As a financial manager (consultant), undertake an investigation to evaluate the strategic financial position of the company assigned to you. Prepare a business report for the company's board of directors, which critically analyses its performance over the financial years 2019 to 2023 (using all financial and non-financial data available) and recommend any action the board should take. Your report should also include the following: Computation and critical analysis of a selection of financial ratios for the financial years 2019-2023 (Consider the list of ratios discussed in the class). Your critical analysis should also include the application of any appropriate model on the ratios to assess the financial position of the company. The underlying reasons for the companys financial performance? (Identify and discuss significant strategic developments that might have affected the companys financial position) The critical assessment of the external factors that might have affected the performance of the company and the relevant business sector since 2019. What you consider to be the major financial performance challenges and the opportunities of the company in the foreseeable future. Analysis of any new plans and strategies by the company under investigation.
Financial Accounting
Full Answer Section
- Financial Model Application: Apply appropriate financial models (e.g., DuPont analysis, discounted cash flow analysis) to assess the company's financial position.
- Critical Analysis: Interpret the ratios and model results, identifying strengths, weaknesses, and trends.
Underlying Reasons for Financial Performance
- Strategic Developments: Discuss significant strategic initiatives (e.g., mergers, acquisitions, product launches, cost-cutting measures) that may have impacted the company's financial performance.
- Internal Factors: Analyze internal factors such as management effectiveness, operational efficiency, and corporate culture.
External Factors
- Industry Trends: Assess industry-specific trends (e.g., technological advancements, regulatory changes, competitive landscape) that may have affected the company's performance.
- Economic Conditions: Analyze macroeconomic factors (e.g., GDP growth, interest rates, inflation) that may have influenced the company's financial position.
Major Financial Challenges and Opportunities
- Identify Key Challenges: Discuss the most pressing financial challenges facing the company.
- Assess Opportunities: Identify potential growth opportunities and areas for improvement.
New Plans and Strategies
- Evaluate Existing Plans: Analyze the company's current plans and strategies.
- Recommend Improvements: Suggest modifications or new initiatives based on the financial analysis.
Conclusion
- Summarize the key findings and recommendations.
- Highlight the implications of the analysis for the company's future.
Note: The specific ratios, models, and factors to be analyzed will depend on the company's industry, size, and financial situation. It is essential to tailor the analysis to the unique circumstances of the company under investigation
Sample Answer
Proposed Structure for the Business Report
Executive Summary
- Briefly summarize the key findings, recommendations, and implications of the analysis.
Introduction
- Provide a brief overview of the company, its industry, and the purpose of the report.
- Define the scope and methodology of the analysis.
Financial Analysis
- Ratio Analysis: Calculate and analyze a selection of financial ratios, such as:
- Liquidity ratios (e.g., current ratio, quick ratio)
- Solvency ratios (e.g., debt-to-equity ratio, interest coverage ratio)
- Profitability ratios (e.g., gross profit margin, net profit margin, return on equity)