IB9Y9 - Financial Reporting and Statement Analysis
Individual Assignment, 2024-2025
This is a structured individual assignment and involves all aspects of valuation techniques. Your case company is Marks and Spencer listed on the London Stock Exchange. You are assessed based partly on your technical skills, but also the extent to which you understand the materials covered in the module.
Good discussion should include relevant readings and examples, as well as refer tightly to your own analysis to support your arguments. You are required to provide full technical demonstrations in appendices, including full reformulation, value-relevant ratio analysis (advanced DuPont analysis), and abnormal operating profit analysis. Word limit figures for each section are for guidance only. Please also take good care in presenting the report and use adequate citations and references.
You are required to write an equity research report on Marks and Spencer, using the company’s 2024 set of financial accounts. The report be up to 2,500 words long, including tables, figures, appendices and footnotes but excluding references. Please save all text as text (not as pictures).
You should follow the format and content described below. Your report should include:
1. A summary page of the report and recommendation. (200 words max. 10% of the mark)
What is expected? A brief and focused review of the company’s key financial performance and of your recommendations.
2. Reformulate Marks and Spencer financial data for at least the last four years. show well- tabulated net operating assets (NOA), net debt, net operating profit after tax (NOPAT), recurring NOPAT (if applicable), and free cash flows (FCF). Review of the firm’s recent financial performance, based on value-relevant ratio analysis that is based on the reformulated income statements and statements of financial position. Discuss the company’s core strategy with support of key reformulated figures. (1,000 words max. 40% of the mark)
What is expected? You need to show the relevant skills when computing the reformulated numbers and the value-relevant ratios. You need to explain clearly how the value-relevant ratios help you to interpret the firm’s strategic initiative. In your explanations refer to current and to past performance.
3. The forecast assumptions. (25% of the mark)
What is expected? You are expected to forecast four primary forecast assumptions (sales growth rates, profit margins, asset turnover, and cost of capital) and explain clearly and in a focused manner how these figures relate to the potential performance outcomes of the firm’s strategy.
4. Calculate the intrinsic (fundamental) value of the equity of the company using the enterprise-based valuation approach based on abnormal operating profit and free cash flow valuation models. What is your assumption about the growth of AOP? Explain your assumption. You should also include a brief discussion about the recommendations you associate with the calculations. (25% of the mark).
What is expected? You are expected to perform. the computations related to the abnormal operating profit and free cash flow valuation models and write a clear discussion that explains your assumptions and your recommendations.