Corporate Finance Report

Note: Read this document thoroughly with care. Do not rush! The document sets out the task description, work expectation, preparation tips, submission guide, and marking scheme for the assignment. The report should be compiled professionally as if a management consultant completes it. The higher your commitment, the better you will learn and gain more transferable knowledge with you in the job market (beyond your grading concern!).

1. TASK OVERVIEW
Lecture 1 introduces the traditional and evolving roles of CFOs in public limited companies – highlighting firms‘ goals and the agency issues in corporate management. Lectures 2 and 3 present the governance and management aspects of capital investment decisions by incorporating risks and real options to ensure positive NPV. Lecture 4–7 introduces the scope of financing opportunities and how to reach a capital structure decision that optimizes firm value, while lecture 10 introduces the dividend decision. Building on the concepts drawn from these lectures, this Corporate Finance Report aims to expand your conceptual understanding, ability to apply and take essential job market transferable knowledge by examining several financial should –

Identifying CFO‘s tasks in the selected organization in the context of the traditional and changing role of CFOs (highlighted in Lecture week 1, Global CFO Research, and 2017 global corporate treasury survey1).
Conduct temporal analysis of the identified CFO functions listed in the task details section in this document for your selected company.
Present a ‘short and sweet’ discussion of the current practices of how CFOs conduct these functions to contribute to the firm goal.
Provide comments and suggestions in each section drawn from your analysis.

2. MAJOR TASK DETAILS:
BACKGROUND TASKS – KNOW YOUR SELECTED COMPANY FIN3CFI is a subject with 200 plus students. Given that leaving the task of selecting companies to students may create interruption with the schedule and unnecessary email back and forth, the subject coordinator has already allocated a company form the list of companies available in ASX. The selected company and the respective students’ details are available in LMS.
1 Available at https://www2.deloitte.com/content/dam/Deloitte/au/Documents/financial–services/deloitte– au–fs–global–corporate–treasury–survey–report–2017–210817.pdf

Changing the assigned company is not allowed. However, for exceptional circumstances where data availability is an issue (debt amount missing, no dividend payment etc), students can request a change of the selected company to the subject coordinator. Note that the email of such request should have an appropriate subject heading with the company’s name from ASX–listed firms. However, the company’s name should not be a company that has already been allocated to other students in the cohort. Either way, the process must be completed by the end of week 5. Students from Sydney and Vietnam campuses will be aided by respective lecturer to finalize the company selection process by the end of week 5. The list of companies are available at SY and VH LMS sites. Before starting the Assignment, you should browse the company’s website to familiarise yourself with the company and check the availability of financial and accounting data, annal reports, and other information in the Data Analysis Premium platform for the respective company.

3. REPORT STRUCTURE:
Each student should gather relevant financial and non–financial sources of information about the selected company and assess its financial management policies and practices.
COVER PAGE
The first page should contain a professionally suitable background image of the company‘s logo/ product/ services and mentions the following:

– Name of consultant (student) and consultant ID (student ID)
– Name of the selected company and its‘ listed exchange(s).
– Release date of the consultant‘s report.
The second page should include the table of content that is hyperlinked (preferably) with various sections of the report to help navigate through the submitted PDF file during the assessment process. The third page should contain the executive summary (Maximum 150 words not counted against the total word count). The executive summary highlights the report’s contexts, findings, and significant inferences from the analysis.

MAIN BODY OF THE REPORT

a. Understating the firm and its industry
This section should provide a brief context to help the reader understand the bigger picture about firm‘s operation and its environmental dynamics. Key points to highlight may include –
– Overview of the market, market shares of key players and your firm, key trends in the past five years.
– A brief overview of the firm and its core businesses (critical products/services, % contribution to revenues) with the comment on the firm‘s business model, e.g., how the firm makes a profit, what are the main sources of revenues and costs, and what it tells about the company‘s future.
– Brief comment on the key strategic/market/financial or other risks through the lens of PEST (Political, Economic, Social, Technological) analyses.

b. Corporate governance
Contents in this section should provide a cohesive understanding of the firm‘s corporate governance practices. You should comment on the potential of the current governance status to resolve agency problems. Key issues to highlight includes –
– Firm’s corporate governance practices with focus on board size, board independence ratio, key committees, independence of key committees, CEO duality (CEO is also chairman of the board), CFO board membership, etc.
– Firm‘s compensation practices for the top management – salary, bonus, option grant, ownership to top management (CEO and CFO) and elucidate its potential to resolve (exacerbate) any agency conflict. Comment on the pay–performance sensitivities of executive (CEO and CFO) compensation design.
– Status of director’s remuneration and audit fee over the years.
– Comment on whether the firm deviates from best corporate governance practices set forth by Australian regulators. Does current practices help the firm in solving agency problem?

c. Capital structure
Contents in this section should provide a cohesive understanding of the firm‘s capital structure and financing choice. Key issues to highlight includes –
– Firm‘s capital structure practices during the past five years.
– Comments on how diversified firms’ long–term financing sources are.
– Whether firms have raised significant additional capital during the period. What are the main sources of such capital, and how evolving are these sources?
– How does the issue of debt (if any) /bank loan affect the firm‘s coverage ratio?

– Whether any link can be established between the firm‘s financing policy and its shareholders’ wealth through higher(lower) EPS, market performance and stock price reaction to the announcement of the new equity or debt issue or raising of significant long–term bank loan.

d. Capital expenditure / investment management
Discussion in this section should provide an overview of the firm‘s investment portfolio strategy and its connection to improved market share and financial performance. Key highlights should include –
– Firm‘s capital investment practices using historical analysis of long–term investments for the past five years.
– If there is any significant investment during the period, including investment in fixed assets, restructuring through merger and acquisition, or divesture.
– How company‘s investments in tangible vs. intangible assets are changing?
– The efficiency of investment – contribution to the cash flow stream, profitability, and market performance and announcement effect (if any) of such investment decision.

e. Distribution decision
Discussion in this section should provide an overview of the firm‘s distribution policy. Key issues to highlight includes –
– Firm‘s dividend decision using historical analysis of dividends, such as dividend payout policy during the past five years.
– Firm‘s dividend practice types – stock dividend and/or cash dividend, frequency – annual vs. interim dividend, etc.
– Comment on the market reaction of dividend announcement using event study, i.e., calculating abnormal return for two dividend announcement events (preferably one increase and one decrease)
– Comment on whether the market reaction is consistent with the nature of the dividend announcement.

If your firms does not pay dividend in past five years, you have two options: (a) you can state the facts and provide reasons justifying non–payment of such dividend (marks will
not be deducted for such cases); (b) you can choose another company and request a change to confirm with subject coordinator or instance lecturer.

CONCLUSION
Concluding notes should provide an overall (maximum 150 words not to be counted against the total word limit) comment on the firm’s financial management practices and value relevance.