In the exam you may sometimes will be given raw tables and data and you have to analyse it and derive information.
That analysed information should have meaning to perform strategic analysis.
It is important that student should be able to interpret the data and use it to answer it.
1) Tables of Data:
Any kind of numerical data can be given in the form of tables and you have to interpret it and should be able to understand what the table is trying to tell you.
2) Financial Statements:
Question may also provide you financial statements and you will be required to interpret to find key messages and key issues.
To effectively analyse the financial statements,
i) Choose three or four key ratios:
The aim is to pick some ratios that best tell the organization’s story.
Key ratio will depend on question and financial statements. It can be sales growth, margin, gearing.
Ratio should not be added if it adds nothing to story like there is no point in calculating receivables days if it hasn’t changed during year and business do not have any problem with debt collection.
ii) There is no need to illustrate the formula or calculation:
No need to show formula because it’s already been tested in fundamental level.
And there is also not required to explain the meaning of ratio.
Example: GP ratio shows how much profit the business makes per $ of turnover.
iii) Only one comparator is needed:
The examiner will often provide four or five years’ worth of financial statements.
However, in order to get the key messages for the company’s story we do not need to calculate the ratios for every year.
Normally we simply need to compare this year’s results with last year’s or occasionally this year’s results to the first year’s results if we are assessing how performance has changed over time.
iv) Focus on the cause of any changes and what this might tell us about organisation’s position:
The key to gaining any marks will be to analyse the data that has been calculated (simply performing the calculation and not discussing it will not achieve all of the marks that are available).
So we need to explain why a ratio has changed (for example, is it due to changes in the external or internal environment) and what these changes mean for the business (for example, does it need to reach to these changes or can the position be improved in future).
3) Non-Financial performance measures:
There will be many non-financial information given in question and will tell you something about company but you should be able to identify important non-financial information which can be linked with financial info or can have usage in strategic analysis.
Example:
Percentage of repeat business, overtime duration of E’ees, machine break down.
To analyse the non-financial performance we have to identify our critical success factors and its KPI’s
Critical Success Factors:
Usually there will be three-four Critical Success factors like
1) Resource Utilisation
2) Quality Service
3) Customer Satisfaction
4) Innovation