In this assessment, you are asked to conduct a financial analysis of a listed European telecom company, Vodafone Group plc, at its financial year-end (31 March 2018).
Task 1: Finding financial information (33 marks)
You are required to find the appropriate financial information in Vodafone’s financial statements and calculate the following ratios for the financial years 2017 to 2018:
1. return on capital employed
2. return on sales
3. asset utilisation ratio
4. gross profit margin
5. current ratio and quick ratio
7. interest cover
8. stock days
9. current trade receivables days*
10. current trade payables days*
11. return on equity.
12. Common Size
13. Cash Flow Statement
14. Du-pont analysis
Show all steps needed to calculate your results, including ratio definition and input values.
Task 2: Financial analysis (67 marks) [no more than 2,000 words]
Conduct a financial analysis of Vodafone using the ratios calculated in Task 1 and the additional financial information provided in the assessment resources area for Vodafone, Deutsche Telekom (one of Vodafone’s main competitors).
Describe what you observe about Vodafone’s performance as well as the performance of its competitors. Explain possible causes for differences in performance and discuss implications for Vodafone.
In your analysis, you should also discuss whether, according to their financial performance, Vodafone should be concerned about Deutsche Telekom.
Your analysis should not be longer than 2,000 words, excluding bibliography.
If you use information that is not included in the financial statements but elsewhere in the company’s annual report (e.g., notes) or in external sources, please cite the exact location and source of this information.
Guidelines for Mid-term Assessment
In your answer, you should particularly refer to Vodafone’s group financial statements for the financial year 2018. The notes to these statements will also be relevant.
You should be able to answer this question relying on the financial information provided in Vodafone’s annual reports. This is a real company so you may want to look at the company’s website or those of its competitors, but this is not required.
If you make any assumptions, explain them as briefly as you can.
Before answering this question, review the financial analysis and ratios studied in the course. You may wish to refer to Sessions 1 to 6. Then make a list of the individual data items that you will need to locate. If that information comes from sources other than Vodafone’s financial statements, you should provide details of these additional sources and your reasons for using them.
*Note: it is suggested that you use current trade receivables and current trade payables to calculate trade receivables days and trade payables days ratios – see notes in Vodafone’s annual reports rather than trade and ‘other’ receivables, and trade and ‘other’ payables to be able to compare like with like.
This assessment is not just testing your ability to calculate the different ratios; it is also assessing your understanding of how to source relevant financial information and make considered decisions about whether and how to deploy it. This is reflected in the following allocation of marks for this question:
· 33 marks for the calculations
· 57 marks for the analysis of the financial performance of Vodafone, and Deutsche Telekom
· 10 marks to discuss whether Vodafone should be concerned about Deutsche Telekom and its other competitors.
Remember to show all your calculations in detail. Tables should be included within the body of the analysis. We recommend you also submit a spreadsheet showing your calculations, as this will help your tutor to give feedback on your calculations.
Format of the Report:
Complete report of not more than 2000 words should be MS Word. MS Excel analysis should be appended as a reference document of as an appendix in Word, but please note Excel is to see accuracy of analysis but will not be marked.
Vodafone Annual Report 2018:http://media.corporate-ir.net/media_files/IROL/77/77862/annual-reports/annual_report18/index.html#downloads
DT Annual Report:https://www.telekom.com/en/investor-relations
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