Feedback Sheets for ASS#2 Steps 3-5

PEER FEEDBACK SHEET: ASS#2 

Feedback From:             Sharon Field                                    

Feedback To:                 Iris Onvlee

	My Comments
Step 3	I researched the industry norms (this is the linkhttps://csimarket.com/Industry/industry_Efficiency.php?ind=1301)  for retail apparel and found the norm ATO ratio is between 1.71 – 2.19 but you have used percentages. It’s my understanding that ratios differ from industry to industry. According to the ratios in your spreadsheet, the ATO shows an inefficiency to generate sales. I agree the liquidity ratios look strong and above industry norm. Although debt ratios have significantly dropped, they are still within industry norms. I would expect the PPE ratio to be way off since no dividend paid and that’s all investors are entitled too. The ROE and ROOA is up and down almost like a response mechanism to the downturn with an increase following. The NBC is concerning with a negative result. The recent PM seems to be way above industry norm, I can’t help but think if this attempt to regain profit will be damaging in the future by putting off customers. It seems growth in all areas in the industry is crawling, as well as FCF which is not unusual to have negative results. You have made a thorough analysis, but I feel the future might be overly optimistic.
Ratios - commentary
Accounting drivers - commentary
Step 4 Economic & business drivers	I agree with your assessment of economic drivers. Brands are very important with fashion, I choose brand over price with many purchases. Logistics are also very important, especially with fashion when time is of the essence. It’s my opinion that the US trade war with China may eventually fizzle out, price is still important and if they can secure brands, they might be okay. You have a firm grasp on understanding your company and relate well to Martin’s examples. I love your sense of humour with row, row, your boat, it’s so fitting to your company’s future.
Step 5 Forecasting & valuation	Such a clever way to explain the company background and relate to GDP. It explains the peaks and troughs of the country and the industry too. I think you justify the change in WACC convincingly and I agree, there are some great risks involved. Therefore, I would not be convinced as an investor to invest.
Overall ASS#2 (Steps 3-5)	What a journey this has been for you. I love your never give up attitude. Your learnings have been bolstered by your approach to discussion and openness to comment. Your willingness to have a go without fear of ‘getting it wrong’ is commendable, inspiring too. You have produced a well thought out assessment. I wish you all the very best for the future.

PEER FEEDBACK SHEET: ASS#2

Feedback From:             Sharon Field                                    

Feedback To:                   Shalika King                .

	My Comments
Step 3	PM seems to be much higher than industry norms according to this link. I think that may indicate their product is high end/luxury. Debt/equity ratio is spot on in terms of industry and according to investopedia is a key indicator to investors and lenders. The current ratio sits higher than industry norms indicating a possible inefficiency in asset management, although difficult to assess in the automotive industry because it also might reflect a recent employment of capital for R&D. I agree their asset turnover reflects steady sales, inline with norms. The slight decline might be due to the slight decrease in general demand by customers across the industry. ROE is well below norm and concerning for investors, however, debt management is cost-effective and shows signs of improvement. I agree the most critical accounting drivers involve asset management as opposed to capital employment.
Ratios - commentary
Accounting drivers - commentary
Step 4 Economic & business drivers	Competition is fierce in the luxury car industry, are there new comers to the industry? Does Audi’s R&D give them an edge over competitors? What else might consumers be looking for in a luxury car? Would Audi consider catering to the mid-class or economy car markets?
Step 5 Forecasting & valuation	Investopedia suggests the automotive industry is a key indicator of economic health and consumer demand. It might be worth looking at GDP in Germany and China. I am concerned that the 8%WACC may be too low for your company as high amounts of capital is needed for R&D which may be slow to show returns. In my opinion, the cost of capital might be higher over the forecasted years long before any ROI. The estimated growth rate might be slightly inflated also, given the creeping growth and previous years decreases in revenue for the industry. You may want to consider apportioning with a decimal figure for accuracy.
Overall ASS#2 (Steps 3-5)	Your approach and layout of the assessment is logical and thorough. The amount of research and connections with learning outcomes are obvious. I have enjoyed your interactions and with others and this reflects well in your learnings also. This has been a significant assessment to tackle and you have risen to the challenge. It has been a pleasure to work with you. I wish you all the very best for all your future endeavours.

ACCT13017 Financial Statement Analysis                                       ASS#2

PEER FEEDBACK SHEET: ASS#2

Feedback From:   Sharon Field                                        

Feedback To:      Sarah Goodchild

 

	My Comments
Step 3 Ratios - commentary Accounting drivers - commentary	Compared to industry norms, PM seems low although it has been decreasing steadily across the board. Investopedia suggests seasonality to be a factor as well as fluctuating energy prices and economic downturn. The debt/equity ratio seems extraordinary compared to China Southern Air but not unrealistic considering the industry, high assets costs, unrealised revenue and the illusion of capital debt can distort figures as well as tax credits. However, this is very concerning given the leverage ratios compared to CSA are heavily reliant on equity and assets means a continued long-term negative ROE. ATO is well on track with industry norms and could mean their saving grace.
Step 4 Economic & business drivers	Would the effect of rising inflation affect passenger numbers if airfares stay the same? I agree creating more destinations would attract sales. Does this affect their operating expenses as runway taxi fees, hub and airport fees, tariffs, hanger and exchange rates would increase?
Step 5 Forecasting & valuation	Trends say profits are normalising but WACC will still be higher than other industries, which might be a factor in forecasting calculations. The airline industry is one of the most unpredictable industries. However, there is little doubt of the future need for airlines long into the future, which guarantees demand.
Overall ASS#2 (Steps 3-5)	You have presented a well thought out and thorough analysis. I am not convinced to invest in an airline as yet. I am compelled to think the existing investors of Air France may see the realisation of their ROI in the near future and won’t be disappointed. It has been a pleasure to interact with you and listen to your insights during class sessions. I wish you all the very best for a bright and fruitful future.