As a senior manager, you will be involved in supporting procurement processes, investment
decisions, evaluating joint ventures partners for common projects, or even assessing
potential business acquisitions as they relate to your division’s operations. All these types of
decisions would require a careful analysis to assess the financial strength, or the position of a
potential supplier, contractor, investment, vendor or partner.
A typical financial management related activity would be to conduct a financial statement
analysis to assess the financial performance and financial position of an organisation your
company may seek to engage with. Financial analysis is most valuable when it considers both
qualitative and quantitative analysis.
In certain circumstances (e.g. selecting suppliers or contractors to fulfil the role of service
providers), it is essential to undertake a comparative analysis of two preferred suppliers /
contractors.

Identify two stock exchange listed (public) companies that you are considering as
potential suppliers of goods or services to your company. These companies can be
located anywhere in the world, if they are stock exchange listed (quoted).
2. Access both companies’ annual financial reports from the ‘Investor relations’ tabs on
their websites (or from the stock exchange where they are listed).
3. Undertake qualitative and quantitative financial statement analysis by utilising the
following financial ratios as part of your analysis:
a. Profitability ratios
b. Efficiency ratios
c. Liquidity ratios
d. Gearing ratios
4. Perform a comparative analysis of the two companies. Ensure that your comparative
analysis focuses on recommending one of these companies as your preferred
supplier.
5. Prepare a report to your divisional director with your analysis and recommendations

Select any two listed companies that are competitors in the marketplace (other than
banks, financial institutions, insurance companies, or extraction / project-based
companies that are reliant on a small number of large projects). This is to ensure that you will have
sufficient depth to your proposed companies to allow you to address all the
assessment criteria.
• When undertaking ratio analysis, focus on the most recent two years of data, but graph
a three to five year period to support trend analysis and meaningful interpretation.
• When conducting each ratio analysis, three ratios per section is sufficient; however,
only two ratios are required for the liquidity analysis.
• You may use any of the techniques discussed in this course in your analysis.
• Retain the focus on the purpose and context of your analysis (i.e. supplier/contractor
evaluation).
• Make sure you analyse and interpret the findings of each ratio analysis activity.