Module Overview

 

This is a coursework-based module. Students will form groups and choose two real life companies and evaluate their financial performance and management practices which include ratio analysis, capital structure policy and dividend policy. In additions students will also be using real life financial data to estimate their companies’ expected returns. By the end of the module, students are expected to submit a report which accounts for their chosen companies’ performance and financial practices.

 

Aims and Objectives

 

This module enables students to apply the accounting and financial theory to a real life company to evaluate its performance and financial management practices.

 

Learning Outcomes

 

By the end of the module, students should be able to:

 

Subject Specific

 

• estimate the cost of capital and discuss the capital structure and dividend policy of a selected company; and
• prepare a report to outline the selected companies’ performance which includes their profitability, liquidity situation, cash management and future prospect

 

Intellectual

 

• integrate subject matter studied on related modules and to demonstrate the multi-disciplinary aspect of practical financial management problems; and
• use academic theory and research to question established financial theories.

 

Practical

 

• be more proficient in researching materials on the internet and Library database.
• be able to use SPSS or excel for statistical analysis.

 

Personal and Social

 

• through group discussion and case study, students will learn to appreciate public speaking and presentation.

 

Key Readings

 

No textbook required. Students are to refer to the textbooks used in Financial Management and Financial Reporting/Financial Accounting.

Pre-requisite

 

Financial Management and Financial Accounting or Financial Reporting

 

Word count: 5,500 words

The following criteria apply:

 

Criteria 1

Technical considerations:

1.1  
correct accounting numbers are used in all essential financial ratios

1.2  
appropriate price data are used for beta estimation and cost of equity is correctly determined

1.3  
at least five years of dividend trend and debt to equity (in market value term) are given

Criteria 2

Interpretation and Analysis

2.1 For each performance aspect: the essential ratios are discussed, the potential causes for their movements are identified and their financial implications are assessed.

2.2 For beta and cost of equity estimation: proper consideration is given to return intervals, market proxies, risk free rates and sample periods.

2.3 For debt to equity ratio: sufficient evidence and mapping is given to the trend of debt ratio and underlying theories

2.4 For dividend policy: sufficient evidence and observation is given to the trend of debt ratio and underlying theories

Criteria 3

Extent of research

Clear evidence of good use of information from annual reports, other scholar articles and public and reputable information

Criteria 4

Referencing, style, presentation, structure and conclusion (together with any limitations)

The group report should cover the following two parts:

 

1.      
Performance

2.      
Financial Management Practices

 

For the Performance part of the group work, you and your group would need to consider the two quoted companies’ profitability, liquidity, efficiency and risk. Ratio analysis which you learn from the accounting modules would be applicable.

 

For the Financial Management Practices, you and your group would need to select only one of the two companies chosen in Part 1 and consider its capital structure, dividend policy, and beta.

 

 

Individual Reflective Commentary (20% of the total mark)

 

 

You will be writing a 750 word report on the difficulties and limitations of the analysis you contribute to this group work.

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