STRUCTURE OF THE REPORT

Financial analysis is mainly explaining reason for the change

Include an introductory paragraph This can be used to include a few wider contexts
points Sample July 2010 case study

Revenue

First Paragraph Overall Revenue change

Change - up or down, adjective wordmarginally, slightly, significantly

Bench mark comparison (forecast,
competitor)
Main drive /reason for change)
Pattern/impact/Broad context

Comparability large one off, distorted, deferred

revenue
Growth trend dropping, increasing,
fluctuating, all in same direction, biggest
change, minimal change
Benchmark
Which stream important, significant, highly
reliant
Interdependence between revenue streams
Volume or price
Other strategy to use broad business context is to mention them whenever the related
item is discussed. Like general with overall performance and one related to each revenue
stream when that part is discussed. Courier is growing etc. Mostly this style is practiced.
Paragraph 2, 3 and 4 One paragraph each for three Business lines/Revenue streams
Change/adjective word/comparison
against and bench mark/reason for
change/pattern/Impact/Broad contexts
One of the Business line would be an
emerging/growing new area

Reason for change

Benchmark
Per unit performance across streams
Further sub mix change
Popularity, life cycle and other comments

Paragraph 5 Sales mix may use for broad context on new area

Gross Profit
First Paragraph Overall change in gross profit amount and change in gross profit
margin.
Change/adjective word/comparison
against and bench mark/main drive
(reason for change)/evaluation/Broad
contexts

Comparability between years distorted by loss

on disposal
GP trend Stable, fluctuating, dropping
Benchmark
Sale mix change impact on GP margin %
Reason for change
Other comment Not possible to calculate GP
accurately

Paragraph 2, 3 and 4 - One paragraph each for three Revenue streamsOnly Gross
profit Margin
Change/adjective word/comparison Reason for change
against and bench mark/main drive Bench mark
(reason for change)/evaluation/Broad Sub mix
Other comments Inability to pass on cost,
contexts
control on costs, whether all costs increased

EPIS
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First produce analysis and then discussion

points
SPS - Calculations, Changes or amounts This
will give you items for discussion

Evaluation Discussion about numbers,

Pro/cons Discuss any related point
pertaining to that area

Conclusion

Total revenue change with remarks and driver/reason of change (with numbers). Any
comparison with forecast/competitor
o Revenue change in revenue streams with number reason for change
Second requirement (with figures) change/remarks/reason
EPIS

Difference between Conclusion and Main Report: Conclusion is on headlines except

for revenue you may add comments on revenue streams. Conclusion is only about
Change/comment/reasons No AJ
Difference between Conclusion and Executive Summary: Executive summary =
Conclusion + AJ+ Broader Context

Recommendations

One recommendation for each of the area

One for Revenue 1 or 2
One for gross profit
3rd requirement EPIS normally two.
Concentrate on business issues and your recommendation would be on that. One free
mark for any recommendation

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For Writing about Implications (May be this is about impact)

This may suggest / reflects / indicates / would confirms / this is broadly in line with /
Outweighing the effect of overall
For writing about reasons
This is likely to be due to / this can be attributed to / this may be due to
Remarks about Change/Movement

Decreased/ declined/dropped/fallen/ deteriorated

Increased/ Exceeding expectations

Quantum

Slightly /
Modest change / modestly
Severely/drastically/significantly /
Disappointingly/ dramatically / striking

Other Comments
Events distorts underlying data trends and therefore while recognizing their impact on
overall performance need to be stripped out to provide like for like comparison
Performance appraisal - what has happened --- How it has happened ---- why it has
happened
Decline in profitability follows through to profit for the year.
This would confirm that price raises have not been passed on to customers
Reduction in R&D expenses may boost performance in short term but will have long term
adverse consequences on business development

3 | Page

EVALUATION

1.

2.
3.

4.

5.
6.
7.
8.
9.

1.

2.
3.
4.

5.
6.

Revenue
This is all about current years performance.
Stepwise:
Comparability of years
a. Large one off event
b. Revenue distorted by --c. Closure over Christmas
d. Deferred revenue item
Revenue growth rate trend (increasing, decreasing, fluctuating) or market share.
Sustainable in future?
Driver of growth
a. Largest/biggest revenue stream
b. Importance of revenue stream Important / not important
c. Highly reliant on
d. Insufficient to sustain growth
If there are unit of sales then
a. Growth by volume?
b. Overall sale price per unit, change? Increased, decreased
c. Each division/unit analysis about unit price, sale volume
Interdependence between revenue streams
Reason for change
a. Link with any external factor?
Compare with benchmark
a. Forecast / expectations
b. Competitors/industry
Further break down. Change in mix in each revenue streams
Comments or inferences from performance
a. Product life cycle - Growing or mature
b. popularity
Gross Profit
GP trend
a. Fluctuating / stable
b. Change in all revenue in same direction
c. Biggest change or minimal change
Impact of change in sale mix on GP%
a. Growth in low margin revenue stream
Reason for change
Comments
a. Inability to pass on cost
b. Control on cost poor/good
c. Only a small change in GP for a large change in revenue
d. GP stable despite cost pressure
e. Whether all cost increased
f. Anticipated last year
g. Not possible to calculate accurately GP
Change in sub mix
Comparability
Loss on disposal of asset distorted ratios

4 | Page

Business Issues and Wider Context R1

Always refer its affect on Companys performance.
Two separate parts
1. Business Issues - One free response mark
2. Wider context - One free response mark

Wider Context

Economy / GDP
Industry
o Competition / competitors
o Trends
- Growth area/popularity/area under threat/ what is happening in
industry
o Forecast - Benchmark - Growth % / GP%
o Any deadline
o One off events
o Industry data

There normally will be one growing area and one biggest (normally mature) area
Business Issues

Broader business issues in each revenue stream. Usually relates to outside. Inputs,
customers, suppliers
o Normally problems relates to biggest/mature area
o Change in price
o profitability

Where to write in Report

Points about overall economy and Industry can be written in overall Revenue change paragraph
Points about revenue streams in their respective paragraphs.

5 | Page

Working capital
Inventory - fallen drastically. Increases risk for potential obsolescence and increased inventory
holding cost. Industry/technology. Inventory turnover has increased but there is a risk of
disruption of supplies unless good just in time system with suppliers
Receivables - Management attention has been diverted to pursuit new products
Payables - Increase striking? Adverse effect of drop in profitability on cash flow have been
cushioned the increase in payables. Might have caused problem with suppliers and some may
refuse to supply
Cash position

Cash flow
Cash from operations
cash
Working capital

Investment cash flows

Dividend

Lower activity reduces need for working capital

-

Cash generating business/ businesss ability to generate

NCA non replacement quality issue

Reduce directors prudent in taking reduce dividend.

Fixed Assets
Loan covenants
Quality of products
Loss on sales may imply under depreciation / Remaining assets overvalued/ profits overstated
Funds for further investments

Cost of sale
1.
2.
3.
4.
5.

% change in cost vs % change in revenue

Reason for change
Comparability
Pattern
Impact although cost has reduces, it may impact quality of service which may have drastic
effect in future. Eroded margins

6 | Page

Wider Context and Business Issues

Two different areas

Own research - Usually about related revenue stream

Overall point about related revenue stream competition/growth/happenings/ competitors
Third Party - Facts/comments
About strategic and operational issues/aspects which are relevant to proposal - from
advance information/EP

Prepare a list of Wider context for each stream. Read EP and highlight strategic & operational point
and link with relevant points in Advance Information.
Point related to overall stream and related party can be mentioned either in back ground para
or within descriptive part. Points related to strategic and operational aspects will be in
descriptive part at the time of discussing strategic and operative aspects
Benefits
Scepticism (criticize available
Revenue
information and looking for missing or
o New Evens out seasonality
unknown and about preparer) about
Reverse previous downward trend
o Revenue figures are estimates / no
Hard to generate anywhere else
back up or figures / benefits may
Improve recent slow growth
never arise
Increase current market share
o Performance may be unable to
Replacement of one off revenue
increase capacity
o Impact on existing business
Implication of benefits - first
Margin Cost May reduce profit/apparently good
describe benefit and then implications
margin
More benefits
Cash flow Upfront payment
Common point
Consistency with strategy
One free response mark for both risks and
Prior experience Building on existing experience.
benefits. So try to find two most obvious
Learning curve
points from Exam Paper.
Diversification Reduces risk
Reputation enhance brand awareness / access to
Strategy for R-3
large market, build on good reputation
Read Exam paper and highlight risks,
Strengthen existing relationship
benefits, evaluation/scepticism and ethical
Possibility of further work with proposer or third
points. Look at Benefits & Risks chart to
party
assess which is there in scenario.
Surplus capacity
Make use of Business issues and financial
Staff and director extra overtime, income, good
facts of Company overall and relevant
experience
revenue stream.
Could benefit from proposer industry
Majority of Risks and Benefits will come
knowledge/ technology
form Exam Paper.

Risks (Proposal, Stream, Company, Resources,

proposer,3rd party)
Working capital / cash flow - upfront payments
Funds needed/investment - space, equipment
Logistic / staff - Vehicle , availability
Capacity issue Ware house, factory
Time constraints
Unknown costs and margins
7 | Page

For Strategic and Operational issues,

discuss both positive and negative.
Use direct langue. Like, this will generate
revenue of -------. This is significant and
would help to improve
Scepticism (criticize available
information and looking for missing or
unknown and about preparer) about
o Cost unknown/ may increase
o GP/Cash flow unknown/ timings of
payments
o Quality
o Unknown non-financial contract terms
o Contractual terms just initial

May take management focus away from existing

business
Unknown non-financial terms
Reputational damage by association, poor
quality, impact on existing business
Over reliance on proposer
Previous experience
Existing relationship with proposer, third party,
customer
Contract duration, size
Ethics - setting the scene / what has happened
and how it is unethical
Three events
Comment about party, related law
Comprehensively describe situation 3 events and 3
other points

Conclusions
Conclude on financial impact
Conclude on main operational / strategic benefit
Conclude on main operational / strategic risk
Conclude on way forward / whether to proceed
Conclude on business trust / ethical issues

8 | Page

discussion rather than a final agreed

contract
Implication of risk mostly
More risks
Common point Reputational risk due
to association will impact existing
business

Evaluation what are implications

and mitigations (recommendations)
Three recommendation - For instance:
Inquire / ask party about issue
Follow up article issue with party
Discuss with party
Perform due diligence
Investigate facts / problems
Review supplier quality control
Ensure that -------- Establish whether ----- Consider alternative
Look for three other points implications
for
o Company
o Related party
o Objectives of company
One of implication will be may
damage reputation
Recommendations
Focus on main tasks confronting if the
company was to proceed
Mostly linked with risks concentrate on
main risk
One free point so need two more points
Revenue - contract terms/back up
Proposer - Negotiate terms/due
diligence/financial stability/ethic
Operational - Need business plan
containing logistics, operational,
costing, cash flow
Operational Operational risks related
steps to mitigate operational risks

Proposal

Company

Resources

Third Party

Other Suppliers/customers

9 | Page

Positive
Revenue/Margins/Cash flow
Fit with Strategy
Other business lines mature
Consistent with strategy
Diversification

Previous experience
Staff overtime, good
experience
Surplus capacity

Reputation
Further work
Strengthen existing
relationship
Could benefit from
technology, knowledge
Existing relationship

Negative
Unknown set up cost /
margin
Unknown non-financial
terms
Duration & Size
Time constraint
Experience
May take focus of
management
Working Capital
Investment needed/funds
Logistics/staff
Capacity
Deliverable
Reputational damage
Over-reliance
Existing relationship
Financial strength