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

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.

Balance Sheet

 

 

(In millions of CHF)

12/2017

12/2018

ASSETS

 

 

Cash and cash equivalents

7,938

4,500

Short-term investments

655

5,801

Trade and other receivable

12,422

11,167

Inventories

9,061

9,125

Assets held for sale

357

8,828

Other current assets

1,757

1,582

Total current assets

32,190

41,003

Intangibles

20,615

18,634

Property, plant, equipment

27,775

29,956

Goodwill

29,748

31,702

Investments in associates and JV

11,628

10,792

Financial and other non-current assets

8,424

4,928

Total non-current assets

98,190

96,012

----------------------------------------------------

 

 

TOTAL ASSETS

130,380

137,015

LIABILITIES & EQUITY

 

 

Trade and other payables

18,872

17,800

Financial debt

10,536

14,694

Accruals and deferred income

4,094

4,075

Other current liabilities

2,552

6,461

Total current liabilities

36,054

43,030

 

Financial debt

 

15,932

 

25,700

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

Translation reserve

-19,433

-20,432

Retained earnings

84,174

84,620

Other equities

989

-183

Shareholders' equity

61,504

57,363

Non-controlling interests

1,273

1,040

TOTAL LIABILITIES & EQUITY

130,380

137,015

Income Statements

 

 

(In millions of CHF)

12/2017

12/2018

Net sales

89,791

91,439

Other revenues

441

348

Cost of goods sold

-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

EBITDA

9,493

12,991

Other non-operating income (expense)

824

916

Taxes

-2,779

-3,439

Profit for the year

7,538

10,468

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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