Obtain the latest annual report and accounts of a company of your choice.* Consult the Balance Sheet and determine the company’s net asset value.

■ What is the composition of the assets, i.e. the relative size of fixed and current assets?

■ What is the relative size of tangible fixed and intangible fixed assets?

■ What proportion of current assets is accounted for by stocks and debtors?

■ What is the company’s policy towards asset revaluation?

■ What is its depreciation policy?

Now consult the financial press to assess the market value of the equity. This is the current share price times the number of ordinary shares issued. (The notes to the accounts will indicate the latter.)

■ What discrepancy do you find between the NAV and the market value?

■ How can you explain this?

■ What is the P:E ratio of your selected company?

■ How does this compare with other companies in the same sector?

■ How can you explain any discrepancies?

■ Do you think your selected company’s shares are under- or over-valued?