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The aim of the assignment is to show your understanding of a number of issues which analysts find significant in carrying out an operational financial review of the performance and position of a business and to address these in a meaningful, insightful and balanced way. The assignment emphasises the application of the analytical techniques you have studied and shows how financial information can be used to aid decision making by the many stakeholders in a business enterprise.
You have been appointed to the financial team of a substantial company. You have been asked by the Board to prepare an analytical review of the financial position and reporting of Chipotle Mexican Grill Inc., using the most recent published financial statements and other information available, either in the public domain or from within the company.
You MAY choose the standpoint from which this report is made (e.g. competitor, investor, potential acquirer, supplier, customer, landlord or lessee etc.) and should identify this in the introduction to the report. This is in order to give the report some ‘focus’ and does NOT mean that you should limit your analysis purely to factors specifically of interest to the type of organisation you represent.
You will have to obtain copies of the published financial statements from the company’s website.
There are also many websites maintained by financial services organisations (e.g. FT.com, Hemscott, Bloombergs etc) which often freely provide useful information and commentary. A sensible ‘Google’ search can also yield very fruitful results
The report should address at least the following: (weightings indicated are for guidance only and need not be reflected precisely in the final word-count)
• Analysis of the financial strengths and weaknesses revealed by the financial statements. Key ratios on profitability (ROSF, ROCE, Operating profit margin, gross profit margin), liquidity (current ratio, acid test ratio), asset utilization (dividend payout ratio, dividend cover ratio, dividend yield ratio, EPS and P/E ratio) and gearing (gearing ratio, interest cover ratio) should be compared against both prior years and with two selected companies (McDonalds & Yum! Brands Inc.). Note that while it is impossible entirely to separate the financial aspects from the strategic and wider management issues, the primary focus of the assignment remains financial. Please also note that the figures you use in your analysis should be taken from the most recent complete set of annual financial statements – 2013 (NOT the interim statements) and should be those referred to in the statements as ‘Consolidated’ or ‘Group’ rather than any denoted as ‘Company’ or ‘Company only’. (80%)
• Review of the market perception of the company in terms of stock price performance and response from the analyst community (you will need to employ the stock market performance indicators such as EPS, dividend yield etc. as discussed on the module). (20%)
The report should include:
• A key point or executive summary of conclusions (preferably at the beginning of the report!) (this IS included in the word-count)
• Graphical illustration, where appropriate. (graphs and tables count a nominal one word for word-count purposes) Resist the temptation to relegate charts and tables to the Appendices. You should place the ‘bulk’ data there and extract ‘mini’ tables/charts/graphs, placing them in the body of your report at the appropriate places to illustrate the points you are making. In particular, when dealing with the second task above, you should use a chart of share/stock price movements during the period under review and map significant rises or falls in the price against key events affecting the company in the review period.
• A bibliography of sources of information and theoretical material used. (this is NOT included in the word-count) It is essential to give acknowledgement of any external sources, making it clear whether the reference is being directly quoted or indirectly consulted. Not to do this may constitute plagiarism, which is considered a serious offence against academic integrity – and against which the official sanctions are severe!
Detailed tables, extracts or copies of financial information should be relegated to appendices (which are NOT included in the word-count) but may be referred to in the body of the report.
Please note the appendices must not exceed 15 pages. If you have substantial financial documents that you wish to include, then refer your tutor to the appropriate website(s).
Please note that you are NOT being asked to produce a marketing or strategic analysis of the selected company – and you will not receive credit for doing so! Neither will credit be given for extensive sections of background material. The principal focus of the report should be on the operational financial analysis and the strengths and weaknesses it reveals. Your work should focus on financial issues and be grounded in the published financial report.
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