Evaluating Financial Performance

Decent Essays

Financing New Ventures

In Chapter 5, we learned about evaluating financial performance. We can evaluate performance by looking at financial ratios and conducting different forms of analyses. Some useful analyses are trend analysis, cross-sectional analysis, and industry comparables analysis. Trend analysis is used to examine a venture’s performance over time. Cross-sectional analysis is used to compare a venture’s performance compared to another company at the same point in time. Industry comparables analysis is used to compare a venture’s performance against the average company’s performance in the same industry. Next, we looked at MPC income statements and balance sheets. A major part of MPC is cash burn. Cash burn is the …show more content…

One is the percent of sales method. This method makes projections based on the assumption that certain costs and selected balance sheet items are best expressed as a percentage of sales. The other method is the constant ratio method. This method shows the variant of the percent of sales method that projects selected cost and balance items at the same growth rate as sales. The process to project financial statements is as follows: 1. Forecast sales. 2. Project income statement. 3. Project balance sheet. 4. Project statement of cash flows.

Works Cited
"" Financial Forecasts. N.p., n.d. Web. 07 Mar.

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