Assessment 1 Instructions: Financial Condition Analysis
Create a 6-8 page report that analyzes financial ratios for a selected company, uses the data to tell the financial story of that company, and concludes with a recommendation on whether the company would be a viable partner based on its financial condition.
It is essential for financial advisors and upper management to know the financial condition of a company for a variety of reasons, including to improve its condition, to make decisions to increase shareholder value, and to know the true value of the entity. Such an analysis is important for any business, small, medium, or large.
This portfolio work project gives you a chance to apply the skills expected of an MBA graduate; from the financial management perspective, you should be able to:
- Tell the financial story based on financial statements.
- Conduct a financial analysis and identify focus areas for enhancing shareholder value.
- Interpret ratio computations that are meaningful and inform business decisions and strategies.
Maria Gomez is founder and president of PacificCoast Technology, a small technology company. She is considering being bought out by a larger publicly traded company so she can be rewarded financially for all of her entrepreneurial efforts. She calls you into her office and says:
Thank you for meeting with me today. I’d like to talk to you about the future of the PacificCoast Technology. I’ve been running this company for a long time now, and I think it’s time for me to consider the next five to ten years. I want to find a buyer for this company who can take it to its full potential but with me still leading it. I still want to be a part of the journey, to see this company’s growth, which means this potential buyer needs to be a high quality company with solid financial health. That’s the only way we’ll be sure there’s going to be necessary funds and stability for the firm to grow.
You are ready to take on this project to assist Maria with her vision to find a buyer to take the company into the next phase. At your desk, you review these additional meeting notes:
- The acquiring company does not need to be in the same industry, as Maria values financial strength over any synergistic benefits.
- Maria wants you to select a company and then examine its financial condition by analyzing its financial statements and using financial ratio analysis. She indicated that using both trend analysis—going back at least three years—and industry average analysis would be helpful information for her.
- From this analysis, Maria wants you to tell the financial story of the potential buyer/company by listing its financial strengths and weaknesses.
- She expects you to provide a list of actionable decisions so she can understand if the company would be a potentially viable corporate partner.
You are one of Maria’s high-performing managers at PacificCoast Technology, and she trusts your work and leadership.
After a few days of thinking about Maria’s project request, you call a meeting with her in which you lay out the requirements below. You tell her that by meeting these requirements, you believe she will have the information she needs. Maria approves your plan and asks that you get started right away.
Here is what your report should provide for Maria on the selected company:
- Provide a brief background and summary of the potential corporate partner in terms of its history, product lines, and geographic reach. (Remember that Maria is looking for a partner that is a publicly traded firm.)
- Analyze the financial statements of the firm, which can be typically be found in the annual report in the investors’ area of the corporate website, including the income statement, balance sheet, and statement of cash flows:
- Do a comprehensive financial ratio analysis, including multiple financial ratios in each of the following categories—short-term solvency or liquidity, long-term solvency, asset management or turnover, profitability, and market value ratios.
- Use the following tools to analyze these ratios: trend analysis (going back at least three years) and industry average ratio analysis. If industry average ratios are not available for the company, use an average of two of its nearest competitors.
- Evaluate the financial statements and ratios of the firm to find its true condition and valuation.
- From the ratio analysis, identify and strengths and weaknesses of the company.
- Make conclusions on the current status of the firm based on its history and comparison to its competitors.
- Make actionable items and conclusions, based on the data analysis, about the status of the company.
- Based on the analysis of the firm, identify any general actions that need to be made to improve the financial condition, and indicate the ease or difficulty of the firm doing so.
- Tell the current financial story of the firm and indicate the overall health of the firm as it relates to current valuation and the future prospects of the company.
- Provide a clear picture of the financial condition and valuation of the company to shareholders, debtholders, customers, and employees.
- Present information graphically and in narrative form, conveying a compelling snapshot of the company.
- Recommend whether the company would be a good match to enter into a buyout tender offer/agreement.
- Remember that it is not enough to just simply summarize numbers or data for your audience. Put yourself in their shoes and make the connections for them, tell them why it is important, and tap into their concerns and motivations.
While you are free to use your creativity in formatting your submission, keep in mind that this is a document that will be for the eyes of the owner of the firm, so make sure it can be easily and quickly examined by a busy upper-management professional, with clear writing and understandable graphics and charts.
Create a report that tells the financial condition of a company. Your report should provide information on the following:
- Analysis of the financial statements.
- Evaluation of the true condition and valuation of the company.
- Recommendation of actionable items for the company based on the financial analysis.
- Ensure written communication is free of errors that detract from the overall message and quality.
- Use at least three scholarly resources.
- Your report should be between 6 and 8 pages.
- Use 12 point, Times New Roman.
If you are experienced with preparing professional reports, you may use a format of your choice. However, if you are new to this type of writing and document style, you may wish to use these sections as a way to organize your report:
- Title Page.
- Executive Summary.
- Company Background.
- Financial Analysis.
- Financial Ratio Analysis.
- Trend Analysis.
- Industry Average Analysis.
- Appendix (if you have additional data, reports, charts, et cetera, to support your analysis).
Related company standards:
- Remember that you are preparing a professional document meant for executive leadership with limited time. Your report should follow the corresponding MBA Academic and Professional Document Guidelines (available in the MBA Program Resources), including single-spaced paragraphs.
- Use APA-formatted references.
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies through corresponding scoring guide criteria:
- Competency 1: Apply the theories, models, and practices of finance to the financial management of an organization.
- Analyze financial ratio analysis, trend analysis, and industry average analysis.
- Competency 3: Apply financial analyses to business planning and decision making.
- Evaluate the financial statements of the firm to find its true condition and valuation.
- Competency 4: Use data to support evidence-based financial decisions.
- Develop actionable items and conclusions, based on the analysis, about the status of the company.
- Competency 5: Communicate financial information with multiple stakeholders
- Tell the current financial story as to the overall health of the firm as it relates to current valuation and the future prospects of the company.
Faculty will use the scoring guide to review your deliverable from the perspective of Maria Gomez. Review the scoring guide prior to developing and submitting your assessment.
This assessment demonstrates your ability to conduct a financial analysis. Include it in your personal ePortfolio.
Note: Your faculty may also use the Writing Feedback Tool to provide feedback on your writing. In the tool, click the linked resources for helpful writing information.