Brief: Prepare a financial analysis (3,000 words) by constructing and analyzing financial statements and ratios and providing recommendations for sources of funding and project approval. Assignment Instructions: For this assignment, there are 3 parts for you to complete. Please note that each part has multiple sections that must be completed. You should submit all 3 parts as one written assignment. Part 1: Financial Statements Part one consists of five sections to complete: balance sheet, profit, and loss statement, statement of cash flows, ratios, and strategies. Complete all five sections. Please note: Although the statements are for the same company and period, the values for some items may be different between cash flow and P&L due to the timing of actual cash out/inflows. Some values in the statements will require calculation. Some items could be interpreted in more than one way. State your assumption and calculate the value based on your assumption. Section 1.1. Balance Sheet Construct a balance sheet for Acme Products Ltd for the year ended 30/06/2021 from the following list of accounts. All values are in $000.00. Items Value Accounts Receivable 352.50 Accounts Payable 405.00 Bank Loan 480.00 Bank Overdraft 495.00 Cash 300.00 Corporate Bonds 645.00 Inventory 555.00 Land and Buildings 1815.00 Ordinary Shares 1035.00 Plant and Equipment 465.00 Preference Shares 390.00 Retained Earnings ?? Tax Liability 135.00 Vehicles 352.50 Section 1.2. Profit and Loss Statement Construct a profit and loss statement for Acme Products Ltd for the year ended 30/06/2021 from the following accounts. All values are in $000. Items Value Closing Inventory 385.50 Dividend Received 75.00 Interest -40.50 Loss from sale of machinery -15.00 Opening Inventory 408.00 Purchases 831.00 Rent -123.00 Sales 1488.00 Tax -15.00 Utilities -85.50 Wages -175.50 Section 1.3. Statement of Cash Flows Construct a statement of cash flows for Acme Products Ltd for the year ended 30/06/2021 from the following list of accounts. All values are in $000. Items Value Cash at the beginning of the year 405.00 Cash paid to suppliers 360.00 Cash received from customers 690.00 Cost of buying back shares 46.50 Dividend paid 39.00 Dividends received 13.50 Interest paid 18.00 Interest received 15.00 Payment of finance lease liabilities 72.00 Proceeds from issue of new shares 127.50 Proceeds from long-term borrowings 232.50 Proceeds from the sale of plant, property, and equipment 120.00 Purchases of plant, property, and equipment 525.00 Repayments of long-term borrowings 36.00 Taxes paid 12.00 Wages paid 195.00 Section 1.4. Ratios Calculate the following ratios based on the previous financial statements. 1. Quick ratio 2. Operating profit margin ratio 3. Return on equity (ROE) 4. Debt to equity ratio 5. Interest coverage ratio Section 1.5. Financial Analysis (500 words) 1. Analyse Acme Products Ltd financial statements and ratios. Include relevant references in your answer. 2. After analyzing Acme Products Ltd’s financial statements and ratios, you are required to provide five relevant strategies to make the company more profitable. Include any theories, frameworks, or concepts in your analysis. Part Two: Financing – Risk & Return Consider the potential sources of financing for a typical start-up firm. Answer the following three scenarios: » Section 2.1. Features & Characteristics (500 to 600 words) Identify five (5) features or characteristics one should consider when deciding upon potential financing sources. Briefly describe the features/characteristics and discuss why each is important. » Section 2.2. Start-Up Firm Financing (500 to 600 words) Identify three (3) sources of financing suitable for a start-up firm. Explain why these sources are appropriate for a firm at this stage of its lifecycle. » Section 2.3. Growing-Expansion Firm Financing (500 to 600 words) Identify three (3) sources of financing suitable for a growing expansion firm. Explain why each source is suitable for a firm at this stage of its lifecycle. Part Three: Cash Flow Estimation and Project Evaluation Provide your recommendation on whether or not you would decide to approve the project or not move ahead with the project using the evaluation methods and calculated project evaluation values listed below. » Section 3.1. Evaluate Measures (500 words) For each five (5) project evaluation measures, indicate whether you would go ahead with the project or not and, if so, why have you made that decision. (The project will last for 5 years and the WACC is 8.9%). Section 3.2. Evaluation Measures Pros/Cons (500 to 600 words) For each of the evaluation measures, discuss the pros and cons. Include any relevant theories, frameworks or concepts in your evaluation. Evaluation Method Values Would you go ahead with the project? (Yes/No) NPV -$53,542 PAYBACK 5.94 years ARR 7.50% PI 0.78 IRR 0.13% Suggested Structure: Your assignment may be structured in any way that best presents your research and thinking. However, the following structure can be used as a guide. 1. Cover or Title Page 2. Financial Statements a. Balance Sheet b. Profit and Loss Statement c. Statement of Cash Flows d. Ratios e. Financial Analysis Summary 3. Financing – Risk & Return a. Features and Characteristics b. Start-Up Firm Financing c. Growing-Expansion Firm Financing 4. Cashflow Estimation and Project Evaluation a. Evaluate Measures b. Evaluate Measures Pro/Cons 5. Reference page (listed in APA format) 6. Appendix, if needed Considerations: Upon review of your analysis, consider how you have demonstrated critical thinking. Specifically: » Have you included all the required elements for your financial analysis? » Have you provided sufficient evidence and examples to support your reasoning and recommendations? » Have you demonstrated the ability to integrate relevant findings, concepts, or theories in your assignment? » Have you used a wide variety of sources? Consider using both academic and industry sources. » Does your assignment flow logically and sequentially?
