Imagine you are a newly hired manager at a publicly traded, global corporation of your choosing. You have been asked to review the company’s past and current financial performance and health and make initial financial projections in order to begin planning for the upcoming year. Your supervisor is particularly interested in a fresh perspective on what your analysis reveals about potential risks and opportunities, as well as recommendations for next steps. Because you will eventually need to convince internal stakeholders, including senior management, of the feasibility and desirability of your suggested activities, it is important that you justify your projections and recommendations, explaining how they were informed by existing information and modeling different scenarios.
Your financial analysis and projection report will include several financial tables, along with a comprehensive narrative describing the company’s context and financial performance and health, and your analytical approach and conclusions. Your report should be geared toward an executive audience with basic accounting and finance knowledge and should be well organized, clear, concise, convincing, and free of distracting errors. Note that, in addition to the company’s financial statements and website, other authoritative news sources—such as annual reports and external sites like Bloomberg—may offer insights that facilitate analysis or provide information on the company’s priorities, challenges, and geographic distribution.
Specifically, your financial analysis and projection report must include the following critical elements. Most of the critical elements align with a particular course outcome (shown in brackets).
- Executive Summary: Clearly and concisely summarize your principal findings, projections, and recommendations as a manager, with the goal of persuading busy executives to support your ideas and read further. Provide your intended audience with a solid but brief sense of the parameters of your analysis and who you would consult in refining it further, and why. Remember that your goal is to convince readers of the validity of your observations while recognizing limitations that affect business decisions.
- II. Financial Performance and Health: In this section, you will evaluate the company’s recent financial performance and current financial health, given its organizational context. In particular, you must cover the following:
A. Organizational Context 1. What key goods or services does your company provide, for whom, where, and why? How do these features of the company (major products or services, customers, location, etc.) help set the boundaries for business decisions? [MBA-520-02]
2. How is the company organized and managed (by product groups, geographic region, function, etc.)? How does that affect accounting and financial information and subsequent business decisions? [MBA-520-02]
B. Recent Financial Performance
1. Assess what the company’s consolidated income statements for the last three years say about its financial performance. Use relevant indicators, graphs, and spreadsheets to support your narrative. (Include all spreadsheets in an appendix.) For example, what do the amounts and year-to-year changes in revenue, operating income, net profit or loss, and earnings before interest, taxes, depreciation, and amortization tell you? Do any items stand out? [MBA-520-01]
2. Assess what the company’s consolidated cash flow statements for the same time period say about its financial performance. Use relevant indicators, graphs, and spreadsheets to support your narrative. For example, what do the amounts and year-to-year changes in cash from operating activities, cash from investing, cash from financing, and total cash flow tell you? Do any items stand out? [MBA520-01]
3. Assess the company’s underlying financial performance. Support your answer with the analysis above and relevant research. For example, is recent performance substantially affected by unusual events such as a major acquisition or spin-off? Is the business thriving or struggling in its industry? How do you know? [MBA-520-01]
C. Current Financial Health
1. Assess how the company is capitalized and what that tells you about its financial health. Support your response with relevant graphs, spreadsheets, and indicators such as cash and cash equivalents, total debt, shareholders’ equity, current ratio, debt/equity ratio, and days sales outstanding (DSO). For example, does the company have enough cash for payroll and other bills? Does it have the right mix of debt versus equity (stock)? How do you know? [MBA-520-01]
2. Does the company have the right amount of cash and other resources (e.g., key people, technologies, reputation, physical assets) to fuel future growth? What does this suggest for business decisions? For example, if it has too much cash, should it pay a large dividend, repurchase its own shares, or reinvest the excess funds? [MBA-520-02]
3. Assess the financial value of the company using relevant indicators. What does your assessment imply for future business health and performance? For example, what is the business’s current market value? What is its price-to-earnings ratio? What do these suggest about investor perceptions of the business’s future? [MBA-520-01]
III. Success Factors and Risks: Use this section to discuss the factors that may affect current and future performance. Specifically:
A. How do the company’s financial and strategic priorities affect accounting procedures and business decisions? How might that affect business success? For example, is management growth-oriented or efficiency-oriented? What is the company’s approach to risk and short- versus longterm planning horizons? [MBA-520-03]
B. How might the company better capitalize on nonfinancial factors such as market share, reputation, human resources, physical facilities, or patents? Support your response with relevant research and analysis. [MBA-520-03]
C. What are the most significant internal risks to the company’s financial performance? Give evidence to support your response. For example, is the company vulnerable to technological changes or cyberattacks? Loss of high-talent personnel? Production disruptions? [MBA-520-03]
IV. Projections: Using what you know about the company’s financial health and performance, forecast its future performance. In particular, you should:
A. Project the company’s likely consolidated financial performance for each of the next three years. Support your analysis with an appendix spreadsheet showing actual results for the most recent year, along with your projections and assumptions. Remember that your supervisor is interested in fresh perspectives, so you should not just replicate existing financial statements: You should add other relevant calculations or disaggregations to help inform decisions. [MBA-520-04]
B. Modify your projections for the coming year to show a best- and worst-case scenario based on the potential success factors and risks you identified. As with your initial projections, support your analysis with an appendix spreadsheet, specifying your assumptions and including relevant calculations and disaggregations beyond those in existing financial reports. [MBA-520-04]
C. Discuss how your assumptions, forecasting methodology, and information gaps affect your projections. Why are your projections appropriate? For example, are they consistent with the company’s mission and priorities? Aggressive but achievable? How would changing your assumptions change your projections? [MBA-520-04]
Business Opportunities: In this section, discuss the incremental impact of a hypothetical but reasonable and simple new investment project, such as a new product or facility or a cost-cutting investment, as an initial step in thinking about the future. Be sure to address the following:
A. Based on your knowledge of this company, what is a likely investment it would consider and why? Be sure to describe the basic features of the investment as a foundation for considering its potential financial impact. [MBA-520-05]
B. Evaluate the approximate costs and benefits of the investment you identified, explaining how they would affect your spreadsheet projections and business decisions. Estimates are sufficient but should be grounded in common sense and insight into the company. [MBA520-05]
C. Assess the implications of how the potential investment affects budgeting and related business decisions. For example, does the investment involve significant cash spending this coming year, followed by benefits in the following year? How might that affect short-term and long-term spending priorities? Does the benefit outweigh the cost? [MBA-520-05]
Use the critical elements as sub- headings to get all your points.