end of March 2016 for the other would both over the high seasons in 2015 whereas Sept 2015 and March 2016 do not. You would be allowed to use the Sep 2015 statements as it complies with the rules in the Information pack however you would need to adjust the figures for the comparator with regard to income and profit to ensure that you were comparing the appropriate high season periods for airlines. This could be tedious as you will need to do this for all the years for the comparator if you are hoping for a high grade (If you only use one year's figures for the comparator you can't get more than a C). So it comes down to what sector your company is in and want to do with regard to grade. If doing an airline read that forum specifically about using an airline as I give advice on the appropriate approach to take with regard to analysis. @Steven -no problem as long as both are consolidated as you need to compare like with like

hello i have chosen topic 8 for my rap and the sector is airline…please can some one tell me if british airways and virgin atlantic are good for comparison??

Please consult our forum 'Using and airline for T8'. Read through to get ideas on how to approach this topic. In theory BA and Virgin would be a good match provided you can get the annual reports for the latter as it is not a plc.

Hi Trephena Could you please tell me the reason why primary data is not necessary for topic 08? Also, please let me know why secondary data is sufficient for doing the RR for topic? I would highly appreciate your help. Thanks.

Look at the definition of Primary Data - and then think realistically is anyone senior and knowledgeable in the company going to give you an interview? Short answer, NO! Is it worth conducting a survey? How much do you know about operational research? Probably like most students very little - in which case how are you going to get reliable data that actually adds value to your work (is not subjective and is valid)? So why bother going down this route when the annual reports, news and business articles will provide all the information needed for an A grade if properly put together? (As are very rarely given for any Topic 8s because the secondary research is inadequate or the student does not make connections with what they read to the company performance via linking SWOT and PEST factors). The key to a good grade is excellent secondary research, objective and critical analysis of the information and data and good presentation of this data. Many ill informed mentors in Pakistan tell their students to try to interview the management. For many years the markers have suspected these so called 'interviews' are fabricated and just ignore them anyway and focus on the secondary data. So in the end, primary data unless it is a company you actually work for and genuinely have interviewed the finance director or one of his buddies is just not going to get you anywhere. Enough said?

Hi @trephena I am doing Topic 08.I have chosen a local telecom company (not a group company). However the company I choose for comparison is a group company-I choose this company as its the only competitor since telecom market in my country is duopoly.So the issue is , the competitor has consolidated statements only but they do have IFRS08 notes and operational highlights for their operations in my country with various information such as NP,EBITDA,CAPEX,Revenue which are specific to my country. I decided to use these information for my RAP and ignore the consolidated results as it seems pointless to compare their operations outside my country. Am I doing this right or is there any problem?

Hi Trephena, is it necessary to read entire annual report? I am going to start part 3 and I am really confused about it. Also, could you tell me approximately how much time will it take to complete part 3.

@iq2k16 - in principle that sounds fine. You will need to justify your choice and show that you are using the data to make useful comparisons setting out the limitations of your approach. You might need to use the group data when it comes to share price and earnings per share (also possibly gearing too) as you should try to have some investor ratios but briefly explain the basis behind your calculations. It is often the trends in the data that are important and of course what has driven the ratios. As these underlying reasons behind the figures are what are really important focus on strengthening the links with models when doing the evaluation of the main company.

@farhana001 - you must read the CEO/Chairman and Directors reports - these are key to understanding the strategies that underlie the decisions and subsequent performance. I suggest that you read my article on Evaluation & Analysis on our homepage www.opentuition.com/obu You need to learn the correct approach when doing analysis as this, when you have read and made some working notes on the CEO reports etc, should guide your research. Do your models next as the application of the models (ideally SWOT & PEST) should also help you with gaining a clearer picture of what the major influences and impacts have been over the 3 year period and the strategies management have used as a consequence. It is impossible to tell you how much time it will take except that it normally takes longer than you expect. A good report with excellent analysis for an A Grade will require thorough research and sensible well reasoned analysis but there is time to do this before P33 closes if you start Part 3 now. A superficial report with weak analysis done in a hurry is unlikely to meet the assessment criteria and remember a good layout with clear graphs will help both you and the marker to see what has gone on. So you should use the word count explaining the factors behind the trends not repeating the figures and talking about increases and decreases as this is NOT analysis.

@trephena said: @iq2k16 - in principle that sounds fine. You will need to justify your choice and show that you are using the data to make useful comparisons setting out the limitations of your approach. You might need to use the group data when it comes to share price and earnings per share (also possibly gearing too) as you should try to have some investor ratios but briefly explain the basis behind your calculations. It is often the trends in the data that are important and of course what has driven the ratios. As these underlying reasons behind the figures are what are really important focus on strengthening the links with models when doing the evaluation of the main company.

Noted!Thanks :)

Hello, I am not sure if this question has been answered before so if it has, please guide me to the link. I am comparing Delta Airlines with United and using 10K reports. There are two types of Financial Statements in the Annual Reports of United. One type has (in millions, except share data) under the heading and the other type only has (in millions). I want to know what is the difference between these two and is the (except share data) one is acceptable for basing ratios on? I have already done half ratios and now I am thinking if it would affect my passing the RAP. I would be really grateful for any help as I believe I still have time to correct if needed. Also, I could not find only (in millions) type of statements for Delta. Thoroughly confused :( Any help or clarification would be appreciated. Thanks in advance! Regards.

@eowyn said: Hello, There are two types of Financial Statements in the Annual Reports of United. One type has (in millions, except share data) under the heading and the other type only has (in millions). I want to know what is the difference between these two and is the (except share data) one is acceptable for basing ratios on?

I don't understand your question - something seems to be missing in your explanation here. So one has share data and the other doesn't - but how does that affect the revenue and profit?? Surely data about shares is only required for the investor ratios section so what is the problem??? Remember as pointed out dozens of times in Using an Airline for Topic 8, you need to get away from the notion that your analysis should be all about calculated ratios and adopting a textbook approach. KPIs actually used in the industry for measuring efficiency are just as important and should not be ignored.

is it ok to use two companies in different countries for topic 8?

Hello, I wouldlike toknow if Telecoomunications can be network providers rather than mobile phone providing company for example, iwould like to know can i use MTN Uganda Ltd as my organisation??

Hello, my mentor suggested me to draft 4 years financial statements of both the competitor and my main company. I have already done so, and have calculated ratios through formulas plus the graphs as well. I just want to confirm whether what my mentor guided me to do is right or not? Your help will be really appreciated. Thanks

When doing the financial analysis against the competitor is it necessary to compare the results throughout the 3-year period or would it suffice to do a comparison on the latest FY only? I was advised that given the word count limit, a comparison of a single FY (being the latest FY) to be enough. Thank you.

@paidah Giving my 2-cents. I guess the compatibility of financial statements for comparison purpose (such as UK vs US or UK vs EU IFRS) rather than geographic issue will be more of a concern. Although you should also consider if the geographic issue affects the comparability of the financial results which may be particularly relevant for certain industry as such telecommunication.

Hi Trephena, which ratios do you recommend for topic 8 airline industry?

@farhana001 - please see our forum topic Using an Airline for T8 (currently only.2 of our forum topic list) as I have made suggestions there. I try to keep all relevant questions and answers on the appropriate forum topic. This then makes it easier for everyone to find them so please look for the forum topic most suited to your query going forward.

HI, Is Astrazeneca a competitor of GSK?

@trephena - I am using AT&T, but the problem is that it is hard for me to get enough information about the mobile segment of the company. In other words, it is hard for me to segregate and make the comparison with Verizon because there is not much information online about the mobile segment of AT&t. I almost finish PART 3 of my project, but it is merely information from the group company on the whole. I received tonnes of information online from the experts, financial analyst, the annual reports, articles....but all related to the group on the whole. The only good thing is that AT&T published their financial about the different segment. How best can I approach this situation given that OBU requested to report on the Mobile Telecommunication Industry?

@Hamasah - really do not like recommending particular companies - as it depends on availability of information and many other factors (and I just do not have the time to do the research!) - discuss it with your mentor as that is what you are paying them for! @kennard - Go for the group level then and discuss the issues in the Limitations. You have GOT to use external info otherwise your report is unbalanced and you will be failed on Evaluation &Analysis and Information Gathering. If more info /better data is available for Verizon why not make that your main company?

Thanks Trephana, I think it's best that I use Verizon Wireless because they are indeed more focus on the mobile side and I saw more external info about it. It's going to take a lot of my time but it worth it.

Please i need some help. Should i do an in depth analysis for my comparator as i have for my main company?

It won't be quite so in depth but a etailed understanding of the comparator. coompany is desirable so that the commentary does not just describe increases and decreases as this is not adequate analysis.

thanks so much Trephena

My business analysis I am using the PESTEL and SWOT models 1)Am I supposed to evaluate these or this has to be done for the financial analysis? Most of these are self-explanatory from the CEO’s statements for example “An increase in airport taxes has resulted in Ryanair closing bases in Spain. If many governments were to raise their taxes, this would affect the profitability of Ryanair and its growth prospects” will that be a good explanation? 2) Some of the external factors and threats are very related to save word count is it okay for me to say that rise in taxes been discussed on the PESTEL analysis? 3) The definitions for the SWOT and Pestel were sometimes too small to paraphrase, I have referenced them, but will be in trouble if most of them have been not exactly copied and pasted but close to but properly referenced. 4) A copied a diagram for the PESTEL on google pictures, how do I reference it? 5) When using Annual report is that okay if I cite as (Ryanair,2016) or it should be (Annual Report,2016). If I have cited it many times I should only put on the reference list once?