Part 1: Financial Accounting
(i) Corporate Governance
You are required to assess the quality of corporate governance within your chosen company.
This part of your report should not merely state what the company does, but provide a well-argued assessment of the governance of the company, and whether the objectives and practices of good corporate governance are met by the company.
There will be a lecture on corporate governance. You should also be familiar with The UK Corporate Governance Code and you will find a useful chapter on the subject in Elliot and Elliot, Financial Accounting and Reporting.
The link to the UK Corporate Governance code is:
https://www.frc.org.uk/corporate/ukcgcode.cfm
Stakeholders and Key Performance Indicators
a) You are required to identify the stakeholders of the company given the nature of its’ operating environment, clearly justifying your choice of stakeholders, stating which ones are identified in the annual report or any other source.
b) From the annual report and accounts, examine the key performance indicators and any critical success factors disclosed by the company, giving reasons how they link to stakeholder groups.
c) Identify any key performance indicators which you believe are missing, and again link these to stakeholder groups with your reasons as to why their inclusion would be beneficial.
Part 2: Financial Management
(i) Share price performance
Produce a graph comparing the share price of the company with movements in the FTSE-100 index for the period 1st of September 2020 to 1st of March 2021. As far as can be ascertained, critically analyse the share price behaviour of your company (a detailed analysis of movements in the FTSE-100 is not required).
(ii) Company beta
From your analysis for this period using weekly data, estimate the company’s beta coefficient. An example will be on Brighspace. Compare your beta calculation with a “commercial” calculation such as is found in the London Business School Risk Measurement Services quarterly publication that you will find in the library. Discuss why any difference in results has occurred. Give possible reasons why the commercial beta for your company is aggressive or defensive.
(iii) Company Rating
Critically analyse the investment rating of your company, with reference to Ratings Agency information. Has this changed over the period? If so, why?
(iv) Company financing and dividend policy
Analyse the type of financing that this company uses and comment on the balance between its debt and equity – calculate the gearing ratio. Comment on any significant changes in long-term financing over the past couple of years.
Analyse the nature of this company’s dividend policy and discuss possible reasons for it.
Drawing on some of the analysis conducted above, provide an overview of the financial performance of the company this year, from a Financial Management point of view. Comment on how the company is seeking to add value for shareholders.
Financial Management Section – Frequently Asked Questions
Q1: For the share price performance, do we need to analyse all share price changes, even the small ones?
Q2: How should we calculate the gearing ratio?
Q3: Shall we include calculations in the main part of the report, or show them in the appendix? And what about graphs?
