Question:
\nThis is the guide for the follow-up reflection note, which accounts for 25% of the overall assessment of this module. Your case company is Next PLC listed on the London Stock Exchange.
\nYou are assessed based on your writing skills, the extent to which you understand the materials, and critical Assessment of the case firm\u2019s upside potentials and downside risks and the recent trading conditions via DuPont analysis.
\nGood discussion should include relevant readings, critical reflection, as well as the analytic evidence to support your arguments and assessment. It is recommended that you also incorporate any opportunities and challenges that affect the case firm in your assessment.
\nThe overall word count is 1,500 words. You are also required to provide full disclosure of the necessary numerical demonstration and analyses in an appendix. Please do not go over the wordcount. Tables, diagrams, references, and appendix are not part of wordcount. Finally, the standard University penalty applies in this assessment. Please refer to your student handbook.
\nTask:
\nSo far, you have had some ideas of Next\u2019s recent operating outcomes from your first reflection note. This follow-up reflection note requires you to critically evaluate Next\u2019s operating strengths and weaknesses and financial risk based on 5 factor DuPont model introduced in the module. Your analysis should cover the accounting period from the year ended January 2019 to the year ended January 2022, bearing in mind that there was an accounting standard revision (IFRS 16) in 2019 fiscal year. The ratios involving the balance sheet items should be based on the average balance sheet amounts for the relevant analysis.
\nThe report must include the analysis of the following aspects:
\n1.\tAnalyse the extent to which Next\u2019s (1) working capital contributes to and (2) Capex supports its core operations in order to maintain its competitive positioning. You must analyse and evaluate the case firm\u2019s working capital policies and growth strategy
\n[40 marks]
\n2.\tSummarise Next\u2019s operating strengths and how it manages and\/or overcomes challenges. You must connect the summary of the case firm\u2019s operating outcomes from the first assignment to the above working capital management and\/or Capex plans with relevant well-edited tables, diagrams, and\/or graphs. Please pay attention to self-plagiarism, which is also a serious academic misconduct.
\n[15 marks]
\n3.\tEvaluate Next\u2019s financial risk. The analysis should incorporate free cash flows (FCF).
\n[10 marks]
\n4.\tA concluding remark [5 marks]
\n5.\tDemonstration of technical calculations in Appendix of the report. Do not attach excel files with your assignment PDF file.
\n[20 marks]
\n6.\tPresentation, citations, and references. Particularly, all relevant figures and indicators in the main body of the report should be nicely edited. Do not copy and paste from the original sources.
\n[10 marks]
\nNote: The students are assessed based on writing skills, ability to conduct independent research, and
\nthe extent to which the materials covered in the module up to the submission date are adequately
\napplied. Good discussion should include relevant readings as well as the analytic evidence to support
\nyour arguments and assessment.
\n1. You must demonstrate the understanding of the information provided by financial
\nstatement.
\n2.\tYou must demonstrate an adequate level of readings in articulating the key points required by the assignment guide.
\n3.\tYou must demonstrate sound technical skills based on DuPont analysis.
\n4.\tYou must demonstrate the ability to conduct the basic research independently regarding the case firm’s operating performance, using legitimate sources of information, such as news media and the databases in the University library
\n5.\tYou must demonstrate the ability to use Excel and Word.
\n6.\tThe assignment must be well presented and well-edited. It is ideal to provide table, graphs, diagrams<\/p>\n
2nd assignment briefing notes
\nDear all
\nPlease find the 2nd assignment briefing notes.
\nDos:
\n1.\tFull technical demonstration of common-size BS, key figures, working capital and its composition, operating cycle, CCC, and Capex portfolio and its composition as the minimum
\na.\tTheoretical understanding – strategic accounting equation emphasising working capital for operations and identification of capex portfolio
\nb.\tTheoretical understanding of working capital policies
\nc.\tTheoretical and empirical comprehension of capital structure
\nd.\tA glossary is encouraged – for clarity in the definitions and formulas – make sure the definitions (and language) and formulas are adequate.
\n2.\tWorking capital turnover from the operation’s points of view (3 key items and operating working capital) & fixed assets turnover
\na.\tOperating cycle and CCC
\nb.\tInterpretations of operating cycle and CCC – the extent to which the case firm manages its inventory (Retail and online Next Label UK) and receivable (Finance segment);
\nc.\tInterpretations of fixed assets turnover, taking care of Capex portfolio composition, and the factors influencing Capex turnover discussed in the class
\nd.\tWatch the case firm’s webcasts (management has some discussions related to its Capex programme) – watch all relevant years.
\n2.\tUnderstanding capital structure, the financing choice of the case firm. The case firm issues bonds – so it has crediting ratings to complement your financial risk assessment.
\n3.\tRead the news articles and use the databases recommended adequately. I read the reports from the link where the assignments provide. One FT article may interest you https:\/\/www.ft.com\/content\/fa4840da-4866-493e-9065-c57a6682b721
\n4.\tFollow the instructions
\n5.\tThe report should have an adequate allocation of the wordcount to the analysis – description of data is not analysis (please read the learning objectives in the week 1 module introduction)
\n6.\tRead the marking criteria if you did not do so for your 1st assignment. It is in the assessment. I also put it in the data file
\n7.\tReview all the material – both asynchronous and f2f (lecture captures), guided readings, homework, and exercises
\n8.\tAnalysis should be neutral and objective. Avoid using subjective expressions.
\nDon’ts,
\n1.\tPoorly presented data – markers cannot see the figures or indicators immediately
\n2.\tPoor understanding of the theoretical framework + inadequate use of accounting language
\n3.\tPerforming irrelevant and ill-defined indicators and misusing them
\n4.\ta large number of descriptions, assertations, and conjectures without supporting evidence (data).
\n5.\tPoor structure and organisation (do not submit the draft). Always go over the assignment again.
\n6.\tLarge tables and graphs in the main body
\n7.\tBulletin points
\n8.\tPoorly defined indicators
\n9.\tTaking data from databases without checking – always check your data even if the data is provided by the module!
\n10.\tUse Investopedia or Wikipedia – said this in week 1.<\/p>\n
FFMA Assignment 2: Notes
\n\u2022\tCalculate Free Cash Flow for NEXT: It is not mentioned in annual reports<\/p>\n
Glossary<\/p>\n
Term\tFormula
\nOperating Margin or EBIT Margin\t(Operating Profit \/ Total Revenue) * 100
\nOperating Working Capital\tOperating Current Assets \u2013 Operating Current Liabilities
\nOperating Working Capital Turnover\tTotal Revenue \/ Operating Working Capital
\nCurrent Ratio\tCurrent Assets \/ Current Liabilities
\nQuick\/Liquid Ratio\t(Current Assets \u2013 Inventories) \/ Current Liabilities
\nCapital Expenditure Portfolio Turnover\tTotal Revenue \/ Capital Expenditure
\nCapital Expenditure Portfolio\tProperty, Plant and Equipment + Intangible Assets + Right of Use Assets + Associates, Joint Ventures and Other Investments
\nPurchases\tCost of Sales + Change in Inventory
\nInventory Holding Period\t(Inventories \/ Cost of Sales) * 365
\nReceivables Collection Period\t(Customer and other Receivables \/ Total Revenue) * 365
\nPayables Payment Period\t(Trade and other payables \/ Purchases) *365
\nCash Conversion Cycle\tInventory Holding Period + Receivable Collection Period – Payables Payment Period
\nReceivables Turnover Ratio\tTotal Revenue \/ Customer and other Receivables
\nInventory Turnover Ratio\tTotal Revenue \/ Inventories
\nInterest Cover\tProfit Before Tax \/ Operating Profit
\nTax Burden\tProfit for the period \/ Profit before Tax
\nNet Debt\tTotal Debt \u2013 Cash and short-term deposits
\nShareholder\u2019s Equity\tTotal Equity
\nReturn on Equity\tProfit for the period \/ Shareholder\u2019s Equity
\nCapital Employed\tNet Debt + Shareholder\u2019s Equity
\nROCE Check\tEBIT Margin * Operating Asset Turnover
\nROE Check\tOperating Asset Turnover * Leverage * EBIT Margin * Tax Burden * Interest Cover
\nOperating Asset Turnover\tTotal Revenue \/ Capital Employed
\nGearing Ratio\tNet Debt \/ Shareholder\u2019s Equity
\nLeverage\tCapital Employed \/ Shareholder\u2019s Equity
\nReturn on Capital Employed\tOperating Profit \/ Capital Employed<\/p>\n","protected":false},"excerpt":{"rendered":"
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