BAC406CAT1.docx

ST. PAUL’S UNIVERSITY

FACULTY OF BUSINESS AND COMMUNICATION STUDIES

BACHELOR OF BUSINESS ADMINISTRATION

CAT 1

BAC 406 FINANCIAL STATEMENT ANALYSIS

Instructions

:

 Answer ALL questions

 Ensure your answers are well argued

 Avoid copy and pasting information from the case study or the internet

 Avoid sharing your work with your colleagues

 The CAT should be submitted only through the V-learning portal

 CAT is due on 29/6/2021

Case study (30 marks)

Analyzing a Company’s Background

Objective: To pick a company to analyze, collect background information and start thinking about the narrative for the company.

Key Steps

1. Choose a company that you want to work at, understand, or own. Consequently, the company can be of any size, in any sector, but it must be listed in the Nairobi securities exchange (NSE).
2. Collect information, both financial and nonfinancial, about the company and the sector that it operates in.
3. Establish your prior views of this company. Put differently, given what you know now about the company (which may be based on limited information or even hearsay), evaluate whether you think that this company is a well-managed, good company or a poorly managed mess.

Framework for Analysis

a. Collect information about the company. Start with the annual reports (three to five years), for a publicly traded company.

b. carry out an analysis focusing on:
1. Business Environment and Strategy Analysis
2. Accounting Analysis
3. Financial analysis focusing on three broad areas—profitability analysis, risk analysis, and analysis of sources and uses of funds.
4. Prospective Analysis based on different financial analysts sentiments. (no calculations expected)

2. Sector information

a. Try to get basic operating metrics for the peer group (competitors) for the company. For the moment, focus on revenues and profitability at these companies.
b. Find out more about the overall market that all the companies are trying to access. (Thus, if you are looking at online advertising companies, you would like to see how big the market is, how fast it is growing, and what parts of the world are growing the most)..

3. Company narrative

This will be entirely subjective, but based on what you know about the company you have picked (as this choice is usually not random), what do you think about this company’s products, its operations, its management, and its business model?