HM5002 Finance for Managers Individual Assignment help

Group Assignment

Assessment Details and Submission Guidelines

Group Assignment Guidelines and Specifications

Part A — Statistical Analysis on Return, Risk and Correlation (20 Marks)

You are employed as a financial analyst with the responsibility of conducting a comprehensive statistical analysis of investment performance across a selection of companies listed on the Australian Securities Exchange (ASX). Your role involves evaluating key financial metrics, including returns, risk measures, and correlations, to generate meaningful insights that support investment decision-making.

The dataset containing the ASX-listed companies assigned to your group has been provided below. Using this dataset, you are required to apply appropriate statistical techniques to assess the performance and risk characteristics of each company.

Allocation of Companies

Requirements:

I. Write an overview of your allocated companies, ensuring the following details are included:

• a. Its principal business activities (main products or services)
• b. Total market capitalization (as of December 2024)
• c. Major company events in 2022–2024 which may have impacted its stock prices.

(2 marks)

II. Statistical Analysis on Return, Risk and Correlation

Using the historical price data provided in a separate Excel spreadsheet, perform the following:

a) Calculate the monthly returns and complete the table below. If there are no return values, indicate them as N.A. (4 marks)

b) Calculate the arithmetic mean and standard deviation of monthly return and comment on the risk and return behaviour of stocks. (4 marks)

c) Calculate the geometric mean of monthly return for each stock, and explain what these values indicate about companies' returns. (3 marks)

d) Estimate the annual return for each company using the calculated average monthly return. (1 mark)

e) Calculate the holding period return for each stock. (1 mark)

f) Based on monthly returns, estimate and comment on these stocks' correlations. (4 marks)

Please insert correlation matrix from your Excel output. The correlation matrix is obtained using CORREL(array1, array2) in Excel spreadsheet.

Note: Ensure that you attach the Excel file containing the price data and necessary calculations to your assignment submission. Assignments submitted without an attached Excel file will incur a 10% penalty.

Part B — Financial Ratio Analysis (13 Marks)

In addition to conducting the statistical analysis on return, risk and correlation for the allocated companies using the historical prices in Part A, you are also required to perform a detailed financial ratio analysis. This analysis should complement the findings from Part A by offering deeper insights into each company's financial performance, and overall market positioning.

Requirements:

Obtain and review the Balance Sheet and Income Statement for each of your assigned companies for three financial years (FY2022, FY2023 and FY2024). Attach these financial statements in the appendix of your report. Based on this information:

a) Evaluate each company's liquidity position by calculating and analysing key liquidity ratios, such as the Current Ratio, Quick Ratio etc. for each of the three financial years. (3 marks)

b) Comment on whether the company appears to have sufficient short-term resources to meet its obligations. (3 marks)

c) Identify and explain two key leverage ratios that would be important to creditors and/or potential investors (e.g. Debt-to-Equity Ratio, Interest Coverage Ratio, etc). Calculate and interpret these ratios for each company for each of the three financial years. (4 marks)

d) Identify and explain two key financial ratios that would be important to shareholders and/or potential investors (e.g. Return on Equity, Earnings Per Share, etc). Calculate and interpret these ratios for each company for each of the three financial years. (4 marks)

Part C — Preparation of an Investment Proposal (7 Marks)

Finally, you are required to develop a well-structured investment strategy proposal. In this proposal, you must select and recommend two out of the four allocated companies, ensuring that one company is chosen from each industry represented in your dataset.

Your recommendations should be clearly justified and grounded in the findings from your earlier analyses, including both the statistical evaluation (returns, risk, and correlation) and the financial ratio assessment. You are expected to integrate these insights to explain why the selected companies offer stronger investment potential, considering factors such as performance consistency, risk profile, growth prospects, and competitive positioning within their respective industries.

Assignment Structure

The assignment should include the following components:

• The assignment cover page (group members' names, student numbers, and all other required details)
• Abstract (one paragraph)
• Table of contents
• A brief introduction or overview of what the assignment is about
• Body of the assignment with appropriate section headings
• Conclusion
• List of References (follow the Holmes Adapted Harvard Referencing guidelines)

Marking Criteria

Student Assessment Citation and Referencing Rules

Holmes has implemented a revised Harvard approach to referencing. The following rules apply:

• Reference sources in assignments are limited to sources that provide full-text access to the source's content for lecturers and markers.
• The reference list must be located on a separate page at the end of the report and titled: "References".
• The reference list must include the details of all the in-text citations, arranged A-Z alphabetically by author surname with each reference numbered and each reference MUST include a hyperlink to the full text of the cited reference source. For example:

1. Hawking, P., McCarthy, B. & Stein, A. 2004. Second Wave ERP Education, Journal of Information Systems Education, Fall, http://jise.org/Volume15/n3/JISEv15n3p327.pdf

• All assignments must include in-text citations. These must include the surname of the author/s or name of the authoring body, year of publication, page number of the content, and paragraph where the content can be found. For example: "The company decided to implement an enterprise-wide data warehouse business intelligence strategy (Hawking et al., 2004, p3(4))."

Non-Adherence to Referencing Rules

• For students who submit assignments that do not comply with all aspects of the rules, a 20% penalty will be applied.
• Late penalties will apply each day after the student/s have been notified of the due date.
• Students who comply with rules BUT their citations are 'fake' will be reported for academic misconduct.

Academic Integrity

Holmes Institute is committed to ensuring and upholding academic integrity, as it is integral to maintaining academic quality and the reputation of Holmes' graduates.

Table 1: Six Categories of Academic Integrity Breaches

Marking Rubric

Note: This sample is for guidance purposes only and should be used as a reference to assist with understanding the assignment requirements.

HM5002 Finance for Managers – Sample Solution (Guidance Only)

Note: This sample solution is provided for learning and guidance purposes only. Students must perform their own calculations using the Excel dataset provided by their lecturer and prepare original analysis in accordance with academic integrity requirements.

Abstract

This report analyses the return, risk, correlation, and financial performance of four ASX-listed companies: Woodside Energy Group Limited, Santos Limited, Neuren Pharmaceuticals Limited, and Telix Pharmaceuticals Limited. Statistical analysis was conducted using monthly stock returns from 2022–2024. Financial ratio analysis examined liquidity, leverage, and profitability indicators. Based on the findings, an investment recommendation is provided by selecting one company from the energy sector and one company from the biotechnology sector.

1. Introduction

Investment decisions require an understanding of both market performance and financial strength. This report evaluates four ASX-listed companies from the Energy and Biotechnology industries through return analysis, risk assessment, correlation measurement, and financial ratio evaluation. The findings are used to formulate an investment proposal.

Part A – Statistical Analysis on Return, Risk and Correlation

2. Company Overview

2.1 Woodside Energy Group Limited (WDS)

Principal Activities

• Oil and gas exploration
• LNG production
• Energy development projects

Market Capitalisation (Dec 2024)

Approximately AUD 50 billion.

Major Events (2022–2024)

• Merger with BHP Petroleum assets.
• Strong LNG demand due to global energy shortages.
• Progress of Scarborough Energy Project.

2.2 Santos Limited (STO)

Principal Activities

• Natural gas production
• LNG exports
• Oil exploration

Market Capitalisation (Dec 2024)

Approximately AUD 25 billion.

Major Events (2022–2024)

• Increased LNG exports.
• Expansion of Barossa Gas Project.
• Higher commodity prices supporting revenue growth.

2.3 Neuren Pharmaceuticals Limited (NEU)

Principal Activities

• Development of neurological disorder treatments.
• Commercialisation of Rett Syndrome therapies.

Market Capitalisation (Dec 2024)

Approximately AUD 2 billion.

Major Events (2022–2024)

• Positive drug trial outcomes.
• Increased royalty income from approved therapies.
• Significant share price appreciation.

2.4 Telix Pharmaceuticals Limited (TLX)

Principal Activities

• Radiopharmaceutical products.
• Cancer imaging and treatment solutions.

Market Capitalisation (Dec 2024)

Approximately AUD 8 billion.

Major Events (2022–2024)

• Strong growth in Illuccix sales.
• Expansion into global markets.
• Regulatory approvals supporting growth.

3. Monthly Return Analysis

Formula

Monthly Return=Pt−Pt−1Pt−1\text{Monthly Return} = \frac{P_t - P_{t-1}}{P_{t-1}}Monthly Return=Pt−1​Pt​−Pt−1​​

Sample Return Table

(Complete using Excel data provided.)

4. Arithmetic Mean and Standard Deviation

Discussion

• NEU generated the highest average monthly return.
• WDS and STO delivered more stable returns.
• Biotechnology stocks exhibited greater volatility than energy stocks.
• Higher returns were associated with higher risk.

5. Geometric Mean Return

Interpretation

The geometric mean represents the average compounded return earned by investors over time. NEU and TLX produced stronger long-term growth, while WDS and STO provided steadier performance.

6. Annual Return

Formula:

(1+Monthly Return)12−1(1+\text{Monthly Return})^{12}-1(1+Monthly Return)12−1

7. Holding Period Return

Formula:

PEnd−PBeginningPBeginning\frac{P_{End}-P_{Beginning}}{P_{Beginning}}PBeginning​PEnd​−PBeginning​​

Interpretation

NEU achieved the highest overall return during the investment period, indicating exceptional growth performance.

8. Correlation Analysis

Sample Correlation Matrix

Discussion

• WDS and STO have strong positive correlation because both operate within the energy sector.
• NEU and TLX show moderate correlation due to similar biotechnology industry influences.
• Low correlation between energy and biotechnology stocks suggests diversification benefits.

Part B – Financial Ratio Analysis

9. Liquidity Analysis

Current Ratio

Current Ratio=Current AssetsCurrent LiabilitiesCurrent\ Ratio=\frac{Current\ Assets}{Current\ Liabilities}Current Ratio=Current LiabilitiesCurrent Assets​

Quick Ratio

Quick Ratio=Current Assets−InventoryCurrent LiabilitiesQuick\ Ratio=\frac{Current\ Assets-Inventory}{Current\ Liabilities}Quick Ratio=Current LiabilitiesCurrent Assets−Inventory​

Sample Results

Interpretation

• NEU and TLX possess strong liquidity positions.
• WDS and STO maintain adequate liquidity.
• All companies appear capable of meeting short-term obligations.

10. Leverage Analysis

Debt-to-Equity Ratio

Debt/Equity=Total DebtTotal EquityDebt/Equity=\frac{Total\ Debt}{Total\ Equity}Debt/Equity=Total EquityTotal Debt​

Interest Coverage Ratio

Interest Coverage=EBITInterest ExpenseInterest\ Coverage=\frac{EBIT}{Interest\ Expense}Interest Coverage=Interest ExpenseEBIT​

Sample Results

Interpretation

• NEU and TLX maintain very low debt levels.
• WDS and STO employ moderate leverage.
• Lower debt reduces financial risk for biotechnology companies.

11. Shareholder Ratios

Return on Equity (ROE)

ROE=Net IncomeShareholders EquityROE=\frac{Net\ Income}{Shareholders\ Equity}ROE=Shareholders EquityNet Income​

Earnings Per Share (EPS)

EPS=Net IncomeShares OutstandingEPS=\frac{Net\ Income}{Shares\ Outstanding}EPS=Shares OutstandingNet Income​

Sample Results

Interpretation

• NEU generated the highest shareholder return.
• TLX demonstrated strong profitability growth.
• WDS provided stable returns supported by strong cash flows.

Part C – Investment Proposal

Recommended Companies

1. Woodside Energy Group (WDS)

Reasons

• Strong market position in the energy sector.
• Stable cash flow generation.
• Lower volatility than biotechnology companies.
• Healthy liquidity and leverage ratios.

2. Telix Pharmaceuticals (TLX)

Reasons

• Strong revenue growth.
• Expanding international operations.
• Attractive long-term growth opportunities.
• Solid profitability and liquidity indicators.

Investment Strategy

A diversified portfolio consisting of:

• 60% Woodside Energy Group (WDS)
• 40% Telix Pharmaceuticals (TLX)

would provide:

• Exposure to both energy and biotechnology sectors.
• Balance between growth and stability.
• Diversification benefits due to relatively low inter-industry correlation.

Conclusion

The analysis found that biotechnology companies generated higher returns but also experienced higher volatility. Energy companies delivered more stable performance and lower risk. Correlation analysis demonstrated diversification benefits when combining energy and biotechnology stocks. Based on the overall assessment, Woodside Energy Group and Telix Pharmaceuticals represent the strongest investment choices due to their favourable balance of growth potential, financial strength, and risk characteristics.

References (Sample)

1. Woodside Energy Annual Reports
2. Santos Annual Reports
3. Neuren Pharmaceuticals Investor Centre
4. Telix Pharmaceuticals Investor Centre
5. Australian Securities Exchange (ASX)

Important: Replace all sample figures above with the actual calculations from your Excel dataset before submission.