BU5002 ASSIGNMENT SEMESTER 1, 2003 There are 2 parts, part 1 is a practical financial analysis, part 2 is a report on benchmarking You

need to attempt BOTH parts. Assignments are due the Monday after the final exam gives you a further uninterrupted weekend - DUE DATE: MONDAY APRIL 14, 2003 Assignments MUST be in the MBA box top floor of Commerce Building by 6.00PM Monday April 14th, 2003.

Part 1:

Financial Analysis

You have been asked by management to prepare an analysis of Key Corporation Pty Ltd. You are required to provide a written report to management based on your analysis of the financial data for Key Corporation Pty Ltd below. Your report should include: (a) Profitability (b) Performance and efficiency, (c) Resource use, (d) Liquidity (e) Financial stability/solvency. (f) General comment and conclusions bring all the above together. In dealing with (a) to (f) above you are required to: Identify appropriate ratios/measures for (a) to (e) above; Explain what each of these ratios/measures represents e.g. Current Ratio represents liquidity/availability of cash in the short term by looking at the relationship between current assets and current liabilities ( you will need to expand a lot more on this) Show your comprehension of what these ratios/measures indicate, individually and jointly, about the companys performance and future prospects. This should identify any weaknesses and/or strengths of the company. Support your conclusions with reference to relevant figures and industry comparisons. Additional calculations may also be undertaken.

Key Corporation Pty Ltd Balance Sheet (Statement of Financial Position) Accounts 1996 Cash at bank Cash on hand Marketable securities Accounts Receivable Inventory Prepayments Plant (net) Land Building (net) Patents Goodwill 1997 $ 11100 10300 400 12800 20400 37400 11280 11100 4720 4850 15000 21000 40000 30000 70000 60400 12000 13300 2000 199700 189750 46400 35210 18000 11000 7800 8400 5500 2700 38000 29000 56000 56000 6000 6000 22000 41440 199700 189750 1998 $ 11600 400 4300 37800 11300 4370 18000 40000 64000 11600 1600 204970 52890 18000 4800 3400 32200 56000 6000 31680 204970 1999 $ 16700 $

600600 10900 0 35000 11240 4560 19000 40000 54400 13200 1200 800 206800 49270 8000 9900 3600 39000 56000 6000 35030 206800

Accounts Payable Bills Payable Wages Payable Provision for Income Tax Debentures Paid-up capital ($1 shares) Share Premium reserve Retained Profits

Key Corporation Pty Ltd Comparative Profit and Loss Account (Statement of Financial Performance) For the years ended 30th June 1997 1999 1997 $ Operating Revenue Cost of goods sold: Opening Inventory Purchases Closing Inventory Cost of goods sold Gross Profit Expenses: Selling Administrative Depreciation Interest Operating profit before income tax Income tax expense Operating profit after income tax Extraordinary items (after tax) Operating profit after tax & ext. items Retained profits at 1 July Dividends Paid Retained profits at 30th June $71200 11280 43000 54280 11300 42980 28220 6800 3400 6500 3000 19700 8520 3400 5120 6800 11900 22000 33920 2240 $31680 1998 $ $73500 11300 45200 56500 11240 45260 28240 8200 3400 5000 2500 19100 9140 3600 5540 (1000) 4540 31680 36220 1190 $35030 1999 $ $68800 11240 38000 49240 11100 38140 30660 9900 6000 5000 3000 23900 6760 2700 4060 4800 8860 35030 43890 2450 $41440

Key Corporation Ltd Cashflow Statement For the Year Ended June 30 1997 Net Cashflow from Operating Activities Receipts from Customers 63,600 Payment to Suppliers (36,510) Payment for Services (22,250) Payment for Income Tax (5,500) Payment for Interest (3,000) Net Cash provided by Operating Activities (3,660) Net Cash Flow from Investing Activities Net inflows from sale and purchase of fixed assets 3,700 Net cash used by Investing Activities 3,700 Net Cash Flow from Financing Activities Payment of Dividends (2,240) Change in Debentures (5,800) Net Cash used by Financing Activities (8,040) Net Cash Movement for the Period would be Add Cash at Bank Opening Closing Cash at Bank @ 31/12 (8,000) 24,300 16,300 1998 1999

84,300 67,600 (48,820) (52,060) (24,290) (15,490) (3,400) (3,600) (2,500) (3,000) 5,290 (6,550) 1,000 1,000 (1,190) 6,800 5,610 11,900 16,300 28,200 1,700 1,700 (2,450) (10,000) (12,450) (17,300) 28,200 10,900

Reconciliation of Cash/Cash Equivalents Cash at Bank Cash on hand Marketable securities 1,996 11,100 400 12,800 24,300 1,997 11,600 400 4,300 16,300 1,998 16,700 600 10,900 28,200 1,999 10,300 600 10,900

Key Corporation Ltd - Summary Ratios: Return on Equity (ROE) Return on capital employed (ROCE) Return on Assets (ROA) Net Profit Margin (Net profit after tax (NPAT) including Extraordinary) Gross Profit Margin Profit Margin (using Operating profit after tax (OPAT) before Extraordinary) Avg Inventory Turnover days Avg Receivable Turnover days Avg Creditors Turnover days (Accts payable only) Asset Turnover Current Ratio Quick Ratio Operating C/flows to Current Liabilities Gearing Debt Ratio Equity Ratio Times Interest Earned Earnings Per Share (cents) Dividend Per Share (cents) Dividend Payout Ratio Operating Cashflow per share 1997 13.4% 9.3% 5.7% 16.3% 39.6% 7.2% 96 149 421 35.2% 0.88 0.68 -0.05 25.6% 54.3% 45.7% 3.84 0.21 0.04 18.8% -0.07 1998 4.8% 8.9% 5.7% 15.8% 38.4% 7.5% 91 181 412 35.7% 1.12 0.89 0.07 28.7% 53.1% 46.9% 4.66 0.08 0.02 26.2% 0.09 1999 8.8% 7.3% 4.9% 14.2% 44.6% 5.9% 107 192 406 34.7% 1.12 0.84 -0.11 21.9% 45.5% 54.5% 3.25 0.16 0.04 27.7% -0.12

The following industry averages were available through industry publications: 1997 1999 Current ratio 2.2:1 Quick ratio 0.9:1 Average Collection period (days) 125.3 Inventory turnover (times per year) Profit margin*based on operating profit after income tax 8.5% Debt ratio 30% Earnings per share (cents) Rate of return on shareholders equity 11% 2.1:1 0.9:1 125 6 6.5% 30% 60c 11% 1998 2.1:1 1.0:1 124.5 5.6 6.2 8.5% 32% 60c62c 12%

ASSIGNMENT - MARKING CRITERIA

ASSIGNMENT Part 1 Financial Analysis Please refer to your course material for details regarding presentation noting particularly:

All assignments are to be professionally typed on standard A4 paper using 1.5 line spacing. binding of assignments is not required staple top left hand corner page limit 5 pages maximum (about 1500 words) remember quantity need not reflect quality. Substance over form. any appendices are not included in the page limit reports should follow (generally) a format for a professional report. assignments MUST be in the MBA box top floor of Commerce Building by 6.00PM Monday April 14th, 2003. all calculations are to be provided in the appendix to your report students should make good use of tables and appendices where applicable students are expected to research the topic in other relevant accounting/finance texts. This research should be well referenced. Do not rely solely on the assigned text for interpretations. Referencing should be as per the GOVERNMENT PRINTER see text references further on