BMAN20081 Workbook – student copy

BMAN20081 Workbook
Your name:-
Workshop leader:-
Day & Time of workshop:-
Location for all on campus workshops: AMBS 2.008

For Workshop Groups 1-9: Self study material is provided for weeks 1, 3, 5 and 9

Workshops run in weeks 2, 4, 8 and 10

For Workshop Groups 10-18: Self study material is provided for weeks 2, 4, 8 and 10

Workshops run in weeks 3, 5, 9 and 11

In week 6 you should meet to agree and practise your group presentation. Week 7 is reading week.

Group presentation assessments will be held in weeks 8 and 9 (Workshop 3). Group number:-
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Contents
Introduction..................................................................................................................................................................................................................4
Self Study 1 – Calculating Profitability, Solvency and Capital Structure, and Working Capital Ratios........................................................................5
(a) Profitability Ratio Calculations............................................................................................................................................................................5
(b) Solvency and Capital Structure...........................................................................................................................................................................7
(c) Working Capital Ratios........................................................................................................................................................................................9
Workshop 1 – Introduction to Shell and Discussion of Ratios...................................................................................................................................11
(a) Find some news on Shell...................................................................................................................................................................................11
(b) Summarising the themes of the Annual Report...............................................................................................................................................12
(c) Commenting on Profitability Ratios..................................................................................................................................................................13
(d) Key Skills............................................................................................................................................................................................................16
(e) One thing I have learnt is…...............................................................................................................................................................................16
Self Study 2 – Commenting on Solvency and Capital Structure, and Working Capital Ratios, and essay writing about a stakeholder perspective17
(a) Solvency and Capital Structure Ratios..............................................................................................................................................................17
(b) Working Capital Ratios......................................................................................................................................................................................18
(c) Should an investor hold or sell shares in Shell? A stakeholder perspective.....................................................................................................19
Workshop 2 – Strategy Issues....................................................................................................................................................................................21
(a) Porters 5 Forces................................................................................................................................................................................................21
(b) How does this help?..........................................................................................................................................................................................25
(c) Shell’s Strategy..................................................................................................................................................................................................26
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(d) Key Skills............................................................................................................................................................................................................27

(e) One thing I have learnt is…...............................................................................................................................................................................27
Self Study 3.................................................................................................................................................................................................................28
Workshop 3 – Group Presentations...........................................................................................................................................................................29
(d) Key Skills............................................................................................................................................................................................................29
(e) One thing I have learnt is…...............................................................................................................................................................................29
Self Study 4- Shell and Sustainability.........................................................................................................................................................................30
(a) Sustainablity essay............................................................................................................................................................................................30
(b) Marking others essays......................................................................................................................................................................................30
Workshop 4, Conclusions...........................................................................................................................................................................................32
(a) Comparative Industry Analysis..........................................................................................................................................................................32
(b) Comment on your findings from the comparables analysis and any observations about the oil and gas sector...........................................33
(c) Viewpoints of Shell............................................................................................................................................................................................33
(d) Key Skills............................................................................................................................................................................................................34
(e) One thing I have learnt is…...............................................................................................................................................................................34

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Introduction
Welcome to your workbook, which has been designed to give you details of the work you need to do for your course on Financial Statement
Analysis before your fortnightly workshop and during the weeks when you have no workshop scheduled. The Student Charter states that “As a
student I will… Attend, and prepare for, all my scheduled teaching sessions and other learning events, such as induction and meetings with
academic advisors”. Preparation and completion of self-study activities is intended to take around 1 -2 hours per week.

You are expected to complete self-study activities during the weeks when you have no workshop scheduled. These will be be supported by
online videos and other material, including a discussion forum on Blackboard. You can also ask questions in the scheduled online lecture times
each week (Monday from 11am to 12 noon, and Tuesday from 9am to 10 am).

You are expected to prepare for workshop questions in advance of workshops. To be able to get a good mark in the exam and create a positive
learning environment you are expected to complete all three sections (a), (b) and (c) each week before coming to class. If you are having
difficulties completing the work we expect you to contact your workshop leader at least 24 hours in advance of the workshop.

We have enhanced the workbook to include a record of the employability skills you can develop on this module, based on the ICAEW
professional development ladder available here. Each workshop, for part (d) you can explain an example of how you demonstrated that skill in
that workshop. The first skill in workshop 1 has been completed for you as an example. This will give you a complete list of skill descriptions
which can be used on application forms, in your CV or in interviews. The more details and specific you are the more useful it will be to you.

We are providing a mixture of videos, Powerpoint slides and other digital tools including Padlet, Mentimeter and wikis to help you get the
most out of the workbook. However please note that you need to actively engage in the material, both for self study and in the workshops
sessions, to gain the necessary understanding of how to apply the knowledge that you are gaining to enable you to score highly in the exam. At
the end of each workshop you should therefore complete parts (d) identifying key skills and (e) which details something you have learnt from
that workshop.

If you have any questions or feedback on your workbook material, please contact your workshop leader.

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Self Study 1 – Calculating Profitability, Solvency and Capital Structure, and Working Capital
Ratios
Throughout this semester we will be focusing on the Shell Annual Report. You will need a copy of the December 2019 report which can be
found on the Shell investors website here: https://www.shell.com/investors/financial-reporting.html . You should use the consolidated
financial statements.

(a) Profitability Ratio Calculations

Calculate the ratios given below for Shell. Formulae have been given to you in the lectures . Some of the ratios are not straightforward to
calculate, so make a note of any assumptions used. Calculations:-

Ratio Formula Calculation and total Variance Increasing or

2019 2018 (%/% pts) decreasing?
$m $m
Operating Operating profit (IE: net profit before interest and tax )
profit Sales
%
margin

Gross Gross profit )

profit
Sales
%
margin

Return on Net profit after interest, tax and preference dividends

Ordinary share capital + reserves
%
Sharehold
ers’
equity

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ROCE
Net profit before interest and tax
Operating capital employed
%

ROCE Alternative calculation: removing the impact

of IFRS 16 on Operating capital employed,
figures taken from Note 14 pp216-217

See accompanying eLearning video on Blackboard for hints on how to calculate these figures.

Any assumptions noted:-

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(b) Solvency and Capital Structure

Calculate the ratios given below for Shell and explain what each of the ratios measure and how and why it might have changed since the
previous year.

The formulas have been given to you in the lectures. Some of the ratios are not straightforward to calculate, so make a note of any
assumptions used.

Ratio Formula Calculation and total Variance Increasing

2019 2018 (%/ or
absolute) decreasing?

Interest Cover Profit before interest and tax

Interest payable
times

Dividend Cover Earnings per Share

Dividends per Share
times

Capital Gearing (1) Debt

%
Equity

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Capital Gearing (2)

Debt
%
Debt + equity

Hint: Also look at Shell’s gearing calculation on page 216 of their financial statements. Why is this different?

Any assumptions noted:-

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(c) Working Capital Ratios

Calculate the ratios given below for Shell and explain what each of the ratios measure and how and why it might have changed since the
previous year.

Formulae have been given to you in the lectures. Some of the ratios are not straightforward to calculate, so make a note of any assumptions
used.

Ratio Formula Calculation and total Variance Increasing or

2019 2018 (%/ decreasing?
absolute)

Net Asset Sales

Turnover
Capital Employed
times

Inventory Inventory x 365

Days
Cost of Goods sold
days

Trade Trade receivables x 365

Receivables Sales (on credit )
days
Days

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Trade Trade payables x 365

Payables Purchases
days
Days

Any assumptions noted:-

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Workshop 1 – Introduction to Shell and Discussion of Ratios

Throughout this semester we will be focusing on the Shell Annual Report. You will need a copy of the December 2019 report which can be
found online by searching for “Shell Annual Report 2019”. You should use the consolidated financial statements.

Use the Necessary Workshop Preparation folder on Blackboard to help you carry out your preparation work.

(a) Find some news on Shell

Try and find three pieces of news about Shell to share. Enter them below so that you have a record of them for your revision. Then share them
on your Workshop’s wiki here.

You could do an internet search for the company, or the oil and gas industry. Look up some reports on Factiva, as you have been shown in
Lecture 3 or browse news sites. As a student in AMBS, you can set up a subscription to the FT via Blackboard (available here). For help with
business research see https://www.escholar.manchester.ac.uk/learning-objects/mle/packages/down-to-business/

News 1

News 2

News 3

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(b) Summarising the themes of the Annual Report

Spend about a hour familiarising yourself with the Shell Annual Report 2019, paying particular attention to the main themes that emerge from
the Chair’s message, the CEO’s review, Selcted Financial Data, Our Strategy and Market Overview. Briefly summarise three main themes that
you have identified in the table below, then share them via the Mentimeter available on Blackboard.

See accompanying eLearning video on Blackboard for tips on how to approach the reading of such a large document.

Theme 1

Theme 2

Theme 3

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(c) Commenting on Profitability Ratios

Using the profitability ratios that you calculated in the self study week, explain what each of the ratios measure and how and why it might have
changed since the previous year

Ratio What does it measure? Improving or Why might it have changed?

worsening?
Significant or
Slight?
Operating
profit margin

Gross Profit
Margin

Return on
shareholders’
equity

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Return on
capital
employed

Return on shareholders’ equity (ROSE) = Net profit after tax, interest and pref dividends =
Ordinary share capital and reserves

Net profit after tax, interest and pref dividends Ordinary share capital, reserves and debt
Ordinary share capital, reserves and debt Ordinary share capital and reserves

PROFITABILITY LEVERAGE
2019 2018 2019 2018

Explanation:

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Return on capital employed (ROCE) = Net profit before interest and tax =
Ordinary share capital, reserves and debt

Net profit before interest and tax Revenue

Revenue Ordinary share capital, reserves and debt

PROFIT MARGIN ASSET TURNOVER

2019 2018 2019 2018

Explanation:

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(d) Key Skills

How were you able to…..
Problem solve – analyse a problem and
identify all options
Technical Competence – use research tools
to create a positive outcome
Guidance on specific examples
Defining the problem after evaluating
business objectives. Persevering in enquiry to Financial Statements for the elements of
ensure completeness, all within an ethical
framework.
Searching via the internet or other sources to
expand technical knowledge and solve a
problem.
Examples demonstrating your skills
development to date
Finding real world definitions in the Shell
each ratios. Using other data (eg Google
search) to find complete reasons for eg the
oil price movement

(e) One thing I have learnt is…..

Project reminder: You need to email a list of the members in your group for the group project to Sangita.mistry@manchester.ac.uk stating
BMAN20081 Workshop [insert number] in the subject line.

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Self Study 2 – Commenting on Solvency and Capital Structure, and Working Capital Ratios, and
essay writing about a stakeholder perspective
Taking the same approach as we used in Workshop 1 to comment on the profitability ratios, comment on the solvency and capital structure,
and working capital ratios.

(a) Solvency and Capital Structure Ratios

Ratio What does it measure? Improving or Why might it have changed?
worsening?
Significant or
slight?
Interest Cover

Dividend Cover

Capital
Gearing

Capital
Gearing
according to
Shell report
page 217
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(b) Working Capital Ratios

Ratio What does it measure? Improving or worsening? Why might it have changed?
Significant or slight?
Net Asset
Turnover

Inventory
Days

Trade
Receivables
Days

Trade
payables
Days

Once you’ve completed your comments, view the video provided to check that you have identified all the key points.

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(c) Should an investor hold or sell shares in Shell? A stakeholder perspective

This week you will practise your essay writing skills, so that you are well prepared for writing essays as part of your final assessment.

Imagine that you are an existing investor owning shares in Shell. Write around 500 words on the following:

Explain the needs of a current investor in Shell and how these needs might be affected by the current economic climate. Should you hold or
sell your shares?

How to tackle this essay question:

- Use an introduction to explain what investors are focused on,

- Explain the context (the economy including the impact of the coronavirus pandemic, the industry and the company) using the news and
information you have already gathered for Shell.
- Explain the movements in the numbers and relevant ratios which may be of interest (eg cash, profitability, dividend cover)
- Explain some of the limitations of your analysis
- Finish with a conclusion to bring your findings together and justifying a clear recommendation.

Use the following criteria as a guide to help you focus on key areas of your essay:
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Area Essay Criteria

Structure, Does the essay have clear structure with a title and an introduction focused on the user of the report (a current
introduction investor), their objectives and needs?
Recommendation Does the essay make a clear recommendation (to hold or sell shares) which is justified?
Ratios Does the essay quote relevant figures from the calculations and explain why they have moved?
Context Have you explained the context (the economy, the effect of the coronavirus pandemic, the industry and the
company).

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Workshop 2 – Strategy Issues

Imagine you are a new CEO at Shell who wants to know more about the forces affecting Shell and its strategy.

(a) Porters 5 Forces

Complete the following diagram with each of Porters 5 forces for Shell, stating whether each force is low, medium or high. Also provide an
overall summary explaining how you will build a strong, sustainable (ie long term) Shell strategy.

Use one of the library’s databases, Business Source Premier, and use the searching interface to locate a Marketline report on Shell:

• Go to library home page http://www.library.manchester.ac.uk

• In search resources in the top left of the screen select “Search Resources”
• Select “Search databases”
• Click on B on the A-Z list, then on Business Source Premier, which is at the very end of the ‘B’ page
• Click “Business Source Premier”
• If you need to login (off campus) log in, use your regular log in details (mz… and password) and select Business Source Premier
• In the search box Type Royal Dutch Shell in the Title box
• Scroll down to find a SWOT analysis of Shell from Marketline. To open the document select “PDF Full text” from the left hand
menu.
• Use this report, along with your knowledge from lectures and material from the Shell Annual Report, to prepare your answer.

If you’d like some help with Business Source Premier have a look at https://www.escholar.manchester.ac.uk/learning-objects/mle/getting-
results/bsp/story_html5.html

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Force 1:
Force 2:

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Force 3: Force 4:

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Force 5: Overall & Recommendation:

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(b) How does this help?

How can this activity add to an effective interpretation of Shell’s financial statement information? How would it help you as new CEO?

10 marks

Please again use full sentences to practise your exam technique.

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(c) Shell’s Strategy

Summarise Shell’s existing strategy in a diagram format, As new CEO where would you focus Shell’s efforts?

Hint – have a look at Shell’s website “About Shell” (https://www.shell.com/investors/shell-and-our-strategy/our-strategy.html) or see page 13
of the Annual Report.

Strategy diagram:

As new CEO where would you focus Shell’s efforts?

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(d) Key Skills

How were you able to…..
Communicate – use persuasion to change
another’s point of view, whilst
demonstrating an understanding of their
views.
Decision making – analyse and use data in
order to predict future outcomes.
Guidance on specific examples Examples demonstrating your skills
development to date
Appreciating both sides being forceful and Eg persuading others of your viewpoint as
persuasive, rather than passive CEO.
Being decisive and using independent
thought.
Supporting reasoning with evidence ….. and
the consideration of alternative views.

(e) One thing I have learnt is…..

Project reminder: 1. You should be able to find your allocated group number on the sheet in the Projects folder on Blackboard this week. If you
are unsure about which group you are in you should email Anne.Stafford@manchester.ac.uk as soon as possible.

Project reminder 2: Use your weekly questions to consider these points for your assigned company. You should also meet with your group this
week to come up with an investor and devise a set of criteria for that investor.

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Self Study 3
During this week, you should meet with your other group members and prepare for your group presentation.

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Workshop 3 – Group Presentations

One member of your group needs to submit your slides, diaries and reflection on Turnitin.

Your presentation should last 1.5 minutes per group member, if you overrun you may be stopped!

Any queries should be sent to your workshop leader with details of your workshop number and group number.

Good luck!

(d) Key Skills

How were you able to….. Guidance on specific examples Examples demonstrating your skills
development to date
Communication – use available resources to Presenting formally and in an appropriate
present information formally to a group style, in order to persuade an audience

Team working – use a team structure to Collaborating with peers and operating to a
meet performance objectives brief in a structured situation.

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(e) One thing I have learnt is…..

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Self Study 4- Shell and Sustainability

(a) Sustainablity essay
This week you will be able to practise your essay writing skills again.

Write a minimum of 750 words on:

Explain the different ways in which Shell can be considered “sustainable”.

In answering this essay you may wish to cover the following:

 The three different aspects of sustainability and how they merge in the long term
 Shell’s long term strategy
 Whether, in your opinion, Shell can deliver long term solvency sufficient to meet the needs of its various stakeholders

(b) Marking others essays

For this essay, swap essays with the others in your project group. Read your peers’ essays and give feedback on them. You will need to give
constructive, detailed and useful feedback on structure, recommendation, ratios and context for every script. You will also need to decide
which of the essays you are reading is better using the criteria below.

Being able to give feedback is an important part of understanding assessment from the markers’ point of view and will help you to self assess
your own work; a vital skill at University and beyond. Following the marking reflect on what you can do differently in your own essay writing to
improve your skills before the exam.

Area Essay Criteria How to judge the winner

1 Structure, Does the essay have clear structure with a title and an The winning essay will focus on the correct audience from
introduction introduction focused on the user of the report (a the first paragraph.
Lender), their objectives and needs? If the structures seem equally good move to point 2
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2 Recommendation Does the essay make a clear recommendation (to lend
or not) which is justified?
3 Ratios Does the essay quote relevant figures from the
calculations and explain why they have moved?
4 Context Has the author explained the context for the company
(the economy, the industry and the company). Have
they externally referenced this information?
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The winning essay will give a clear recommendation which
is justified.
If the structures seem equally good move to point 3
The winning essay will quote figures and explain why they
have moved
If the ratios seem equally well explained move to point 4
The winning essay will describe the context clearly, with
references to external information
If the context seem equally good move to point 3
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Workshop 4, Conclusions
(a) Comparative Industry Analysis
Obtain a comparative industry analysis for Shell from the Thompson One database

Hint: This needs to be done using Internet Explorer (not Google Chrome)

• Go to library home page http://www.library.manchester.ac.uk

• In search resources in the menu in the top right of the screen select “Search Resources” then “Search Databases”
• Click on T on the A-Z list, then on Thomson One, Click “Thomson One”
• In the search box Type Royal Dutch Shell in the Search box
• Select RDSA-AE – Royal Dutch Shell plc
• From the drop down menus select: Fundamentals – Comparables
• Click on the down arrow on the blue “peers” band across the top of the page
• Select “Global” from the locations and currency USD
• Select “Key financials and effectiveness” for comparative ratios
• Download the file in excel to study it more easily

Click on the little box in the column title on Thomson for details on what each of the columns represents

If you’re stuck with research refer back to the lecture from the library on how to find information and this guide from my learning essentials
https://www.escholar.manchester.ac.uk/learning-objects/mle/packages/down-to-business/

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(b) Comment on your findings from the comparables analysis and any observations about the oil and gas sector
Please note down 5 meaningful comments about the differences across the oil and gas sector and why this might be the case. Include your
observations on the oil and gas sector from the course so far and your own research.

(c) Viewpoints of Shell

Consider alternative viewpoints of Shell’s business by comparing what Shell might want you to see from their published reports and an
alternative viewpoint. Consider all sources of information – Financial Statements, Analysts reports, additional information provided by Shell to
satisfy stakeholders, market research reports, news items, etc.

What Shell might want you Source of this information Alternative view point
to see

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(d) Key Skills

How were you able to…..
Communication – show an appreciation for
both sides of the argument
Guidance on specific examples Examples demonstrating your skills
development to date
Keeping and open mind. Demonstrating
listening skills. Showing diplomacy and
compromise

(e) One thing I have learnt is…..

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Top tip: Look out for the lecture on a practical example of advanced interpretation and the clinic session where you can raise any queries with
lecturers.

Top tip: You need to research the company you have been given for your exam to find additional information which can be used in the exam.
Revision alone will not be sufficient for this exam – you are expected to draw on external sources of information about the exam company. For
help with company research see https://www.escholar.manchester.ac.uk/learning-objects/mle/packages/down-to-business/

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