FINM7409 Financial Management for Decision Makers Semester 2, 2023
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Due date: 12pm, 6 October 2023.
Background
You are an assistant analyst for an investment bank. As part of a team responsible for preparing a report that sets out
a complete financial analysis to the (adjusted) accounts of the above two companies, you contribute to this report by
conducting financial ratio, common-size, and trend analyses of these companies’ income statements, using your
knowledge from FINM7409 as well as from your independent research.
Assignment materials (available on Blackboard)
 Excel spreadsheet template “FINM7409_Excel.xlsx”
 This file contains the BCI and GRR income statements and balance sheets.
 Use this template to complete Part 1) described below.
 For background information and/or readings, you can refer to the financial reports of the two
companies, available from the following links.
 BCI: https://www.bciminerals.com.au/investors/reports-and-presentations/annual-
reports.html
 GRR: https://www.grangeresources.com.au/announcements
You don’t need to use these reports to carry out your analyses, but may want to use them to glean
any relevant information you find useful for your analyses and interpretations, especially in Parts 2)
and 3) of this assignment.
TASKS:
1) Complete ratio and common-size analyses of the two companies’ income statements using the Excel
template mentioned above. You are also required to fill out the missing numbers in the “Other
Inputs“ worksheet.
NOTE:
 Do not change the order or the name of the worksheets.
 Financial ratios may vary in terms of how they are defined, i.e., the same ratio could be defined
in a slightly different way. For your assignment, use the definition as covered in FIMN7409,
but if you have difficulty, you can refer to the definitions provided in the Appendix of this
document.
INDIVIDUAL ASSIGNMENT
BCI Minerals Limited (ASX: BCI) engages in the development and operation of mineral assets in
Australia. The company explores for salt, iron ore, and potash deposits. It primarily focuses on its 100%
interest owned in the Mardie Salt and Potash Project located in the West Pilbara coast, as well as owns
interest in the Iron Valley, an iron ore mine located in the Central Pilbara. The company was formerly
known as BC Iron Limited and changed its name to BCI Minerals Limited in December 2017. BCI
Minerals Limited was incorporated in 2006 and is based in West Perth, Australia.
Grange Resources Limited (ASX: GRR) owns and operates integrated iron ore mining and pellet
production business in Australia and internationally. The company is involved in the mining,
processing, and sale of iron ore; and exploration, evaluation, and development of mineral resources. It
owns interests in the Savage River project located in 100km southwest of the city of Burnie; Pellet Plant
project situated in Port Latta located to the 70Km northwest of Burnie; and Southdown magnetite project
located 90km from Albany Western Australia. Grange Resources Limited was incorporated in 1985 and
is headquartered in Burnie, Australia.
FINM7409 Financial Management for Decision Makers Semester 2, 2023
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2) Carry out the trend analysis for the two companies, focusing on sales revenue, operating income, and
net income. Graph the trends for these metrics.
3) Using the financial ratios, common-size reports, and trend analyses you have completed in Parts 1)
and 2) above, write a short essay (Word limit: 1,000 words) to answer and discuss questions in the
following areas:
3.1. Profitability:
a) Are these companies’ profit margins changing? What do you think are the underlying causes of
such changes (i.e., key drivers)? Why? How do they compare?
b) Are they managing overhead and administrative costs well? How do they compare?
c) What do you think are the most important factors explaining the difference in financial
performance between the two companies over the 5-year period?
3.2. Efficiency:
a) How well do they manage their inventories? Are inventory ratios changing? What do you think
are the underlying causes of such changes?
b) How well do they manage credit policies?
c) Are you taking advantage of trade credit? Are they relying too heavily on trade credit? If so, what
do you think are the implicit cost of relying too much on trade credit?
3.3. Liquidity and solvency (capital structure)
a) Do they have enough debt? Do they take advantage of the potential benefits of using debt?
b) What are they doing with the borrowed funds, e.g., investing in working capital or PPE?
Mark allocations
Excel computations (Part 1) 50
Essay (Parts 2 + 3)
 Essay: 40 marks
 Presentation: 10 marks
50
Total 100
SUBMISSION
You will find 3 submission links in the folder “Assessment/Individual Assignment/Assignment
Submission” on Blackboard:
1. Part 1 - Excel: Submit your completed Excel spreadsheet here. Your Excel file must be re-named in
the following format: “Assignment_XYZ.xlsx”, where XYZ is UQ student number. For example, if
your student number is 12345678, then your Excel file must be named “Assignment_12345678”. This
Excel file will be marked.
2. Part 2 & 3 (Turnitin submission): Submit the same essay as you did in the 2nd submission folder
above. The purpose of this link is check for similarity and detect plagiarism. Each time you submit
your essay to Turnitin, you will get a report showing similarity scores. You may re-submit through
Turnitin as many times as you like, but make sure that your last version should be the one submitted
in the link below for marking.
3. Part 2 & 3 (Essay): Submit your essay in a single pdf document here. Name your file using the
following format: “Assignment_XYZ.pdf”, where XYZ is your student number. You may submit
your essay multiple times but only your last submission will be marked.
Late submission will incur penalties as outlined in Section 5.3 of the Electronic Course Profile. For submission
extension, please refer to the same section. IMPORTANT: AI tools such as ChatGPT is not allowed as per
the University policies. Using such tools will be treated as plagiarism.
FINM7409 Financial Management for Decision Makers Semester 2, 2023
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Appendix
Commonly Used Asset Efficiency Ratios
Activity Ratios Numerator Denominator
Inventory turnover Cost of sales or cost of goods
sold
Average inventory
Days of inventory on hand
(DOH)
Number of days in period Inventory turnover
Receivables turnover Revenue Average receivables
Days of sales outstanding (DSO) Number of days in period Receivables turnover
Payables turnover Purchases Average trade payables
Number of days of payables Number of days in period Payables turnover
Working capital turnover Revenue Average working capital
Fixed asset turnover Revenue Average net fixed assets
Total asset turnover Revenue Average total assets
Commonly Used Liquidity Ratios
Liquidity Ratios Numerator Denominator
Current ratio Current assets Current liabilities
Quick ratio Cash + short-term marketable
investments + receivables
Current liabilities
Cash ratio Cash + short-term marketable
investments
Current liabilities
Defensive interval ratio Cash + short-term marketable
investments + receivables
Daily cash expenditures
Additional Liquidity Measure
Cash conversion cycle (net
operating cycle)
DOH + DSO – number of days
payables
Commonly Used Solvency/Capital Structure Ratios
Solvency Ratios Numerator Denominator
Debt-to-assets ratio Total debt Total assets
Debt-to-capital ratio Total debt Total debt + Total shareholders’
equity
Debt-to-equity ratio Total debt Total shareholders’ equity
Financial leverage ratio Average total assets Average total equity
Coverage Ratios
Interest coverage EBIT Interest payments
Fixed charge coverage EBIT + lease payments Interest payments + lease
payments
FINM7409 Financial Management for Decision Makers Semester 2, 2023
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Commonly Used Profitability Ratios
Profitability Ratios Numerator Denominator
Return on Sales
Gross profit margin Gross profit Revenue
Operating profit margin Operating income Revenue
Pretax margin EBT (earning before tax but after
interest)
Revenue
Net profit margin Net income Revenue
Return on Investment
Operating ROA Operating income Average total assets
ROA Net income Average total assets
Return on total capital EBIT Short- and long-term debt and
equity
ROE Net income Average total equity
Return on common equity Net income – Preferred
dividends
Average common equity
DuPont Analysis: The Decomposition of ROE
ROE = Net income/Average shareholders’ equity
ROE = Net income/Average total assets × Average total assets/Average shareholders’ equity
ROE = ROA × Leverage
ROE = Net income/Revenue × Revenue/Average total assets × Average total assets/Average
shareholders’ equity
ROE = Net profit margin × Asset turnover × Leverage
ROE = Net income/EBT × EBT/EBIT × EBIT/Revenue × Revenue/Average total assets ×
Average total assets/Average shareholders’ equity
ROE = Tax burden × Interest burden × EBIT margin × Asset turnover × Leverage
DuPont Analysis Numerator Denominator
Tax burden Net income EBT ×
Interest burden EBT EBIT ×
EBIT margin EBIT Revenue ×
Asset turnover Revenue Average total assets ×
Leverage Average total assets Average shareholders’ equity =
ROE Net income Average shareholders’ equity
FINM7409 Financial Management for Decision Makers Semester 2, 2023
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Selected Valuation Ratios
Numerator Denominator
Valuation ratios
P/E Price per share Earnings per share
P/CF Price per share Cash flow per share
P/S Price per share Sales per share
P/B Price per share Book value per share
Per-Share Quantities
Basic EPS Net income minus preferred
dividends
Weighted average number of
ordinary shares outstanding
Diluted EPS Adjusted income available
for ordinary shares, reflecting
conversion of diluted
securities
Weighted average number of
ordinary and potential ordinary
shares outstanding
Cash flow per share Cash flow from operations Weighted average number of shares
outstanding
EBITDA per share EBITDA Weighted average number of shares
outstanding
Dividends per share Common dividends declared Weighted average number of
ordinary shares outstanding
Dividend-Related
Quantities
Dividend payout ratio Common share dividends Net income attributable to common
shares
Retention rate (b) Net income attributable to
common shares – Common
share dividends
Net income attributable to common
shares
Sustainable growth rate b × ROE