Assessment 2 Financial analysis of Nick Scali Limited

Your task is to analyse and interpret the financial performance and financial position of Nick Scali Limited (NCK) for the financial year ended 30 Jun 2021 in a written report.

Your primary source of information is the company’s 2021 annual report together with the list of ratios provided in this document for 2019, 2020 and 2021. Whilst your focus is the 2021 financial year, also comment on comparative and trends in key financial indicators where relevant. For this purpose, we have also provided the 2020 Annual report.

Instructions:

• Use financial data from the sources identified above.

• Model your analysis on the guidance and examples provided in Topics 4 and 5.

• Before you start your analysis, contextualise your financial analysis by reading the Chairman and Managing Director’s Review and the Directors’ Report for the 2021 financial year. Include any relevant information from these reports in your financial analysis.

• You can presenttables, graphs or diagramsto help summarise and communicate your analyses but you must provide explanations and conclusionsfrom each. 

Required:

A. Overview of economic and industry context

Overview the economic impact of the extraordinary events caused by covid-19 and identify what you think the key national and retail industry drivers of profitability during the pandemic for a company such as NCK might be.

B. Analysis of cash flow performance

Analyse and interpret NCK’s Statements of Cash Flows for 2021 (comparing to the prior year where relevant) and provide conclusions on the company’s cash flow performance.

C. Analysis of profitability

Analyse and interpret NCK’s profitability for 2021 (comparing to the prior year where relevant) and provide conclusions on the company’s profit performance.

D. Analysis of financial position

Analyse and interpret NCK’s financial position as at 30 June 2021 including analysis of financial liquidity, gearing and efficiency.

E. Overall evaluation of NCK

Utilising NCK’s investment ratios and your analysis in parts A to D above, provide an overall financial evaluation of NCK for the 2021 financial year. Include a brief discussion of how you perceive the covid-19 pandemic to have impacted NCK.