|ACCT1063: Management Accounting & Business|
Business Report detail requirements:
Students are required to download Singapore Airline company annual reports from 2017 to 2021 (five-year annual reports)
Levered beta measures the risk of a firm with debt and equity in its capital structure to the volatility of the market. So, please consider levered beta for your study.
Beta for Singapore Airline
How to find market rate:
The compound return from the All Ordinaries Total Return Index (ASX: XAOA) from June 1979 (when it started) to end June 2020 is 11.49%. You can safely quote this as the average return from the stock market.
Yahoo finance may be used to collect financial data used to estimate the market portfolio return. Students can prefer to use the S&P/ASX 200 or All ordinary indexes in estimating the market return. Yahoo finance link is provided here:
Singapore Monetary Authority Bonds rate can be used to search information about bond yields such as Singaporean government daily and monthly bond yields; corporate bond yields and other market interest rates. Students should search for other information about market interest rates from Notes to Financial Statements. The most significant financial information is found in Notes to financial statements! The SMA link is provided here: Singapore monetary authority bonds rates Please use 15 – year bond yield rate.
1. Title: Provide a title of your report followed bya Lego that represents your company.
2. Executive Summary:
An executive summary provides a condensed version of the main report in three paragraphs that discuss (1) the aim of the report, methods used to analyze financial data (e.g. trend analysis based on historical financial ratios); (2) findings; conclusion and recommendation; and (3) limitation of the report.
Table of Content
4. Brief company and industry overview:
What is the selected company and what industry that the selected company operates in (Hint: Agriculture or Manufacturing etc.), discuss the competitive industry landscape, and provide an industry outlook? What are the essential products or services in this industry? Briefly list and description of the most important ones. Who are the primary producers (major companies) in this industry? Who are the primary buyers or customers (Hint: major markets) of the products of this industry?
5. Data Analysis
5.1. Analysis of the company’s capital structure policies
Describe the capital structure considering the following criteria:
5.1.1 Why is capital structure analysis useful for a company? (discus on optimal capital structure, firm value, why higher EPS does not always support for the optimal capital structure).
5.1.2 What does the capital structure theory say about a company’s capital structure?
5.1.3 Assess the firm’s capital (i.e. capital structure of the selected company) over a five-year period (i. e. 2017 – 2021) using the data collected for the analysis. In your analysis
a. Use debt ratios, debt-equity ratios and Times interest earned ratios to assess the company’s current performance against its past performance ( i. e trend analysis) and its current performance against its competitors (i.e. industry analysis). How might they be useful in value chain analysis? Please use 5–year financial data from 2017 to 2021 (please conduct performance analysis over the 2017–2021 period).
b. Based on the findings found in a, what is your opinion about the company’s capital structure, specifical degree of financial leverage. (HINT: Make an informed assessment about its firm capital structure based on these solvency ratios).
5.2.1 explain the relationships between bond prices and interest rates and explain why it is important for company managers as well as investors to understand the relationship.
5.2.2 what long-term borrowings are available to the company (e.g. bonds, long-term loans)? provide information on terms (e.g. coupon rates, maturity period for bonds, interest rates, and term period for loans).
5.2.3 describe the types of shares held by the company. what can you say about the history of company share issues, retained earnings, and payment of dividends? are they following any specific policies for these? (please refer to notes to the accounts in the annual reports).
5.3.1 (1) What is the main benefit of debt financing? How does it affect the firm’s cost of capital?
(2) How do the cost of debt, the cost of equity, and the weighted average cost of capital behave as the firm’s financial leverage increases from zero?
5.3.2 Discuss the importance of the knowledge of the cost of capital of the selected company.
5.3.3 Calculate company cost of capital for, 2017, 2018, 2019, 2020, and 2021 financial years. Compare with the required rate of return and assess the actual performance