The purpose of stating my views regarding the unaudited annual report of the Norne Group is to assess the company’s financial health and performance. Norne Group’s annual report contains key information regarding the entity's sales revenues, net income, dividend per share, total assets, capital expenditure, and share price. Such information needs to be analyzed to portray the firm's economic reality. The combined investigation of all of the annual report's items is necessary, given that all the items are interlinked. For instance, the net profit is linked to the revenues since it is derived from subtracting expenses from the revenues (Vernimmen et al., 2014) . The assessment of the financial information in the annual report is needed to determine whether Norne Group can create wealth for its shareholders and continue meeting the customers’ needs. The review of the trend in Norne Group’s sales revenues can show whether it can attract customers and, in effect, pay its shareholders high returns from the profits.
Trend analysis allows the entity to determine whether its current strategies are feasible and effective. The firm implements various strategies to boost its financial performance. Improved financial performance has positive outcomes, including increased shareholder returns and continued operation of the firm in the long run. The firm can also obtain more funding for its investment projects if it has good financial performance. Through trend analysis, the firm can determine whether its financial performance is improving (Vernimmen et al., 2014) . If its financial performance is not impressive, the firm can alter its current strategies. Trend analysis can also enable the entity to realize its financial strategy by forecasting the future. The assessment of the historical data can assist the entity to predict its future performance. In this case, the firm can evaluate its going concern status.
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Exercise 1 Chapter 9
The purpose of the results regarding the financial information from companies in different sectors is to show the industry-based variations in income statement items such as personnel cost, depreciation and amortization, and EBITDA. The results show that income statements of companies differ based on the sector a firm operates. They emphasize the impact of different operations carried out by the companies and the different customers served by them. The results showcase the inherent characteristics that are known for companies in a particular sector. For instance, companies in the retailing sector are known to have low EBITDA margins, while those in the utilities sector are known to have high EBITDA margins (Vernimmen et al., 2014) . The results show the importance of the EBITDA margin in performing comparative financial analysis. The assessment of the EBITDA from the results can show which sector among the utilities, retailing, construction, and media sectors is the best in terms of yielding high margins.
The assessment of the income statement items assists the firm in its financial strategy by allowing it to identify areas in which it needs to reduce costs. The results depict key income statement items such as personnel cost and depreciation, and amortization. Such expenses need to be reviewed to determine whether they are high or normal for an entity in a specific sector. In the retailing industry, the deprecation expense is expected to be lower than that of companies in the mining sector. In this sense, a firm in the retailing sector can focus on cost reduction if it discovers that its depreciation expense is similar to that of mining companies. In addition, the review of the various line items in the income statement is needed to obtain clues regarding the entity's financial health and performance (Robinson, 2020) . The EBITDA and operating income can show whether the company has an impressive financial performance.
Exercise 3 Chapter 10
The purpose of the calculations and results is to show the sensitivity in Schmidheiny Group’s projected earnings at different business levels. The computations depict the projected sales revenues, variable costs, fixed costs, and breakeven amounts. The computations depict the number of units Schmidheiny Group should produce to generate profits. They also show the effect of changing the entity's production capacity on its total costs, including the variable and fixed expenses. For instance, the increase in the fixed costs has an impact on the breakeven point given that it increases it. The results also depict the effect of debt capital on Schmidheiny Group's breakeven point. They show that debt capital considerably increases the breakeven point and resultantly leads to a higher level of risk.
The results of the breakeven analysis can assist the entity to meet its financial strategy associated with cost reduction. Schmidheiny Group can manage its costs better by determining the effects of changing its variable and fixed costs. The breakeven analysis can assist the entity to establish cost control points (Cafferky & Wentworth, 2010) . Notably, companies such as Schmidheiny Group can monitor and control their expenses leading to increased chances of realizing greater profits. In addition, the entity can alter its financial strategy by changing its selling prices based on the breakeven analysis results. The breakeven analysis depicts the sales revenues the firm needs to realize to be profitable. In this case, Schmidheiny Group can adjust the selling price of its prices accordingly to meet expenses and generate profits. Moreover, the breakeven analysis can show the amount of capital Schmidheiny Group needs to borrow from lenders to finance its key projects and operations. A high amount of debt capital is detrimental to the entity since it may lead to the entity’s collapse.
References
Cafferky, M. E., & Wentworth, J. (2010). Breakeven analysis: The definitive guide to cost-volume-profit analysis . New York: Business Expert Press.
Robinson, T. R. (2020). International financial statement analysis workbook . Newark, United States: Wiley.
Vernimmen, P., Quiry, P., Dallocchio, M., Le Fur, Y., & Salvi, A. (2014). Corporate finance: theory and practice . John Wiley & Sons.
