STRUCTURE OF THE REPORT
Financial analysis is mainly explaining reason for the
changeInclude an introductory paragraph This can be used to include
a few wider contexts points Sample July 2010 case study
RevenueFirst Paragraph Overall Revenue change Change - up or
down, adjective word- marginally, slightly, significantly Bench
mark comparison (forecast, competitor) Main drive /reason for
change) Pattern/impact/Broad context Comparability large one off,
distorted, deferred revenue Growth trend dropping, increasing,
fluctuating, all in same direction, biggest change, minimal change
Benchmark Which stream important, significant, highly reliant
Interdependence between revenue streams Volume or price
Other strategy to use broad business context is to mention them
whenever the related item is discussed. Like general with overall
performance and one related to each revenue stream when that part
is discussed. Courier is growing etc. Mostly this style is
practiced.
Paragraph 2, 3 and 4 One paragraph each for three Business
lines/Revenue streams
Change/adjective word/comparison against and bench mark/reason
for change/pattern/Impact/Broad contexts
One of the Business line would be an emerging/growing new area
Reason for change Benchmark Per unit performance across streams
Further sub mix change Popularity, life cycle and other
comments
Paragraph 5 Sales mix may use for broad context on new area
Gross Profit
First Paragraph Overall change in gross profit amount and change
in gross profit margin. Change/adjective word/comparison against
and bench mark/main drive (reason for change)/evaluation/Broad
contexts
Comparability between years distorted by loss on disposal GP
trend Stable, fluctuating, dropping Benchmark Sale mix change
impact on GP margin % Reason for change Other comment Not possible
to calculate GP accurately
Paragraph 2, 3 and 4 - One paragraph each for three Revenue
streamsOnly Gross profit Margin
Change/adjective word/comparison against and bench mark/main
drive (reason for change)/evaluation/Broad contexts
Reason for change Bench mark Sub mix Other comments Inability to
pass on cost, control on costs, whether all costs increased
EPIS First produce analysis and then discussion points SPS -
Calculations, Changes or amounts This will give you items for
discussion
Evaluation Discussion about numbers, Pro/cons Discuss any
related point pertaining to that area
Conclusion Total revenue change with remarks and driver/reason
of change (with numbers). Any comparison with forecast/competitor
Revenue change in revenue streams with number reason for change
Second requirement (with figures) change/remarks/reason
EPISDifference between Conclusion and Main Report: Conclusion is on
headlines except for revenue you may add comments on revenue
streams. Conclusion is only about Change/comment/reasons No AJ
Difference between Conclusion and Executive Summary: Executive
summary = Conclusion + AJ+ Broader Context RecommendationsOne
recommendation for each of the area One for Revenue 1 or 2 One for
gross profit 3rd requirement EPIS normally two.Concentrate on
business issues and your recommendation would be on that. One free
mark for any recommendation
For Writing about Implications (May be this is about impact)This
may suggest / reflects / indicates / would confirms / this is
broadly in line with / Outweighing the effect of overallFor writing
about reasonsThis is likely to be due to / this can be attributed
to / this may be due toRemarks about Change/Movement Decreased/
declined/dropped/fallen/ deteriorated Increased/ Exceeding
expectations QuantumSlightly /Modest change /
modestlySeverely/drastically/significantly /Disappointingly/
dramatically / strikingOther CommentsEvents distorts underlying
data trends and therefore while recognizing their impact on overall
performance need to be stripped out to provide like for like
comparison Performance appraisal - what has happened --- How it has
happened ---- why it has happenedDecline in profitability follows
through to profit for the year.This would confirm that price raises
have not been passed on to customersReduction in R&D expenses
may boost performance in short term but will have long term adverse
consequences on business development
EVALUATION
Revenue
This is all about current years performance.
Stepwise:
1. Comparability of years a. Large one off eventb. Revenue
distorted by ---c. Closure over Christmasd. Deferred revenue item2.
Revenue growth rate trend (increasing, decreasing, fluctuating) or
market share. Sustainable in future?3. Driver of growtha.
Largest/biggest revenue streamb. Importance of revenue stream
Important / not importantc. Highly reliant ond. Insufficient to
sustain growth4. If there are unit of sales thena. Growth by
volume?b. Overall sale price per unit, change? Increased,
decreasedc. Each division/unit analysis about unit price, sale
volume5. Interdependence between revenue streams6. Reason for
changea. Link with any external factor?7. Compare with benchmarka.
Forecast / expectationsb. Competitors/industry8. Further break
down. Change in mix in each revenue streams9. Comments or
inferences from performancea. Product life cycle - Growing or
matureb. popularity
Gross Profit
1. GP trend a. Fluctuating / stableb. Change in all revenue in
same directionc. Biggest change or minimal change2. Impact of
change in sale mix on GP%a. Growth in low margin revenue stream3.
Reason for change 4. Commentsa. Inability to pass on costb. Control
on cost poor/goodc. Only a small change in GP for a large change in
revenued. GP stable despite cost pressuree. Whether all cost
increasedf. Anticipated last yearg. Not possible to calculate
accurately GP5. Change in sub mix6. ComparabilityLoss on disposal
of asset distorted ratios
Business Issues and Wider Context R1Always refer its affect on
Companys performance.Two separate parts 1. Business Issues - One
free response mark2. Wider context - One free response mark
Wider Context Economy / GDP Industry Competition / competitors
Trends - Growth area/popularity/area under threat/ what is
happening in industry Forecast - Benchmark - Growth % / GP% Any
deadline One off events Industry dataThere normally will be one
growing area and one biggest (normally mature) areaBusiness Issues
Broader business issues in each revenue stream. Usually relates to
outside. Inputs, customers, suppliers Normally problems relates to
biggest/mature area Change in price profitability Where to write in
ReportPoints about overall economy and Industry can be written in
overall Revenue change paragraphPoints about revenue streams in
their respective paragraphs.
Working capitalInventory - fallen drastically. Increases risk
for potential obsolescence and increased inventory holding cost.
Industry/technology. Inventory turnover has increased but there is
a risk of disruption of supplies unless good just in time system
with suppliersReceivables - Management attention has been diverted
to pursuit new productsPayables - Increase striking? Adverse effect
of drop in profitability on cash flow have been cushioned the
increase in payables. Might have caused problem with suppliers and
some may refuse to supplyCash position
Cash flowCash from operations - Cash generating business/
businesss ability to generate cashWorking capital -Lower activity
reduces need for working capitalInvestment cash flows-NCA non
replacement quality issueDividend-Reduce directors prudent in
taking reduce dividend.
Fixed AssetsLoan covenantsQuality of productsLoss on sales may
imply under depreciation / Remaining assets overvalued/ profits
overstatedFunds for further investments
Cost of sale1. % change in cost vs % change in revenue2. Reason
for change3. Comparability4. Pattern5. Impact although cost has
reduces, it may impact quality of service which may have drastic
effect in future. Eroded margins
Wider Context and Business Issues Two different areas Own
research - Usually about related revenue stream Overall point about
related revenue stream competition/growth/happenings/ competitors
Third Party - Facts/comments About strategic and operational
issues/aspects which are relevant to proposal - from advance
information/EP
Prepare a list of Wider context for each stream. Read EP and
highlight strategic & operational point and link with relevant
points in Advance Information. Point related to overall stream and
related party can be mentioned either in back ground para or within
descriptive part. Points related to strategic and operational
aspects will be in descriptive part at the time of discussing
strategic and operative aspects
Scepticism (criticize available information and looking for
missing or unknown and about preparer) about Revenue figures are
estimates / no back up or figures / benefits may never arise
Performance may be unable to increase capacity Implication of
benefits - first describe benefit and then implications More
benefits Common point One free response mark for both risks and
benefits. So try to find two most obvious points from Exam
Paper.
Scepticism (criticize available information and looking for
missing or unknown and about preparer) about Cost unknown/ may
increase GP/Cash flow unknown/ timings of payments Quality Unknown
non-financial contract terms Contractual terms just initial
discussion rather than a final agreed contract Implication of risk
mostly More risks Common point Reputational risk due to association
will impact existing business
Ethics - setting the scene / what has happened and how it is
unethical Three events Comment about party, related law
Comprehensively describe situation 3 events and 3 other
pointsEvaluation what are implications and mitigations
(recommendations) Three recommendation - For instance: Inquire /
ask party about issue Follow up article issue with party Discuss
with party Perform due diligence Investigate facts / problems
Review supplier quality control Ensure that --------- Establish
whether ------ Consider alternative Look for three other points
implications for Company Related party Objectives of company One of
implication will be may damage reputation
Conclusions Conclude on financial impact Conclude on main
operational / strategic benefit Conclude on main operational /
strategic risk Conclude on way forward / whether to proceed
Conclude on business trust / ethical issuesRecommendationsFocus on
main tasks confronting if the company was to proceedMostly linked
with risks concentrate on main riskOne free point so need two more
points Revenue - contract terms/back up Proposer - Negotiate
terms/due diligence/financial stability/ethic Operational - Need
business plan containing logistics, operational, costing, cash flow
Operational Operational risks related steps to mitigate operational
risks
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