Analysis of STO company annual report of 2016/2015 (Include charts and be professional)

Topic: Analysis of STO company annual report of 2016/2015 (Include charts and be professional) • have to attach as appendix following 1- Income statement (1 page ) 2- Balance sheet (1 page 3- Cash flow ( 1 page ) Structure of assignment 1- Introduction – 5 marks 2/3 page • Name of company/ nature of business/ history (should not be more than 3 sentence. (eg. STO since 1930) • Financial year (e.g. Financial year 2016) • Focus of this report 1) long term source of finance 2 ) short term form of finance 3) dividend policy 4 ) profitability • Company profile (not part of intro para but it’s part of intro) separate page 2- Long term source of finance ( Capital structure) • Capital structure available to companies/ include literature/ write a definition already accepted. a) Equity b) Debt c) Embedded / part equity and part debt • Optimal capital structure. (10 marks) (you can give definition & theory) - M & M theory - Agency theory. – How to solve agency problem ( eg. Bonus, BJR) :Important to mention risk averse if they are not taking loan but if they take debt then you can say they are risk takers. - From annual report you read notes relates to capital structure related risk, debt etc… - CAPM Asset= liability + Capital = Debt + equity =Debt (loan ) + capital (Share capital ) You can find this in report under equity & liabilities For eg. Your asset value is 100,000 and your equity is 25,000, that means you have debt of 75,000- its total 100% - this is capital structure – whats the best ratio- is it 25: 75 -? I would prefer 75% equity and 25% debt cos of interest. But there is no steady rule this is right - But considering M&M irrelevant theory says capital structure doesn’t effect what ever the capital structure % cos these assumptions are based. on ideal world. 3- Short-term source of finance (working capital management) (10 Marks) • WCM- talk about WCM ratio : Liquidity a) current ratio b ) quick ratio • Cash conversion cycle (CCC) - When you talk about CCC you can take about ratios: efficiency ratios- 1) rate of stock turnover 2) debtors collection period 3) creditors payment period. - In appendix you can do calculation and in report you can put ratio outcome in a table. Eg 2015 2016 Quick turnover 5% 6% Current ratio 4- Dividend policy (10 marks) • In general write about dividend policy. E.g. If your company is giving dividend every year, then it’s your dividend policy. • Relate dividend policy to your company. You can include chart and explain whether its progressive or constant. • M & M dividend irrelevant theory. • Birds in the hand concept. 5- Profitability (5 marks) • Start with brief explanation of profitability and commercial viability • Then cuculate profitability ratios (3-5 ratios. Include any) : a) ROCE b) GP % c) NP% • Include profit trend based on sale of profit . If you want to show trend then two years would not be enough, so include 5 years. • Macro analysis ( PEST ) / • Minsky analysis. • Recommendation: (Based on these ratios and above you have to recommend whether this is a good company to purchase or invest or not to purchase). If ratios not ok then sell/ if ratio good then keep. 6- Conclusion: (half page) • Conclude all above guidance on correct referencing go to: http://www1.uwe.ac.uk/students/studysupport/studyskills/referencing.aspx