Interpretation of Financial Statements

Select two quoted companies of the same segment. These companies can be listed in the London Stock Exchange or in any other exchange. You should then obtain a full set of the most recent statutory financial statements.
On receipt of your selected financial statements, you are required to prepare a report based on them, of between 2000 and 3000 words. The report must cover all of the following areas:
1. Introduction possibly including the following topics:
History of each company, history of any acquisitions or take-overs, products or brands, current state of the market, and future prospects of the company.
You may obtain information from the company financial statements and from the financial press, or any other source.
(30 Marks)
2. Interpretation of the financial statements using appropriate accounting ratios. Your interpretation must be based on the group (consolidated) profit and loss and balance sheet and should include discussion on the following:
a. Profitability of the group
b. Liquidity of the group
c. Sources of finance including discussion of the company’s capital
structure and gearing.
You may include some explanation of the ratios you have used. A minimum of 10 ratios is required for a good score in this section. You should analyse the historical trends of these ratios for each company (horizontal analysis) and compare the two companies.
Calculation of ratios
Discussion and interpretation
3. Comment on the uses and limitations of using ratios.

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