BUS 1220E / 1299E FINANCIAL MANAGEMENT

Java Python BUS 1220E / 1299E

FINANCIAL MANAGEMENT

STUDY SHEET

I. EVALUATING PAST PERFORMANCE

1. Analyzing the Statement of Cash Flows

a. Was cash generated from operations?

c. What are the sources and uses from operations?

b. Was net income a source of cash?

d. What are the remaining sources and uses?

e. Recommendations for the future.

2. Analyzing Financial Ratios

PROFITABILITY RATIOS

Vertical Analysis = Statement of Earnings Item ÷ Sales

Return on Average Equity = Earnings ÷ Average Equity

LIQUIDITY RATIOS

Current Ratio [CR] = Current Assets ÷ Current Liabilities

Acid Test Ratio [ATR] = (Cash + Marketable Securities + Accounts Receivable) ÷ Current Liabilities

STABILITY RATIOS                                                  EFFICIENCY RATIOS

Net Worth to Total Assets = Equity ÷ Assets              Age of Receivables = Accounts Receivable ÷ (Sales/365)

Interest Coverage [IC] = EBIT ÷ Interest Expense      Age of Payables = Accounts Payable ÷ (Purchases/365)

                                                                             Age of Inventory = Inventory ÷ (COGS/365)

GROWTH RATI BUS 1220E / 1299E FINANCIAL MANAGEMENT OS

Growth = (Year 2 - Year 1) ÷ (Year 1)

II. PROJECTING FUTURE PERFORMANCE

3. Projecting Financial Statements

Use management estimates and reasonable assumptions to project Statements of Earnings, Statements of Retained Earnings, and Balance Sheets. Discuss your findings.

III. POST-PROJECTION ANALYSIS

4. Interpreting the Plug

What does the plug figure mean?                 Perform. a sensitivity analysis on the plug.

Will seasonality affect the plug?                    How will these affect your decision?

SEASONALITY

Plug

+ Additional seasonal working capital required

= Total annual working capital requirement

SENSITIVITY ANALYSIS

Number of Days Assumption              Account Value             Change in Plug           New Plug

5. Risk Assessment

CAPACITY TO REPAY

Projected CR, ATR, & IC; treat negative plugs as cash

CONDITIONS

CHARACTER

IV. DECISION

6. Essay

‘‘As ____, I will….’’

Draw on important areas of analysis to support your decision. Make whatever recommendations you deem necessary. Overcome any issues or risks