London School of Business and Finance
Program: MA in Finance and Investment
Unit Name and Reference: Business and Financial Analysis
Assignment Title - BFA Written Coursework Assignment
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Learning Outcomes:
Learning Outcome 1. Identify rules and principles in the international accounting standards and financial regulations and core values in business that led to competitive advantage
Learning Outcome 2. Demonstrate an in-depth knowledge in the sphere of business and financial analysis with a view to corporate evaluation.
Learning Outcome 3. Critically assess businesses and accounting data and financial information available to make investment decisions.
Learning Outcome 4. Discuss the linkage between current theory and common practice and be able to organise appropriate evidence and reasoning to produce a balanced conclusion in business and financial analysis
Learning Outcome 5. Demonstrate problem solving and analytical approaches to facilitate effective business and financial decision-making.
Your Task Question 1
Below are presented consolidated financial statements for Nestlé, a Swiss transnational company and the world´s food and beverage leader.
The company´s headquarter is set in Vevey, Vaud, Switzerland. Nestlé prepares its financial statements under IFRS.
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Balance Sheet
|
|
|
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(In millions of CHF)
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12/2017
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12/2018
|
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ASSETS
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|
|
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Cash and cash equivalents
|
7,938
|
4,500
|
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Short-term investments
|
655
|
5,801
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Trade and other receivable
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12,422
|
11,167
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Inventories
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9,061
|
9,125
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Assets held for sale
|
357
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8,828
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Other current assets
|
1,757
|
1,582
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Total current assets
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32,190
|
41,003
|
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Intangibles
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20,615
|
18,634
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Property, plant, equipment
|
27,775
|
29,956
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Goodwill
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29,748
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31,702
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Investments in associates and JV
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11,628
|
10,792
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Financial and other non-current assets
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8,424
|
4,928 |
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Total non-current assets
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98,190
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96,012
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----------------------------------------------------
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|
|
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TOTAL ASSETS
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130,380
|
137,015
|
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LIABILITIES & EQUITY
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|
|
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Trade and other payables
|
18,872
|
17,800
|
|
Financial debt
|
10,536
|
14,694
|
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Accruals and deferred income
|
4,094
|
4,075
|
|
Other current liabilities
|
2,552
|
6,461
|
|
Total current liabilities
|
36,054
|
43,030
|
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Financial debt
|
15,932
|
25,700
|
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Employee benefits liabilities
|
7,111
|
5,919
|
|
Other non-current liabilities
|
8,506
|
3,963
|
|
Total non-current liabilities
|
31,549
|
35,582
|
|
Share capital
|
311
|
306
|
|
Treasure shares
|
-4,537
|
-6948
|
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Translation reserve
|
-19,433
|
-20,432
|
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Retained earnings
|
84,174
|
84,620
|
|
Other equities
|
989
|
-183
|
|
Shareholders' equity
|
61,504
|
57,363
|
|
Non-controlling interests
|
1,273
|
1,040
|
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TOTAL LIABILITIES & EQUITY
|
130,380
|
137,015
|
|
Income Statements
|
|
|
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(In millions of CHF)
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12/2017
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12/2018
|
|
Net sales
|
89,791
|
91,439
|
|
Other revenues
|
441
|
348
|
|
Cost of goods sold
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-44,923
|
-46,070
|
|
Other expenses
|
-32,076
|
-31,928
|
|
Gross profit
|
13,233
|
13,789
|
|
Other operating income (expense)
|
-3,121
|
-37
|
|
Operating profit
|
10,112
|
13,752
|
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EBITDA
|
9,493
|
12,991
|
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Other non-operating income (expense)
|
824
|
916
|
|
Taxes
|
-2,779
|
-3,439
|
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Profit for the year
|
7,538
|
10,468
|
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Attributable to non-controlling interests
|
355
|
333
|
|
Attribuable to shareholders of the parent (Net profit)
|
7,183
|
10,135
|
Question 1a)
Identify (calculate) and critically analyse key relevant financial ratios using data provided in the statements for the two-year period. Try to include at least one ratio from each category of financial analysis: liquidity, activity, profitability, coverage. Make sure to provide formulas for calculations. In this ratio analysis, discuss also their importance and barriers.
Question 1b)
Based on different online/printed sources, financial statements, reports etc. perform a company/business and industry analyses of the Nestlé company. Please, apply SWOT Analysis and Porter´s Five Forces Analysis in your discussions.
Question 2
Senior managers of a German company specializing on atypic glass windows and doors are currently considering company´s expansion. Its main trading partners are France, Switzerland and other neighbouring countries and trading currency Euro. The company would like to expand to some non- European countries as well (such as USA but also Asian countries). This would require a large investment that company cannot finance from its own sources.
Short term funds, of up to six months, are available from a German bank at a cost of 5% per annum.
The company also needs to take into account different cultural specifics of local demand in selected countries in order to consider the change in product offer which would require (among other things) to double the number of employees (especially blue-collar workers, but also product and project managers, engineers, sales specialist etc.).
Question 2a
Explain how (using what technics) the company could identify its main risks and critically evaluate at least three of the various types of business risk the company is facing.
Question 2b
With reference to the risks identified in the previous question, critically evaluate some of the various methods the company has available to it in order to moderate the risks.
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