Assignment-FAM

Guidelines to produce a
top quality FAM
assignment!
A Strategy for success.

Assignment-FAM

Very important notes that

every
student
has
to
consider, with regard to the
submission of assignment,
is clearly outlined in the
next 3 slides!!!

Assignment-FAM
All students are advised to refer to the
student portal & get a sound awareness
on
the
policies
governing
late
submissions
&
other
academic
regulations!
Student Handbook, MBA Handbook , and
academic
regulations,
external
examiners report are all available on
the student portal and students must
refer
to
these
handbooks!

Assignment-FAM
Students who have been found to have
committed
acts
of
Plagiarism
are
automatically considered to have failed the
entire semester. If found to have breached
the regulation for the second time, you will
be asked to leave the course.
Plagiarism involves taking someone elses
words, thoughts, ideas or essays from
online essay banks and trying to pass them
off as your own. It is a form of cheating
which is taken very seriously.

Assignment-FAM
Plagiarism and its
Consequences
Maintaining low similarity index count ( i.e.
Similarity count from any single source
should be less than or equal to 1% ).
Any academic matter taken from your
own
previous
assignment/s
and
submitted as is, even though cited, is
not allowed as it would tantamount to
SELF PLAGIARISM.

Assignment-FAM

Submission of answers
to the assignment
questions in
IMAGE FORMAT is
STRICTLY
PROHIBITED.

Assignment-FAM
QUESTION
1. You work as a research analyst for a leading
investment bank, your main tasks are to provide
competitive analysis on various companies
market offerings, identify market trends, and
analyse business models of public listed firms.
As part of your routine work identify a specific
industry and select a firm that has experienced
dynamic changes over the last five years.
Critically evaluate the key drivers of change that
have affected the industry and the selected firm

Assignment-FAM
2. Undertake a secondary research and
write a report to your current and
prospective clients on a specific listed
firm on the main board of the Colombo
Stock Exchange or the London Stock
Exchange or any other global stock
exchange

Assignment-FAM
Your report should critically evaluate the FIVE year
financial performance of the selected firm. This
report should cover the areas of profitability,
liquidity, efficiency, capital structure and
analysis of investor returns.
Your analysis must also include suggestions on why
such trends prevail or change accordingly.
Meanwhile you must state areas considered for
remedial action to any weaknesses that you have
identified for investigation and state your
recommendations clearly.

Assignment-FAM
3. Critically evaluate the firms cash flow
statement over the FIVE year period and
suggest possible impact(s) of the changing
environment on the firms cash flow under the
main headers cash flow statement - cash flow
from operation, investment and financing.

Your analysis must demonstrate the ability to

engage in a critical discussion on the
sustainability of future cash flow, possible
remedial action(s) and additional factors taken
into consideration.

Assignment-FAM

Pl do not consider
companies
from
the Banking and
Insurance Sectors
for
this
assignment.!

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What is the report structure?
a.) Front page: This should include the
following;
Title of the report
Module name
Student name
Student ID
Maximum word count= 4000

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b.) Executive summary
You must clearly explain the work
methodology
undertaken
to
complete this finance report.

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C . ) Table of contents :
The prospective company and their
market details
Analysis of the industry dynamics and
critically evaluating its impact on the
firms business operation
3. Critical evaluation and comparison of
FIVE year financial performance of the
selected firm.

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4. Critically evaluating the firms cash
flow statement over FIVE year time
horizon

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General Guidelines
Your analysis has to be
based
of
one
listed
companys annual report.
The annual reports must
display information for the
past 05 yrs! The industry
and this company must have
been very dynamic!!!

Assignment-FAM

Based on the
marking
scheme
structure
your
answers

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1.0 The prospective company and their
market details 500 words & 10 marks
1.1 Answer Plan:
You may select one company from a industry
that has shown dynamic changes and also listed
in the CSE or any other global stock exchange!
But, you must select a firm or Industry that have
gone through a lot of changes lately (this will
give you material for ideas/suggestions)

Assignment-FAM
Once, the suitable company is selected, then
describe the financial background!
How to describe the financial background?
The companys sales, profitability, cash
flows, asset structure, liabilities etc can be
presented in either bar charts or pie charts
over the five year time span!
You may also briefly describe the corporate
background in summary form!

Assignment-FAM
2.

Analysis of the industry

dynamics
and
critically
evaluate how the key drivers
of change affected the firms
business operation 700
words & 20 marks

Information
on this will be in the
2.1
Answer Plan:
narrative part of the Annual
Reports (Review of Chairman/CEO)

Assignment-FAM
Ideas for possible key drivers:
regulation, competition, consumers
(taste), suppliers, changes in prices
of raw material (commodities),
technology
Select few key drivers (maximum 5
but could be even less) and how
these affected operations of firm &
the changes could be positive or
negative or a combination of both

Assignment-FAM

You can also use PESTEL or

Porters Five Forces to select key
drivers
Try
to
prioritise
from
most
important to least important (see
what they discuss in official
corporate reports most)

Assignment-FAM
3.

Write a report that critically

evaluates and compares the FIVE year
financial performance of the selected
firm. 2100 words & 50 marks

Answer Plan:
Five important ratios has
to
be
calculated
and
critically reviewed

Assignment-FAM
a.) Profitability ratios:
ROCE and Net profitability or
any
other
suitable
two
profitability ratios or asset
turnover, EBITDA, Operating
profits/employee etc!

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b.) Liquidity ratios

Liquidity ratios :
Current ratio
Quick assets turnover ratio
c)

Cash operating cycle

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C.) Efficiency ratios
Efficiency ratios :

a)

b)

c)

Stock turnover days

Debtors turnover days
Creditors turnover days

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d.) Capital Structure ratios
Capital structure ratios :
Debt/equity ratio
b)

Interest cover ratio

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e.) Investor ratios
This can be P/E ratio and EPS OR
any other two ratios such as
dividend yield or dividend cover.
You should critically interpret !!!

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You must critically analyze why trends
change or prevail (why has it
happened)
Critical analysis means connecting the
behavior of ratios to areas such as
cost
control,
productivity
improvements, capital appreciation,
technology
up
dates,
budgetary
controls etc. In other wards, there
must be an integrated picture of ratio
analysis performed on a broader scale

Assignment-FAM

If you can get industry average,

use it to compare otherwise, leave
it, and only compare the company
figures
with
its
own
past
performance and comment on
trends!

Assignment-FAM
Important points to observe when
writing this assignment:
Remember ratio workings must come
in the appendix & critical analyze in
the main body of the assignment
Ratios should be reported on a group
basis and organized in a table
Interpret ratios on a group basis!

Assignment-FAM
Another sub-section within this
question has to deal with areas for
remedial
action
and
state
recommendations for each area:
For example , in the profitability area if
ROCE
is
on
the
decline
what
recommendations can be made to
reverse the trend
If Debt/Equity ratio is on the rise, how
can this be reversed ?

Assignment-FAM
4. Critically evaluate the firms cash flow
statement over FIVE year period and
suggest possible remedial actions for
sustainable future cash flow - 700 words &
15 marks
There are two answering parts to this
question!

Answer Plan-1
Part-1: Analysis & explanation of each
segment of the cash flow statement

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a. Analyze each section of Cash Flow
Statement separately (Operations,
Investment and Financing)
For example, Operating activities
which shows the actual cash flows from
operating activities for example, the
receipts from customers and the
payments to suppliers and staff

Assignment-FAM
Investing activity cash flows are
those that relate to non-current
assets. Examples of investing cash
flows include the cash outflow on
buying
property
plant
and
equipment, the sale proceeds on the
disposal of non-current assets and
any cash returns received arising
from investments.

Assignment-FAM
Financing activity cash flows relate to
cash flows arising from the way the entity
is financed. Entities are financed by a
mixture of cash from borrowings from third
parties (debt) and by the shareholders
(equity). Examples of financing cash flows
include the cash received from new
borrowings or the cash repayment of debt
as well as the cash flows with
shareholders in the form of cash receipts
following a new share issue or the cash
paid to them in the form of dividends.

Assignment-FAM
b.) Relate the inter connectivity of all
three sections of the cash flow
statement, by demonstrating, how the
changing environment has impacted
companys cash flows
For example, high degree of industrial
competition in a business sector would
have led to either a loss in market
share or fierce price cutting, leading to
a drop in overall revenue collection

Assignment-FAM
When overall revenue reduces in
value, then operational cash inflows
declines
and
if
there
are
any
immediate supplier payments to be
made, then the overall net cash in flow
from operations significantly declines,
leading
to
additional
financing
activity( i.e. taking more
loan &
perhaps even withholding dividends)
to finance vital investment activities
( such as purchasing technology to
diversify operations), if required at
additional costs!

Assignment-FAM
What happens when there is
significant technology innovations
in a industry concerned to net cash
flows from operations in a related
company?
When answering this question ,
you need to show the connectivity
of all three sections of the cash
flow statement , with regard to
final net cash flows!

Assignment-FAM

You can use tables to present

the main changes in the various
sections (no detail needed here)

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Answer Plan 2
Part-2: Sustainability of Cash flows
Discuss the sustainability of future
cash flows and if problems in
sustainability what can we do ?
Relate the three sections when
discussing sustainability issues!!!
But, remember cash flow from
operations sustain what happens in
investment and financing

Assignment-FAM
Points to discuss under sustainability
of cash flows?
Sustainable cash flow refers to a
continuous stream of revenue. For
example, a company may heavily rely on
client or customer payments for payroll,
and if a client defaults or sends a payment
late, the company is unable to pay its
employees. Maintaining a sustainable cash
flow alleviates these types of dilemmas.

Assignment-FAM
a.) In sustaining cash flows, if for
example when we are paying
dividends (see trends in dividends
) is it sustainable ? If yes how it is
sustainable? If not sustainable
why it is so?

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b) Do we expect some key outflows
related to investment ? If yes where
will we get the money? Is it from
operations or external financing ?
c)

In sustaining suitable cash flows, do

we need to cut/reduce dividends?

d) If we need external financing can we

get it from bankers/financial markets ?,
do we need to renew some LT
financing?

Assignment-FAM
Finally :
References must be shown in alphabetical order.
Bibliography must be shown in alphabetical
order.
Proper formatting, proper numbering, proper
paragraphing etc must be pursued.
There must be a high degree of critical thinking
with the application of good English, effective
presentation, logic of argument and clarity of
exposition must be seen in your assignment.