FOLLOW THE STEPS OUTLINED BELOW TO

OBTAIN THE INFORMATION NEEDED FOR THE

ASSIGNMENT

1. Go to e-resources on WSU Library and from the alphabetical list click on "D" and then pick DatAnalysis

Premium database. Once you are in the database, go to the search engine on the top right and enter each the

following company's ASX code:

- NRW Holdings Limited (ASX: NWH)

- Reliance Worldwide Corporation Limited (ASX: RWC)

For each company, the displayed page summarises general information about the company including the

sector and industry in which it operates, total market capitalisation of the firm, latest closing share price, etc.

Both firms are operating in the same Sector (Industrials) and same Industry Group (Capital Goods).

2. On the left-hand side, click on "Financial Data". The displayed page shows annual and interim

information for your assigned company (in the view bar, make sure you choose annual and not interim

data). On the page's control bar at the top, you will see the first three icons which displays the company's

summarised annual financial statements (income statement (profit & loss statement), balance sheet and

the cash flow statement). Additional information, such as the number of shares outstanding at end of period

is also given in these statements for different years.

3. The figures shown on the Financial Data page are rounded figures and are not to be used in the

calculation of ratios. To access the raw figures, select the relevant time period from the 'year range' drop

down bars, and click on 'go'. Once the figures appear, click on download spreadsheet. This will download an

Excel file that contains all the relevant financial statements i.e. Profit & Loss Statement, Balance Sheet, etc.

4. In the downloaded Excel file, you will see a sheet titled "Revenue Expense" in which you can locate the

Cost of goods sold (COGS) for each company for the different years.

5. For more detailed information about how to obtain the data required for your group assignment, please

watch the 'How to Obtain Data for the Group Assignment' video. The video is located in the

Assessment Zone under the Assessment 2: Numerical Problem Solving link.

REQUIRED

Your team has been hired as financial analysts by Paramount Investment Fund. The Fund has identified the Capital

Goods industry to be experiencing growth and have selected two firms as potential investments. The Fund

requires your team to analyse the financial position and performance of the above assigned two companies for

the two stated financial years (2017 and 2018), and to provide a recommendation as to which may be the best

company for the fund to invest into, if any. As a financial analyst, you are primarily concerned with three main

financial aspects for each of the two firms: overall liquidity, capital structure and shareholders' profitability.

Your task involves answering the following 5 questions in your own words (i.e. do not simply "cut and paste"

information from the Annual Report or any other source). You must apply critical thinking concepts when

explaining and justifying your choices.

BASED ON THE INFORMATION AVAILABLE ON THE DatAnalysis Premium

DATABASE FOR BOTH ASSIGNED COMPANIES, ANSWER ALL OF THE

FOLLOWING QUESTIONS (1 TO 5 INCLUSIVE).

QUESTION 1:

Analyse the overall liquidity position for each of the two companies in 2018 as compared to 2017. Calculate the

values for two liquidity ratios to help support your answer and justify why you have chosen these ratios. Note:

ensure that you analyse in this question, not just describe the ratio values. (2 marks)

QUESTION 2:

Calculate the Cash Conversion Cycle (CCC) for each of the two companies in 2017 and 2018. Using your

answer, analyse the efficiency of each of the two companies in managing their working capital in 2018 as

compared to 2017. Note: ensure that you analyse in this question, not just describe the CCC values. (2 marks)

QUESTION 3:

a. Analyse the sources of finance for each of the two companies in 2018 as compared to 2017. Use two capital

structure ratios to support your answer and provide an explanation regarding the changes in the composition

of the sources of finance for each enterprise. Note: ensure that you analyse in this question, not just describe

the ratio values. (2 marks)

b. Assume that the average debt ratio for the Capital Goods industry in 2018 was around 50 per cent. What can

you infer about each of the two firms' current capital structure and gearing (leverage) effect in 2018 as

compared to the industry average? (2 marks)

QUESTION 4:

Using the DuPont method, analyse the profitability of each of the two companies in 2018 as compared to 2017

from a shareholder's point of view. Based on your calculations, explain the main reason(s) for the change in the

profitability for each company over the two years. Note: ensure that you analyse in this question, not just describe

the ratio values. (2 marks)

QUESTION 5:

In light of your analysis in questions 1 to 4, what is your team's final recommendation to Paramount Investment

Fund, with regards to the potential of investing in any of the two firms? Discuss the basis for your

recommendation. (4 marks)

NOTES

1. All ratios must be selected from those identified in your prescribed textbook (Bakry 2016). The use of

ratios other than those identified in the textbook and discussed in class will not gain any marks.

Include all supporting calculations for any values shown in Questions 1 to 5 in the Appendix. The

Appendix is not included in the word count.

Note: Marks will not be awarded if no supporting ratio calculations are shown in the Appendix.

2. In questions 1-4, an analysis is required and not just a description of the ratio. That means you need to

explain how the ratio changed over time and what are the main reason(s) for that change, and how that

will impact the company's financial position.

3. Question 5 requires you to synthesise the analyses from questions 1-4 to formulate a well-justified

argument/conclusion, which is both logical and critical.

4. In calculating the ratios, assume that the Sales are the Operating Revenues (available in the Profit

& Loss statement), and the Sales (i.e. Operating Revenues), for each year specified, are all on

credit.

5. In calculating the ratios, ignore abnormals. You should only use figures before abnormals such as 'Net

profit after tax before abnormals'.

6. Ratios calculated by the Morningstar analyst and available within the database are not to be used as

guidance for calculating your ratios. The analyst has calculated some of the ratios using formulas different

than the one covered in this unit.

7. The assignment does not require the obtainment of industry/peer group averages for any of the

calculated ratios. Where relevant, an industry average has been provided within the question. It is

important to note that the objective of the assignment is to compare each of the two companies'

financial performance over the specified two-year period.