A1: Projecting Financial Trends
An organization’s finances are closely linked to local and global markets. Therefore, regular monitoring of economic factors, such as employment, inflation, supply and demand, and interest rates is sure to provide beneficial information. Therefore, it is important to understand the impact of economic factors upon an organization’s current and future operations and finances.
- Using the module readings, online library resources, and the Internet, research two to three articles on the importance of analyzing economic factors for organizations.
Then respond to the following:
- Why should companies pay attention to economic factors when managing the organization’s current and future financial information?
- Consider an organization you are familiar with. Identify the economic factor that has had the most impact on the organization’s earnings in the past 5 years.
- How has this factor impacted the organization and how has the organization dealt with the impact in a positive or negative manner?
- Please put the following income statement and balance sheet terms in the proper order:
Taxes, interest, gross profit, selling, general and administrative expenses, sales, depreciation, net income, cost of goods sold, and EBITDA.
- For the balance sheet, please categorize the following as short-term assets, long-term assets, short-term liabilities, long-term liabilities, or owner’s equity:
Cash, accounts payable, accruals, property, plant and equipment, inventory, accounts receivables, paid in capital, retained earnings, notes payable, mortgage, and accounts payable.
- Please explain in which order the four major financial statements need to be prepared, and why.
- Please also explain the three major categories of the statement of cash flows and under which category the following items belong. Also explain whether or not each item would be considered a source or use of cash for the period in question:
Inventory-increased for period
Net income-increased for period
Accounts receivables increase for period
Accounts payable decrease for period
Accruals decrease for period
Depreciation-increases for period
Bonds paid off
Inventories increase for period
Notes payable increase for period
Bonds redeemed for period
Write your initial response in (1 to 2 page) 300–500 words. APA Style w/two references.
A2: Calculating Financial Ratios
Vital to any ratio analysis are the steps of gathering financial data and selecting and calculating relevant ratios. This assignment provides you with an opportunity to do just that.
- Download a company’s balance sheet and income statement from one of the many sites where financials are available, such as http://www.zacks.com/ or http://www.marketwatch.com/.
- Choose five financial ratios, one from each of the five categories described in Chapter 3 of Brigham and Ehrhardt (i.e., liquidity, asset management, financial leverage, profitability, and market value) and look at them over a three-year period. Put your findings in a table with the years across the top (horizontal axis) and the ratios along the side (vertical axis). What do the findings tell you about the financial health of the company? How does your selected company compare to the industry?
- Calculate each ratio using the information from the balance sheet and income statement.
Write a 1-2-page paper that reports your findings. Apply APA standards to citation of sources.
A3: External Financing
Genesis Energy’s newly established operations management team decided to seek outside assistance in developing a long-term operating plan that also addresses the financial issues identified. A major consideration for Genesis Energy is assessing those short-term and long-term economic factors, which will greatly enhance the company’s ability to successfully transition to a viable international business. Grasping and correctly prioritizing these economic factors, supply and demand, interest rates, inflation, unemployment, and exchange rates are pivotal, thereby requiring expert guidance. Therefore, their first major decision was to hire a respected strategy-consulting firm, Sensible Essentials.
After meeting with the client team, Sensible Essentials concluded that the operations management team would significantly benefit from a more in-depth understanding of the financial environment at Genesis Energy. This understanding needed to encompass not only sales, costs, and profitability forecast under the new strategic plan, but also the way expansion would highlight the need to manage working capital and cash flow in order to try to minimize the need for external financing.
As the lead consultant for Sensible Essentials, do the following:
- Describe and evaluate the financial environment at Genesis Energy by using ratio analysis of the company.
- Choose one ratio from each of the five categories listed in the table on page 103 of your textbook, Brigham and Ehrhardt, and do a 3-year ratio trend analysis. Compare these results to the industry averages. What do the results tell you?
- Name three specific options that are available to Genesis Energy for obtaining needed capital.
- Identify and explain two ways Genesis Energy can improve its strategy.
- Explain what specific macroeconomic factors are likely to affect genesis, i.e., inflation, interest rates, exchange rates etc. Please do a brief country risk assessment and discuss the most likely problems a company like Genesis Energy is likely going to confront when contemplating an international expansion. What would be the least risky avenue for them to get their product/service to the country you have chosen? Which entry mode is the riskiest? Explain.
Write a 3–4-page paper in Word format. Apply APA standards to citation of sources. Then, create a 2-3-slide PowerPoint with Speaker’s notes and references (including research) presenting your findings to the Genesis Energy operations management team.