1 A Brief Business Analysis Including Economy Industry And Company Strategies 2864619

1. A brief business analysis (including economy, industry, and company strategies) which forms the basis of your subsequent financial analysis. Note that before doing the business analysis, you should determine the purpose, which can be either equity valuation or credit and risk analysis in this project. The purpose can influence all your subsequent analysis. 2. Identify financial reporting choices and biases that affect the quality and comparability of the company’s financial statements. You may refer to supplemental information from sources other than financial statements. 3. Evaluate the quality of the company’s financial statements and earnings, and recommend appropriate adjustments for such desirable characteristics as sustainability or comparability. 4. Conduct equity valuation or credit and risk analysis based on the adjusted financial data. 5. Prepare adjusted financial statements (statement of financial position, statement of profit and loss/statement of comprehensive income, and statement of cash flows). Purpose 1. Equity valuation OR 2. Credit analysis – -https://www.crisil.com/Ratings/Brochureware/RR_ASSES/CRISIL-Ratings-research-approach-to-financial-ratios_2013.pdf (following indicators to consider for credit analysis and subsequently to adjust the final report for calculation) a. Capital Structure i. Gearing = Total debt /Tangible net worth ii. Total Indebtedness Ratio = Total Outside Liability / Tangible Net Worth iii. BV_TANG = Tangible Book Value / Assets iv. LEVERAGE= Total Liabilities / Total Assets v. LTDEBT= Long Term Debt / Total Assets b. Interest coverage i. Interest coverage ratio = Profit before depreciation, interest, and tax (PBDIT1 )/ Interest and finance charges c. Debt-service coverage ratio i. CDSCR = [Profit after tax + Depreciation + Interest charges – 25 per cent of incremental NWC3 ] / [Debt payable within one year + Interest and finance charges] d. Net worth i. Market value of equity = Number of common shares outstanding *share price e. Profit margin i. PAT margin = Profit after tax / Operating income ii. ROA= Net Income before Extraordinary Items/ Total Assets iii. PROFIT= Net Income before Extraordinary Items / Sales f. Return on capital employed i. RoCE = Profit before interest and tax (PBIT) / [Total debt + Tangible net worth + Deferred tax liability] ii. ROE= Net Income before Extraordinary Items / Book Value of Equity; iii. g. Net cash accruals to total debt i. NCATD = [PAT – Dividend + Depreciation] / Total debt (short and long term, including off-balance-sheet debt) h. Current ratio i. Current ratio = Current assets (including marketable securities)/Current liabilities (including current portion of long-term debt i.e. CPLTD) ii. Gross current assets days = Total current assets related to operations/ operating income iii. i. Others i. PRSTDS= Standard deviation of earnings / Total assets Company Summary 1. Qualitative – A brief business analysis (including economy, industry, and company strategies) 2. Quantitative – a. Growth i. Net increased moderately, growing by X%. This is XX than the XX% growth rate for 2016. b. Cash status – liquidity i. XXX cash flow from operations generated in 2016/17, which was insufficient?? to cover all financing costs or any debt amortization. ii. capital and investment expenditures to meet by new debt, additional equity, or cash depletion, subsidies… c. Outstanding indicators i. Gross Margin ii. Operating expenses iii. Operating Profit iv. Net Profit Margin v. Bad Debt Reserve vi. Debt/TNW vii. Others… 3. Why the indicator is outperformed/underperformed – the focus question/assumption 4. Key notes i. Construction revenue recognition using percentage-of-completion method and allowance for expected losses ii. Impact of challenges in the marine industry on the valuation of assets iii. Valuation of held-to-maturity financial assets iv. Impairment loss sudden decrease v. Sudden growth in 2017 (revenue jump) vi. Contracts – b/s vii. Borrowing – b/s viii. Other reserves – b/s ix. Income tax – i/s x. Equity holder – i/s xi. Re-classification / fair loss – oci xii. Currency loss – oci 4. Reasons and alerts in the financial statements 1. Earning quality 2. Cashflow quality 3. Balance sheet quality


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