© 2023 The University of Sydney Business School 1

FINC3600 Finance in Practice S2 2023

Project 1: Preliminary Research Checklist




February, 2023

Corporate
Finance
Scope of
Company's
Operations
Environmental
Social and
Governance
Leverage and
Liquidity
Payout Policy
Capital
Structure
WACC for
Main Business
Activity
© 2023 The University of Sydney Business School 2

Introduction
Prior to the first workshop with practitioners (in Week 4), it is essential that every team member
performs preliminary research on their assigned company so they can contribute fully to the session.
Also, an early review of the company means that the finalised group can have more a productive
early brainstorming session in Week 3. For example, at the Week 3 session, your team should use the
questions in the checklist as an agenda for the discussion and agree to the calculation of major
parameters.
The checklist list below suggests key reference materials for this research. The list is not exhaustive,
and you may identify further materials.
Below the list of documents are suggested “key questions” that would typically be covered in a
preliminary company review.
You are not required to document the preliminary research in any set format, but you must be able
to respond to the practitioners on the “key questions” at the first workshop in Week 4.
As a guide, you should expect to spend a minimum of three hours on preliminary company research
(but certainly no more than five hours).
We will review the checklist and related resources during our online session in Week 2.
Checklist
Checklist of documents to access and suggested sequence of review:
1. Last two half yearly investor results briefings on ASX website. For companies with June or
December year ends these briefings will probably be issued in late August 2022 and late
February 2023. Read the latest briefing in full and – at least – scan prior briefing.
2. Company’s daily ASX announcements for the past year to identify any announcements of
significant company developments or useful company presentations. Very quick scan of index
of announcements and extract key details from important announcements.
3. Media coverage of any major events relevant to the company and its industry. Possibly linked
to matters identified in scan of ASX announcements.
4. Last two financial reports on the ASX website. Use to extract data as necessary.
5. Last annual report. Use to extract data as necessary. Use information on the company website
to confirm and compare information on the ASX site.
Key Questions
Key questions to consider for preliminary research:
1. Company overview questions
▪ Does the company report/analyse aggregate performance by the different major activities
of the company? If so, what are the dimensions of the different major activities using
revenue and/or profit measures?
▪ Has the company made a significant acquisition or divestment in the past year? If so,
ascertain summary details from ASX announcements.
© 2023 The University of Sydney Business School 3

▪ Has the company raised new equity during the past year – for what disclosed purposes?
▪ Are there major areas for future capital expenditure/investment identified by company
disclosures?
▪ Ascertain whether the company make specific disclosures (but at this stage only quickly
scan disclosures), regarding:
▪ ESG
▪ Capital management policy
▪ Dividend policy
▪ Briefly identify one specific ESG issue identified by the company as well as other sources.
▪ Briefly identify two other major commercial issues for the company as identified by the
company as well as any other sources?
▪ Based on the major activities of the company, identify at least two possible listed peer
companies for comparable company analysis. Why are these peers appropriate?
2. Investment parameters questions
▪ What was the market capitalisation of the company at 1 August 2023 (or earlier)?
▪ What were borrowings, cash and net debt of the company as at 31 December 2022 (adjust
for any very large capital returns or major investment transactions between 1 January
2023 and 1 August 2023).
▪ Does any of the company debt have a rating?
▪ What is the mix of the company’s debt between bank and other debt?
▪ What is the debt coverage ratio (i.e. net debt/EBITDA) for the company and what impact
will the application of the new leasing standard AASB 16 have on the disclosed ratio?
▪ What is the dividend payout ratio in the last full financial year? Does the company pay
franked dividends?
▪ Ascertain whether the company has made share buybacks or capital returns?
3. Operational parameters questions
▪ What is EBITDA margin (EBITDA/revenue) of the company for past two financial periods?
▪ Using the latest company statement of cash flows, prepare a brief high-level summary
showing:
▪ Cash flow from operating activities
▪ Cash flows from investing activities - by major categories
▪ Cash flows from financing activities – by major categories
▪ What was the net working capital of the company at the most recent reporting date?
▪ What are relativities of EBITDA, capital expenditure and depreciation for the company in
the last two financial periods?