Financial analysis of three companies

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Financial analysis of three companies

1 Introduction

We have organised a shareholders club which we have called 6IM. There are six members within 6IM of which we all have £1000 each to invest.

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As part of our Investment process we have decided to choose three companies in different sectors and conduct an in depth financial analysis. Due to the three companies working in different sectors we have also analysed key financial data of a major competitor to that particular company. We feel this will enable us to gain a greater understanding of the industry of which the three companies are working in and also a direct financial comparison with our chosen companies.

Our report will begin with a brief profile of the three companies followed by a SWOT analysis to enable us to paint a picture of where the company currently sit and the potential investment opportunities and risks associated with that particular company. In addition to this we will conduct a five forces investigation to understand the industries competitiveness.

In respect of financials we will gain an understanding of the numbers in the annual reports of both our targeted three companies and also our competitors. We will use a number of investment ratios to quantify the numbers which will help us review the performance of our chosen companies against our competitors and in addition devise a brief explanation as to what aspects of the business have made a positive or negative impact on the ratio in which we are assessing. The ratios that we will choose will be independent of each other due to the fact that some ratios are more relevant than others in certain industries. The ratios will be conducted for each of the last 3 financial years for both our targeted companies and competitors. The ratios will be split into four categories liquidity, profitability, financing and investment.

Finally we will then standardise the ratios and compare our three chosen companies. We will use a marking system to identify which company we feel excel in each ratio to help us arrive at our chosen investment vehicle. The three companies in which we will be conducting the report on are:

1) MGM Grand

Sector: Leisure & Tourism Fiscal year: Jan 01st – Dec 31st

2) Rio Tinto

Sector: Mining Fiscal year: Jan 01st – Dec 31st

3) Toyota

Sector: Car manufacturing Fiscal year: April 01st – March 31st

Investment Objective

  • A medium term investment of 5 years
  • Provide income through dividends
  • Provide capital growth at the end of the term
  • We would be looking at an annual expected return of between 8% and 10%

Tax Implications

6IM discussed about the tax implications of our investment objectives.

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