Project 1 - Financial Statements

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Valencia College *

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Course

2000

Subject

Finance

Date

Apr 3, 2024

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docx

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4

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FIN6406 - Financial Management Project – Financial Analysis 1 Instructions The project will teach you how to perform a financial analysis on a set of financials. A financial analysis report is constructed by a person who is researching a company, usually with the intent of recommending its stock to investors or to a board of directors. The report contains multiple components, such as company overview, investment essentials, valuation, risk analysis, and a summary. However, for the purpose of this class, we will focus on the investment essentials. In this component – “investment essentials”, you will need to analyze the financials by using ratio analysis, trend analysis, and provide a quick summary of your findings. You as manager need to fully understand your role in the budgetary process.  It is the most basic financial planning and control tool.  Every manager needs to know what costs are associated with their department, and how in relation are they doing to that budget.  You might achieve your departmental goals, but if you go over budget in order to achieve those goals, you create financial problems for the company and jeopardize your own job performance review.  In most cases, part of your performance appraisal will be based on whether you were within budget for the year.  Income statements show the results of a company’s operations, which are usually given quarterly or by fiscal year.  It shows the sales, also known as revenue, and expenses.  It also shows whether the company had a profit or loss during that period.  The Income Statement is also known as the “Profit & Loss” statement or “P&L.”  Simply put, the formula is: “Revenue – Expenses = Income.”  The easiest and best scenario is, “The higher the sales and the lower the expenses, the greater the income.”  There are all types of expenses that are generated in a company and this statement sees how the company is spending its money, and how management is most and least effective.   As previously described, the Balance Sheet shows the value in the company’s accounts at a certain period, whereas the Income Statement covers operations over an entire period. Please recreate the financial statements below using excel. Please keep in mind that the financial statements below are unaudited. Therefore, there may be some errors found on both statements. Once the financial statements are recreated, please complete the following: 1. Prepare a common size income statement (10pts) 2. Prepare a common size balance sheet (10pts) 3. Prepare a trend analysis for the historical data for both financial statements and answer the following questions (30pts) a. What conclusion can you draw about Sales/Revenues between 2019 and 2020? b. What conclusion can you draw about COGS? c. What conclusion can you draw on Cash as a percentage of Total Assets? d. What conclusion can you draw on Inventory as a percentage of Total Assets?
4. Use the sheet labelled Notes on Financial Ratio Formula to calculate 3 ratios from each category for years 2019 and 2020 (20pts) 5. Prepare a pro-forma income statement – project income statement for years 2021 – 2022 – 2023. (15pts) 6. If total revenue grows by 10 percent in 2021, what is the company’s net income? (15pts) Please provide only excel file – all comments should be listed on the excel file.
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