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OBU RAP Topic 5 – Analyse and evaluate the business and financial performance of a company which has performed exceptionally well over a three-year period with a critical analysis of the reasons for its success’

Overview

Business performance or corporate performance refers to the company’s ability to use its resources in the best way possible to manage its business activities. In comparison, financial performance measures the company’s ability to generate profits.

The main factors to be considered in this topic are:

  • The exceptional performance must have become obvious within the last three years.
  • The reasons for good performance must not entirely relate to COVID-19
  • Reasons other than COVID-19 must be researched

The main objective of this topic is to identify and analyze an organization that has shown unusually impressive performance in both the business and financial sectors while also discussing the main reasons for the company’s roaring success for three years in a detailed manner.

Many companies roared to success during covid-19, which is an obvious factor in the performance of the companies in relevant sectors during the previous three years. Only mentioning this reason will not be sufficient. All other reasons must be considered.

Key features/requirements

This topic relates to the study of the performance of the company in business and financial aspects. It is crucial that all requirements must be fully understood before starting your RAP

  • Identification of a suitable company with a record of outstanding performance over three years
  • Identification of the business and financial aspects of the company
  • Evaluating how the business performance improved over three years
  • Evaluating how financial performance improved over three years
  • Critically analysing the factors that led to the excellent performance
  • Creating a link between the factors and the performance of the company

Key success factors

Under the guidance of a mentor, topic 5 can be tackled very successfully. Some points need to be followed to ensure high-quality RAP.

  • Selecting a suitable company that has performed very well over three years
  • Justifying the choice of organisation and justifying why you consider the performance exceptionally good
  • Providing academic justification for the selection of the company performing well
  • Indication of COVID-19 as a sole reason for the successful performance will not be sufficient
  • Identifying the positive changes in the business performance of the selected company
  • Identifying the positive changes in the financial performance of the selected company
  • Detailed knowledge of the performance of other companies operating in the same industry
  • In-depth knowledge of the factors that resulted in the outstanding performance of the selected company in the past three years
  • A critical assessment of the reasons for the great financial performance
  • Studying the performance of the relevant companies in the same industry and analysing if they also showed good results
  • Demonstrating a clear understanding of the industry sector and its competitive pressures
  • Adequate application of the selected goals and objectives that were set at the beginning of the RAP in the proper sections of RAP
  • The implementation of the correct research methodology to get good results on all the selected goals and objectives that were put in place at the beginning of the RAP
  • Keeping the discussion logical by keeping all the objectives in mind
  • Using reliable and appropriate sources for data gathering
  • Properly referencing the information gathered according to the Harvard referencing style as told by the OBU.
  • Usage of suitable business models to study various aspects of performance and its reasons
  • A comparison to another organization or the industry sector average
  • Providing appropriate reasons for the impressive performance of the company and not just relying on any one of the reasons like COVID-19

Accounting and business models for topic 5

For the strategic analysis of the external environment, the following models can be used:

  • PESTEL: A PESTEL analysis is an acronym for a tool used to identify the macro (external) forces facing an organization. The letters stand for Political, Economic, Social, Technological, Environmental, and Legal. It is an extremely popular model used by management for strategic planning and also for risk management
  • Porter’s five forces model: It identifies and analyses five competitive forces that make every industry and helps determine an industry’s weak points.

For the strategic analysis of the organization’s position, the following models can be used:

SWOT: The SWOT model can be used to study the before and after 3-year changes in the company’s performance. It is a situational analysis or assessment that helps us to study the strengths, weaknesses, opportunities, and threats that are related to the company under consideration.

Value chain: A value chain is a guide that helps us to transform our ideas and dreams into reality by providing us with 5 steps of a business model, Value chains aid to increase a company’s efficiency so the business can deliver the most value for the least possible cost. Five steps to developing a value chain analysis

  • Step 1: recognize all value chain activities.
  • Step 2: Assess each value chain activity’s cost.
  • Step 3: judge what your customers value the most
  • Step 4: assess the value chain of your most competitive peer.
  • Step 5: finalize your competitive advantage.

Business Canvas: This model is a strategic management model that helps to design and create new models and also helps in the maintenance of already existing models. This model can be studied to highlight all the key strategic factors involved in the performance of the company. It is a complete review of the company’s workings, profits, revenue streams, customer experience, and much more. This model can give you a complete overview of how it managed to achieve such a remarkable performance.

Financial Analysis (Ratio Analysis): A complete financial analysis of the organization with the help of ratio analysis is important. Ratio analysis is a quantitative measure of a company’s position regarding its profitability, liquidity, gearing, and efficiency. It helps the investors to make informed decisions regarding their investments. Many financial ratios can be used such as GP margin, NP margin, current ratio, quick ratio, gearing ratio, interest cover ratio, EPS, DPS, P/E ratio, etc.

KPIs: Key performance indicators can be used to detect the performance of the company through different measures. These are the critical indicators of a company’s progress toward its objectives. Many relevant KPIs such as revenue, profit, customer satisfaction, and employee satisfaction can be used to judge the performance of the company over the three years.

So which model can be used for the best evaluation of the topic? Well, it depends on the company you chose and the business that the company is involved in.

Major benefits of choosing topic 5

This topic has several benefits that will motivate the students to write a competent RAP

  • Students will get to know about the companies showing outstanding performance
  • Students will learn about the relevant companies and the industry of the selected company
  • Insight will be gained regarding all the success factors of the company
  • A detailed study regarding the company’s operational and financial performance will equip the students for their professional careers
  • Students can apply their theoretical knowledge to real-world situations.
  • A critical analysis of the company’s business and financial performance will help to sharpen the required skills needed by an accountant
  • Studying the financial performance of a company and the reasons for it may increase students’ business acumen

Possible limitations faced by the students while researching topic 5

The main aim of conducting research is to set up new facts or confirm the outcomes of the previous research. It enables us to gain new knowledge regarding the subject. However, while preparing for OBU thesis research students face many problems.

Some of the key limitations are as follows:

General Limitations

  • Research method: Students need to have a clear understanding of the research methods. The research methods are not relevant or reliable as students are not trained in different methodologies. Simply replicating the knowledge available online or from various sources is not wise. There is a lack of basic knowledge regarding the correct methods of research.
  • Interaction between the subject company and student: There isn’t any proper interaction between the subject company and the student. This means that a substantial amount of data going into the thesis goes untapped. The key issues of the company can only be highlighted with the help of internal company management.
  • Authorization for research: Students may not be able to get authorization to talk to the higher management and some information may not be provided due to confidentiality issues.
  • Limited Time: it is quite common that children start to lose track of time and they are not able to complete their projects in time. Time is also a big limitation in the thesis.

Specific limitations

Some limitations specific to topic 5 can be faced by the students and overcoming them is necessary

  • Poor understanding of models: A good analysis can only be done if students have a clear understanding of the models they are using. These models must be understood with the help of a mentor.
  • No access to internal management: To fully understand the operations of the company, access to internal management is important so that processes and activities can be fully comprehended. students might not get access to internal information.

Suitable organization for topic 5

The most suitable organization is the one which has shown outstanding performance in the last three years. Selecting a company that is established enough so that its performance and financial position to be studied over some time is necessary. To make a high-quality RAP, it is essential that students choose a company whose operations are easily understood by the student, and he can make connections between several topics.

The following factors should be kept in mind when choosing a company for RAP:

  • The general interest of the students in the company
  • The amount of information available for the company
  • Access to reliable secondary sources of information
  • Familiarity with the industry sector associated with the company

Innovation is particularly important for companies to grow and adapt to the challenges of change. Any company that has adapted to innovate in the rapidly changing environment failing can be considered for this research. Many companies prosper due to several factors such as the TESLA company which has been profitable consistently because of its huge technology that is years ahead of its competitors. The IT sector is continually growing with high revenues. More information about these companies can be found here:

https://www.ft.com/content/f8251e5f-10a7-4f7a-9047-b438e4d7f83a

Suggested approach for topic 5

Before starting your research, you should understand the assignment. The guidelines mentioned in the information pack should be read. Words must be kept between 7001-7500. The font size is 11 and the ‘Arial’ font must be used.  The style of citation ‘Harvard referencing’ should be understood by the students. All the other requirements and directions made by the OBU must be complied with. After choosing this topic, a proper mind map must be made from the start, so the student conducts all the required tasks in a proper and timely manner. All the major requirements and aspects of the topic should be considered thoroughly so that a strategy can be devised to meet those requirements. A research methodology and all reliable websites and authentic sources should be noted down. The style of referencing must be kept in mind while researching this topic to pass the OBU RAP.

In Part 1- (Research objectives and overall research approach), Students need to make a table of contents and a title page mentioning the ACCA reg number and the selected topic. Part 1 mostly contains the introduction and the objectives of the RAP. The objectives should be consistent with the research of the project. This topic requires the student to fully study the financial statements and look for the figures that led to the success. Your personal aims and goals are not required to be a part of this section. The reasons for selecting the topic must be jotted down. The organisation which is suitable for topic 5 and why that organisation was deemed appropriate for the topic.  The aims and objectives of the project should be explained in several points. Research questions are written in detail, and it targets the specific areas that need to be researched. Usually, there are 3 or 4 research questions. Consideration of all these points is important in part 1. If you follow all these instructions, you can move very strongly ahead.

Part 2- (Information gathering/accounting and business techniques) is a crucial section as all your understanding of the business and accountancy models is analysed here. A quality explanation of the used models or any other frameworks and analysis of all their limitations must be performed. The most structured way of representing section 2 is by first mentioning the sources of information that were used to acquire the data for research on topic 5. Topic 5 relates to financial and business performance so publicly available information can be used such as the annual reports of the company and other articles that provide evidence for the reasons for its success. Students are advised to select only those resources that they can understand easily.  Briefly describe all the sources used and why they were considered useful sources. A discussion of the limitations of your information gathering must be included. Students should find references to mention limitations instead of writing from their own opinion. Any ethical issues that arose during information gathering and your solutions regarding the issues. Every part should be backed up by good references. Next, you would list all the business and accountancy models and their limitations. SWOT model and PESTEL are the most appropriate for this topic. To find out more about the selection of respective models for topic 5, kindly refer to section ‘Accounting and business models for topic 5’ above.  Word count is to be prioritized which is 1800-2000 words.

In part 3, there is a further evaluation, analysis, and conclusion. It should contain a description of the results obtained and all the limitations. Further research with examples and comparisons between the two companies is done. Evaluation and analysis of topic 5 means you need to explain the financial performance with the help of ratios and compare those ratios over the three-year time period. Analysis and evaluation are done by using ratios and not absolute numbers. Students should analyse trends over time like how much the profit has increased. The working capital cycle changes, customer satisfaction rate, and revenue streams should be presented with the help of graphs. Merely writing the figures or absolute numbers will not be sufficient.  Ratios like liquidity, gearing, P/E ratio, profitability, and EPS movement help to critically analyse the changes taking place in the selected company. The reasons for growth should be considered. Was it because of the greater market dominance, greater buying and bargaining power, lower costs, or an increase in sales? Using relevant KPIs is a way to check how the company is performing and what targets have been met. Conclusions must be made based on your research work. Recommendations to the selected company may be made but it is not very necessary. It is of utmost importance that the word count must be kept in mind. If you exceed it in any way, then the examiner will not mark the conclusions resulting in failure.  4500 words must be written to ensure a detailed analysis.

Every student takes his approach regarding the given topic, and this is only an extremely broad version of what can be done. The detailed approach depends on the student’s perception of the topic and the sources of information being used. Whatever approach is taken, the guidance of the project mentor is needed every step of the way to pass RAP with good grades.

Suggested approach for SLS

The meetings with the mentor must be planned at the start of the RAP and a track of those meetings must be kept in a diary as it will help later to write the SLS. In your SLS. You should not describe the events and focus on the self-development and learning process. You should explain the purpose of self-reflection as well. There may be many new business and financial models that you learned while researching topic 5. There are 2 questions that need to be answered. Both the questions should be answered well. It must reflect your ability to make judgements, and all the actions that you took during the process. A timetable should be made at the start and make sure you follow it.  SLS word count should be limited to two thousand words.

Sources of information

There are two types of sources that can be used, primary and secondary.

Primary sources are the data that you collect on your own and it is considered first-hand. This can be done by conducting interviews, surveys or having participants fill in questionnaires. In this topic, students are not required to gather information directly from the management.

Secondary information on the other hand refers to already available and published information. Using it to your own advantage by checking the authenticity of these sources can be beneficial for RAP.  All other sources of information such as online websites, journals, and articles are considered secondary sources of information. The students can look for statistical reports, environmental reports, and any other reports available online to judge the performance of the company.

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