Interpreting Financial Statements

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Part 1: Preparing a Balance Sheet

Balance Sheet Information

Your balance sheet should be completed in a separate Excel spreadsheet. Use this area to make note of the file name where your balance sheet is located.

Quality of the Balance Sheet

Replace this text with your response to the following: In 75–150 words (1–2 paragraphs), describe how you would interpret the quality of the balance sheet (using the Financial Statement Excel Template). Be sure to address whether there is excessive leverage, enough cash to make payroll and/or buy equipment, et cetera.

Recommendation Based on the Balance Sheet

Replace this text with your response to the following: In approximately 75–150 words (1–2 paragraphs), address the following: Based on your interpretation of the balance sheet, would you recommend lending to the company? Explain why or why not, including listing any potential risks.

Part 2: Building an Income Statement

Income Statement Information

Your income statement should be completed in a separate Excel spreadsheet. Be sure to use proper Excel formulas to show your work in cells where math is involved to derive the answers. Use this area to make note of the file name where your income statement is located.

Quality of the Income Statement

Replace this text with your response to the following: In 75–150 words (1–2 paragraphs), explain how you would interpret the quality of the income statement for this company. Is the income statement improving or deteriorating over time? Explain your answer, including why you reached your conclusion.

Profitability Based on the Income Statement

Replace this text with your response to the following: In approximately 75 words (1 paragraph), describe whether or not this company is profitable. If the company is unprofitable, explain if it is growing fast enough for sales to outpace expenses.

Recommendation for Investing Based on the Income Statement

Replace this text with your response to the following: In approximately 75 words (1 paragraph), address the following: Based on their income statement, would you invest in the company?

Part 3: Calculating the Operating Cash Flow

Operating Cash Flow Information

Quality of the Operating Cash Flow

Replace this text with your response to the following: In 75–150 words (1–2 paragraphs), explain how you would interpret the quality of the operating cash flow for this company. Is the operating cash flow improving or deteriorating over time? Explain your answer, as well as why you reached your conclusion.

Generation of Positive Cash Flow Based on the Operating Cash Flow

Replace this text with your response to the following: In approximately 75 words (1 paragraph), describe whether or not the company generates positive cash flow from operations.

Recommendation for Investing Based on the Operating Cash Flow

Replace this text with your response to the following: In approximately 75 words (1 paragraph), address the following: Based on the quality of their cash flow, would you invest in the company?

References

Include appropriately formatted references to at least one scholarly source for each part of your business report to support the statements made in your report. Please refer to the Writing Checklist for more information.