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National Gas Financial Statement Analysis

Question Description

Q1. Assume that you are a Financial Analyst working of a leading Auditing Firm. Evaluate the financial performance of a company listed in the Muscat Securities Market (MSM)/GCC Market by taking into consideration the following

instructions.

 Select a company listed in Muscat Securities Market Market ,You may refer to http://www.msm.gov.om/]the company name is :NATIONAL GAS

 Collect annual financial reports of the chosen company for three consecutive years.

 Use ONLY annual financial statements for analysis. Avoid using quarterly statements.

 Provide references for the data collected (use Coventry Harvard style of referencing). Company websites can also be used for data collection.

 From the financial statements and additional information collected by you complete the below mentioned tasks.

A. Prepare comparative income statements and balance sheet for 3 years using Horizontal and Vertical Analysis

techniques for the both income statements and balance sheet. (10 marks)

B. On the basis of literature review and from the above computations analyses; Profitability position and Financial position of the chosen company. Provide meaningful recommendations for the company to improve the Profitability position and financial position based on the analysis.

(Literature Review about the techniques used for analysis and recommendations

(profitability position- & financial position

Q2. City Cinemas is planning to expand and open new Cinemas in Sultanate of Oman. Currently they are considering two options, one is to start a new cinema in Sohar and other is to take over an existing cinema in Nizwa. But due to recent developments they will be able to fund only one project of the two as the overall revenue trends are subdued. Details of cash inflows for 5 years of the two projects along with additional information is given in the table below

Details

New cinema at Sohar

Take-over existing cinema at Nizwa

Consumer trends

Growth expected at 10%

Stagnated

Population growth

12%

5%

Competition

Strong

Moderate

Initial cost

500,000

500,000

Cash flows

YEAR 1

150,000

200,000

YEAR 2

160,000

185,000

YEAR 3

190,000

160,000

YEAR 4

175,000

175,000

YEAR 5

200,000

150,000

,

A. Evaluate the projects using Internal Rate of Return method.

B. Based on the above analysis and on the basis of the relevant literature review, which project would you recommend and why. The students have to consider the non-financial factors provided in the above scenario and other relevant non-financial factors while recommending a project.

C. Based on appropriate literature review, analyse the non-financial factors provided in the above

scenario and other relevant non-financial factors.

Q3. Your company, a leading fertilizer manufacturer has asked you to submit a cost-volume-profit analysis report for the two products being produced in your company

Particulars

Product A Price per unit (RO)

Product B Price per unit (RO)

Sales price

20

15

Material

10

9

Direct wages

3

2

Variable expenses

100% of direct wages

100% of direct wages

Fixed expenses

RO 800

The following scenarios are predicted by the Management:

Scenario 1: 100 units of product A and 200 units of product B

Scenario 2: 150 units of product A and 150 units of product B

Scenario 3: 200 units of product A and 100 units of product B

You are required to:

  • Compute the contribution per unit of both Product A and Product Find out total contribution and profits for each of the scenario.
  • In your opinion which is the most profitable scenario and justify your recommendation

C. Evaluate the role of CVP analysis in taking business decisions with appropriate literature review.

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Q1. Assume that you are a Financial Analyst working of a leading Auditing Firm. Evaluate the financial performance of a company listed in the Muscat Securities Market (MSM)/GCC Market by taking into consideration the following instructions. Select a company listed in Muscat Securities Market Market ,You may refer to http://www.msm.gov.om/] the company name is : NATIONAL GAS Collect annual financial reports of the chosen company for three consecutive years. Use ONLY annual financial statements for analysis. Avoid using quarterly statements. Provide references for the data collected (use Coventry Harvard style of referencing). Company websites can also be used for data collection. From the financial statements and additional information collected by you complete the below mentioned tasks. A. Prepare comparative income statements and balance sheet for 3 years using Horizontal and Vertical Analysis techniques for the both income statements and balance sheet. (10 marks) B. On the basis of literature review and from the above computations analyses; Profitability position and Financial position of the chosen company. Provide meaningful recommendations for the company to improve the Profitability position and financial position based on the analysis. (Literature Review about the techniques used for analysis and recommendations (profitability position- & financial position Q2. City Cinemas is planning to expand and open new Cinemas in Sultanate of Oman. Currently they are considering two options, one is to start a new cinema in Sohar and other is to take over an existing cinema in Nizwa. But due to recent developments they will be able to fund only one project of the two as the overall revenue trends are subdued. Details of cash inflows for 5 years of the two projects along with additional information is given in the table below Details Consumer trends Population growth Competition Initial cost YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 New cinema at Sohar Growth expected at 10% 12% Strong 500,000 150,000 160,000 190,000 175,000 200,000 Take-over existing cinema at Nizwa Stagnated 5% Moderate 500,000 Cash flows 200,000 185,000 160,000 175,000 150,000 , A. Evaluate the projects using Internal Rate of Return method. B. Based on the above analysis and on the basis of the relevant literature review, which project would you recommend and why. The students have to consider the non-financial factors provided in the above scenario and other relevant non-financial factors while recommending a project. C. Based on appropriate literature review, analyse the non-financial factors provided in the above scenario and other relevant non-financial factors. Q3. Your company, a leading fertilizer manufacturer has asked you to submit a cost-volumeprofit analysis report for the two products being produced in your company Particulars Sales price Material Direct wages Variable expenses Fixed expenses Product A Price Product B Price per unit (RO) per unit (RO) 20 15 10 9 3 2 100% of direct 100% of direct wages wages RO 800 The following scenarios are predicted by the Management: Scenario 1: 100 units of product A and 200 units of product B Scenario 2: 150 units of product A and 150 units of product B Scenario 3: 200 units of product A and 100 units of product B You are required to: A. Compute the contribution per unit of both Product A and Product Find out total contribution and profits for each of the scenario. B. In your opinion which is the most profitable scenario and justify your recommendation C. Evaluate the role of CVP analysis in taking business decisions with appropriate literature review. Instruction Cover page Table of contents: Introduction: Overall introduction about the assignment. A short paragraph capturing all the points to be covered in the assignment. Question 1: (40 marks) Introduction: A short paragraph covering the tasks involved in question no. 1 A short profile about the selected company (short paragraph) Task A: calculations (10 marks) Prepare comparative income statements and balance sheet for 3 years using Horizontal and Vertical Analysis techniques for the both income statements and balance sheet. Income Statement – Profitability position Vertical Analysis of Income Statement for three years: Vertical analysis table to be presented here. Horizontal Analysis of Income Statement for three years: horizontal analysis table to be presented here Example: if you have selected the financial data of 2018, 2017 and 2016 then two tables to be presented. Table one – horizontal analysis of 2016 and 2017 and table two – horizontal analysis of 2017 and 2018 Balance sheet – financial position Vertical Analysis of Balance sheet for three years: Vertical analysis table to be presented here. Horizontal Analysis of Balance sheet for three years: Horizontal analysis table to be presented here Example: if you have selected the financial data of 2018, 2017 and 2016 then two tables to be presented. Table one – horizontal analysis of 2016 and 2017 and table two – horizontal analysis of 2017 and 2018 Task B: Analysis and LR – 30 marks On the basis of literature review and from the above computations analyse; Profitability position and Financial position of the chosen company. Provide meaningful recommendations for the company to improve the Profitability position and financial position based on the analysis. Literature Review about the technique used (vertical and horizontal analysis) for calculations. – 10 marks Profitability position: Analysis and recommendations based on calculations and with LR (LR could be used for benchmarking/ comparison of similar industry across the globe/GCC etc) – 10 marks Financial position: Analysis and recommendations based on calculations and with LR (LR could be used for benchmarking/ comparison of similar industry across the globe/GCC etc) – 10 marks Conclusion: a short paragraph about the overall position of the company. Question 2: (25 marks) Task A: Calculations (10 marks) Evaluate the projects using Internal Rate of Return method. IRR calculations to be provided here (including all steps involved in the calculations) Task B: Recommendation with LR (10 marks) Based on the above analysis and on the basis of the relevant literature review, which project would you recommend and why. The students have to consider the non-financial factors provided in the above scenario and other relevant non-financial factors while recommending a project. Literature review of the technique used Recommendations based on calculations, LR and Non- financial factors including factors mentioned in the scenario and other relevant non-financial factors. Task C: Analysis with LR (5 marks) Based on appropriate literature review, analyse the non-financial factors provided in the above scenario and other relevant non-financial factors. Analysis based on literature review of the non-financial factors provided in scenario Analysis based on literature review of other relevant non-financial factors. Question 3: (20 marks) Task A: calculations (10 marks) Compute the contribution per unit of both Product A and Product B. Find out total contribution and profits for each of the scenario. Provide the detailed calculations/ tables of the following, Contribution of Product A Contribution of product B Total contribution and profits for Scenario A Total contribution and profits for Scenario B Total contribution and profits for Scenario C Task B: Discuss the most profitable scenario with justification (5 marks) In your opinion which is the most profitable scenario and justify your recommendation. Task C: role of CVP analysis with LR (5 marks) Evaluate the role of CVP analysis in taking business decisions with appropriate literature review. Reflection report on Industry Guest Lecture: (5 marks) Your reflection report may cover the following, Introduction – brief profile of the Industry Guest Speaker Reflection/ Your understanding of all points mentioned/ covered by the Industry Guest Speaker. Reflection/ Your understanding of the Question & Answers session Any other relevant point covered in the speech. Conclusion List of references: Include all references (text book, Journals/ Research articles, websites etc) and style prescribed in CU Harvard Style referencing for both in-text citations and references. Pls ensure that you have provided the reference for all your in-text citations used in your assignment. Appendix: 1. Student declaration form - mandatory 2. Financial statements downloaded from the MSM website. Pls insert the financial statements as files (both word format and PDF acceptable) - mandatory 3. Any working notes or calculations which are part of the assignment - mandatory 4. Any other relevant documents if necessary ...
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Final Answer

Attached.

Running head: FINANCIAL ANALYSIS

1

Financial Analysis
Name
Institution

FINANCIAL ANALYSIS

2

Financial Analysis
Introduction
Financial statement analysis is a critical evaluation of the information provided by
companies in their annual reports in a bid to establish certain aspects such as their financial
health and performance. As such, financial statement analysis provides a magnifying lens
through which different information users, such as investors, managers, and creditors, can make
informed decisions regarding an entity. The report focuses on specific financial aspects of a
business such as profitability, efficiency, liquidity, and leverage among others. To exemplify the
application of financial analysis to companies, this paper will examine the National Gas
Company; listed in Muscat Securities market. The paper will provide a comparative analysis
through horizontal and vertical analyses of the company’s income statement and balance sheet,
and profitability ratios. It will also explore aspects of CVP analysis and project appraisal.
Question 1
A
The response is based on the consolidated financial statements of the company for the
three years ranging from 2016 to 2018. The company’s horizontal and vertical analyses can be
presented as follows: (excel worksheet attached for the calculations)
Income Statement

FINANCIAL ANALYSIS

3

Horizontal Analysis
vertical Analysis
2018
2017
2016 2016-2017 2017-2018
2018
2017
2016
Sales
85,414,529
77,700,111 60,660,289
28%
10% 100.00% 100.00% 100.00%
Cost of Sales
(75,341,667)
(68,061,848) (49,582,446)
37%
11% -88.21% -87.60% -81.74%
Gross profit
10,072,862
9,638,263 11,077,843
-13%
5% 11.79% 12.40% 18.26%
Administrative expenses
(5,787,550)
(5,391,551) (5,424,922)
-1%
7%
-6.78%
-6.94%
-8.94%
Operating profit
4,285,312
4,246,712
5,652,921
-25%
1%
5.02%
5.47%
9.32%
Other Income
426,776
412,833
669,985
-38%
3%
0.50%
0.53%
1.10%
Finance cost
(951,934)
(911,828)
1,045,140
-187%
4%
-1.11%
-1.17%
1.72%
Gain on closure of a subsidiary
Share of results from joint ventures
38,302
56,429
41,582
36%
-32%
0.04%
0.07%
0.07%
Impairment reversal / (loss) on trade receivables(10,333)
(6,733)
53%
-0.01%
-0.01%
0.00%
Impairment of investment in equity-accounted
(4,735)
(54,247)
-91%
-100%
0.00%
-0.01%
-0.09%
Impairment of available-for-sale investments
(15,167)
-100%
0.00%
-0.02%
0.00%
Profit before taxation
3,788,123
3,777,511
5,212,471
-28%
0%
4.43%
4.86%
8.59%
Taxation
(888,205)
(1,098,134) (1,164,752)
-6%
-19%
-1.04%
-1.41%
-1.92%
Profit for the year
2,899,918
2,679,377
4,047,719
-34%
8%
3.40%
3.45%
6.67%
Other comprehensive (loss) income
Movement in fair value of Financial assets at fair
(267,585)
value through other comprehensive income
-0.31%
0.00%
0.00%
Net other comprehensive (loss) income will not(267,585)
be reclassified to profit or loss in subsequent periods
-0.31%
0.00%
0.00%
Movement in fair value of available-for-sale investments
(206,831)
28,408
-828%
-100%
0.00%
-0.27%
0.05%
Recycled to profit or loss
15,167
-100%
0.00%
0.02%
0.00%
Exchange difference on translation of foreign operation
(443,269)
1,719,669
(584,760)
-394%
-126%
-0.52%
2.21%
-0.96%
Net other comprehensive (loss) income to be reclassified
(443,269) to profit
1,528,005
or loss in subsequent
(556,352) periods
-375%
-129%
-0.52%
1.97%
-0.92%
Other comprehensive income (loss) for the year
(710,854)
1,528,005
-147%
-0.83%
1.97%
0.00%
Total comprehensive income / (loss) for the year
2,189,064
4,207,382
3,491,367
21%
-48%
2.56%
5.41%
5.76%
Profit attributable to:
Equity holders of the Parent
1,759,174
1,671,329
2,796,266
-40%
5%
2.06%
2.15%
4.61%
Non-controlling interest
1,140,744
1,008,048
1,251,453
-19%
13%
1.34%
1.30%
2.06%
Total profit for the year ended
2,899,918
2,679,377
4,047,719
-34%
8%
3.40%
3.45%
6.67%
Total comprehensive income attributable to:
Equity holders of the Parent
1,220,380
2,549,799
2,434,008
5%
-52%
1.43%
3.28%
4.01%
Non-controlling interest
968,684
1,657,583
1,057,359
57%
-42%
1.13%
2.13%
1.74%
Total comprehensive income for the year
2,189,064
4,207,382
3,491,367
21%
-48%
2.56%
5.41%
5.76%

Balance Sheet

FINANCIAL ANALYSIS

2018

4

2017

Horizontal Analysis
2016 2016-2017 2017-2018

Assets
Non-Current Assets
Property plant and equipment
23,675,713
22,553,911 21,165,746
Available For Sale investments1,365,419
1,572,250
Financial Assets at Fair1,096,075
Value through other comprehensive
Income
Investment in Subsidiatries Goodwill
7,840,565
8,018,345
7,235,598
Trading License
40,421
Other Investments
662,332
624,030
543,023
Due From Joint Venture
33,562
33,562
Total Non-Current Assets
33,315,106
32,595,267 30,550,179

vertical Analysis
2018
2017

2016

7%
-13%

5%
-100%

45.92%
0.00%
2.13%

42.36%
2.56%
0.00%

44.88%
3.33%
0.00%

11%

-2%

15%
0%
7%

6%
-100%
2%

15.21%
0.08%
1.28%
0.00%
64.61%

15.06%
0.00%
1.17%
0.06%
61.21%

15.34%
0.00%
1.15%
0.07%
64.77%

15%
34%
-13%
25%
-5%
24%
13%

-6%
9%
-33%
2%
0.0%
3%
-3%

2.38%
35.20%
3.46%
41.03%
0.18%
41.21%
100.00%

2.45%
31.19%
4.97%
38.79%
0.17%
38.79%
100.00%

2.40%
26.20%
6.43%
35.02%
0.20%
35.23%
100.00%...

Richardweir (7243)
New York University

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