1006GBS Why Money Matters

Trimester 2, 2024

Assessment 2: Financial Decision-Making: Take-Home Assignment.

40 Marks worth 40% of total assessment.

The deadline is 11pm, Friday, 30th August 2024.

Task:

You are an intern financial analyst. In referring to the XeroLtd’s 2024 Annual Report (provided in an attached filehere), you are tasked by your supervisor to present a report evaluating the financial performance of the company from different perspectives by addressing the questions listed on pages 2 and 3 below..

*Financial year: 1 April 2022 to 31st June 2023

Notes – read these carefully!

- Use a new Word document and type in your answers for each question. Label questions numbers, 1), 2), 3), etc … in presenting your answers. There is no need for you to re-type the questions. At the start of your assignment document, insert your name (Surname, Given Name), and your student number.

- Please refer and adhere to word limits for your answers that are specified in each of the questions.

- Students must use their own words when presenting relevant information taken from the provided annual report, instead of just copying and pasting.

- Assignment must be submitted as a PDF.

- You are required to keep a hard copy of your submitted assignment to re-submit, in case the original submission is lost for some reason.

- Please keep 2 decimal points for all the calculation questions.

- IMPORTANT: As this is an individual assessment item, students must work on their own and present their individual assignment submission. If you are found to have cheated, your submission would receive a mark of zero for this assessment item.

1) State the full name of the Chairman and the CEO of Xero Ltd (XRO). As reported in the 2024 Annual Report provided, what was the CEO’s total remuneration package in the 2024 Financial Year? In which business sector of the economy does XRO operate? Explain the reasoning for your answer.

100 words max, 3 marks

2) Describe the purpose of the 1) income statement and the 2) balance sheet. Which accounting elements appear in each financial statement. Explain in which section of the balance sheet profit is represented.

100 words max, 3 marks

3) When was XRO incorporated? Is it a private or a publicly listed company? What was the date of the IPO on the ASX? What price were shares sold at in the primary market and how much capital was raised? What was the closing price on the first day of trading? What is the total return an investor would have made up until 30 June, 2024, by purchasing the share at the IPO?

100 words max, 4 marks

4) a) Suppose the economy of a country experiences a period where inflation,instead of averaging 2 to 3%, is measured at 1.3%, 0.9%, 0.6% and 1.1% over the four quarters of a year. How do you think the central bank of the country might respond in setting monetary policy? With the use of an appropriate drawing of a money demand and money supply diagram, explain the open market operation process that the central bank will undertake in implementing such a policy. Further, explain how this policy will likely impact a company like Xero Ltd’s financing cost. Also explain how the policy will likely impact household consumption, business investment, aggregate demand, GDP, unemployment and prices in the country. What do you think is likely to happen to the exchange rate of the country during this period? 

250 words max, 4.5 marks

5) What are XRO’s total assets, total liabilities, and total equity in 2023 and 2024?

50 words max, 3 marks

6) Based on your answers in Question 5, undertake a horizontal analysis by calculating the percentage change (from 2023 to 2024) for total assets, total liabilities, and total equity. 

100 words max, 3 marks

7) Calculate the gross profit margin, operating profit margin and net profit margin for XRO in 2023 and 2024.

100 words max, 3 marks

8) Based on your answer in Question 8, are gross profit margin and operating margin changing in the same direction or not and why?

50 words max, 1.5 mark

9) Please calculate the current ratio and quick ratio of XRO in 2024 and comment on the results.

200 words max, 4 marks

10) Please calculate the debt-to-equity ratio of XRO in 2024 and comment on the result. (Assuming the industry average is 0.5)

100 words max, 2 marks

11) Please calculate the ROE of XRO in 2023 and 2024. (Total equity at the end of 2022 is $1,033,923,000.

50 words max, 2 marks

12) Decompose the calculated 2023 and 2024 ROE from Question 11 to ROA and Equity multiplier, and comment on your result. (Total assets at the end of 2022 is $2,343,340,000)

150 words max, 4 marks

13) Based on your analysis so far and your research, what are your suggestions for the future operation of the company?

200 words max, 3 marks

End of Assignment