BFN1014 Financial Management I (Sem II, 2015/2016)

BFN1014 Financial Management I

ASSIGNMENT
There are two (2) cases. Attempt all.
CASE 1:
You have been recently employed by Global Bank as a financial analyst. One of your
first job assignments is to analyze the current financial condition of a public listed
company in Bursa Malaysia. You are required to perform both time series and crosssectional analysis for the selected company. The analysis involves calculating certain
financial ratios and comparing these calculated ratios with the industry average ratios.
You are also told to base your analysis on five categories of ratios: (a) liquidity ratios, (b)
activity ratios, (c) debt ratios, (d) profitability ratios, and (e) market ratios. Based on the
assessment, you are required to write a detailed report if the company is recommended
for investor.
Use the following guidelines to complete this job assignment. First, identify which ratios
you need to use to evaluate the selected company in terms of its (a) liquidity position, (b)
business activity, (c) debt position, (d) profitability, and (e) market comparability. Next,
calculate these ratios. Finally, compare these ratios to the industry average ratios
provided in the problem and answer the following questions for each company.
1. Based on the provided industry average information, discuss the firms liquidity
position. Discuss specific areas in which the firm compares positively and negatively
with the overall industry.
2. Based on the provided industry average information, what do the firms activity ratios
tell you? Discuss specific areas in which the firm compares positively and negatively
with the overall industry.
3. Based on the provided industry average information, discuss the firms debt position.
Discuss specific areas in which the firm compares positively and negatively with the
overall industry.
4. Based on the provided industry average information, how is the firm viewed in the
marketplace? Discuss specific areas in which the firm compares positively and
negatively with the overall industry.
5. Overall, what are the firms strong and weak points? What would be your final
recommendation knowing that your client will only agree to invest in companies in a
better-than-average financial position?

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KJH
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BFN1014 Financial Management I (Sem II, 2015/2016)

To do:
1. Choose any company which is listed under Main Market in Bursa Malaysia.
The list of available companies are available at:
http://www.bursamalaysia.com/market/listed-companies/list-of-companies/mainmarket.
2. Register your selected company at https://goo.gl/kJOSNR
3. Selection of company is based on first-come-first-serve basis. Companies which
had been chosen by other groups are not allowed to be selected again. Please click
here to view the availability of the company before selection:
https://goo.gl/YphCO3
4. Registration must be done by the group leader by 18th December 2015 (Friday).
Late registration will subject to penalty (i.e. marks deduction from overall
assessment).
5. Each group is only allowed to register ONCE. Please contact your lecturer if there
is any further changes. Permission is subject to availability of the company (i.e.
not selected by other groups).
6. Most listed companies publish their annual reports on their websites. Go to:
http://www.bursamalaysia.com/market/listed-companies/list-of-companies/mainmarket and download the relevant reports.
7. For more details about the company, you may visit online financial database such
as
the
company
official
website,
www.finance.yahoo.com
OR
http://www.reuters.com/finance/stocks.

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KJH
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BFN1014 Financial Management I (Sem II, 2015/2016)

CASE 2:
Choo Bhd, a large shoes manufacturing company, is considering replacing one of its
machinery with either two new machines Machine A and Machine B. Machine A is a
highly automated, computer-controlled machine; Machine B is a less expensive machine
that uses standard technology. To analyze these alternatives, your fellow colleague, Mr.
Abdullah, a financial analyst, prepared estimates of the initial investment and incremental
(relevant) cash inflows associated with each machine. These are shown in the following
table.
Machine A
Initial
Investment
(CF0)
Year (t)
1
2
3
4
5

Machine B

RM660,000 RM360,000
Cash Inflows (CFt)
RM128,000 RM88,000
182,000
120,000
166,000
96,000
168,000
86,000
450,000
207,000

Note that Mr. Abdullah plans to analyze both machines over a 5-year period. At the end
of that time, the machines would be sold, thus accounting for the large fifth-year cash
inflows.
Mr. Abdullah believes that the two machines are equally risky and that the acceptance of
either of them will not change the firms overall risk. He therefore decides to apply the
firms 12% cost of capital when analyzing the machines. Choo Bhd. requires all projects
to have a minimum payback period of 4.0 years. Please advise him.
TO DO:
a) Use the relevant capital budgeting techniques to assess the acceptability and
relative ranking of each machine (detailed calculations must be shown). Discuss
the strength and weaknesses of each technique.

b) Summarize the preferences indicated by the techniques used in part a. Do the

projects have conflicting rankings? If yes, how should it be overcome?

c) Use your findings in parts a and b, which machine would be preferred? Explain
any difference in recommendations.

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KJH
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BFN1014 Financial Management I (Sem II, 2015/2016)

IMPORTANT NOTE:
ASSIGNMENT FORMAT Remember that this is a written report to your boss. The
writing style should be formal and professional. All the calculations should be shown
and attached together with the report in Appendix. Citations/ references should be
listed in Reference, if there is any.
The report should be typewritten and justified.
Spacing: 1.5
Font type: Times New Roman
Font Size: 12
DUE DATE This assignment must be submitted in hardcopy to your respective
lecturer (B01: Ms. Kwan; B02: Ms. Thai BEFORE 5pm on Monday, 3rd February
2016 (Week 12).
REPORT SUBMISSION It must be accompanied by a copy of Assignment
Cover sheet that has been completed and signed by every member in a group.
Failure to attach the required cover or to submit a complete cover details will result in
deduction of overall group marks.
REMINDER All work submitted must be your own. Copying or not acknowledging
the work of others is considered plagiarism. The University regards plagiarism as a
form of academic misconduct and has strict rules regarding plagiarism. The group
shall be assigned ZERO for the said assessment if committed in such misconduct
without further negotiation. Please take note that this is a group assignment. Thus, No
individual assignment will be accepted for assessment under any circumstances.
LATE SUBMISSION WILL BE PENALIZED. Please note that no excuse for late
submission will be accepted under any circumstances. There will be 50% deduction
for every one hour delay.
GROUP PRESENTATION All members are required to make a presentation during
lecture or tutorial session between Week 13 and 14. Details of the group assignment
presentation guidelines and schedule will be made available on MMLS. Please check
accordingly.

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KJH
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