FINACIAL MANAGEMENT

Financial Analysis Task 5

The bank vice president will decide if the bank will approve a $1,000,000 funding request for the European expansion of Custom Snowboards Inc. currently under consideration. Robert Baldwin January, 15th 2013 Financial Analysis Task 5 B3a Internal Risk Management Recommendation B3 Internal Expansion Risks B3 Expansion Internal & External Risks B2 Improvement Six Sigma B2 Improvement ABC Costing B2 Improvements A2 Risks References B6 Optimal Selection and Why Split this up, there are 3 options. B5 Summary Pros and Cons This has multiple parts so split it. B4 Potential Returns B3a External Risk Management Recommendation B3 External Expansion Risks Section Placeholder Expansion Options B1a Future Performance B1a Future Performance History, performance, improvement, risk, and recommendations Section B: CEO & Board Content A3 Ratios - Solvency Content A3 Ratios - Profitability Split into 3 based on professors list. A3 Ratios Horizontal, vertical, and trend analysis.

Profitibility, liquidity, solvency. A1 Key Points Key points, risks, and ratios Section A: CEO & Bank Resources Used Open Items Robert Baldwin WGU

1/19/2013 JET2 Financial Analysis Task 5 B1a Future Performance There is a lot of material for this (come back and revisit) Do more charts like this to visualize it. B1 Horizontal Analysis SUBDOMAINS:

325.4 - COMMUNICATING EFFECTIVELY IN ORGANIZATIONS

326.1 - MANAGING INTERNAL COST & CONTROLLING FINANCES

326.2 - MANAGING CAPITAL & FINANCIAL ASSETS

326.4 - MANAGING ENTERPRISE RISK & CONTINUITY

Competencies:

325.4.1: Enhancing Organizational Communication - The graduate communicates effectively within an organizational setting.

326.1.5: Budgets - The graduate utilizes budgets and a variety of pro-forma statements for planning and control purposes including analyzing cash flows to assure adequacy of funds for capitalizing on business opportunities.

326.2.1: Capital Budgeting - The graduate uses capital budgeting to analyze business opportunities and applies risk mitigation concepts to capital budgeting situations.

326.2.2: Financial Goals - The graduate considers risk and the potential value added for all stakeholders when balancing risk and return and the tradeoffs between competing financial goals.

326.2.3: Capital Structure - The graduate considers the costs and the advantages and disadvantages of equity financing versus debt alternatives while designing the capital structure that balances risk and reward.

326.2.4: Working Capital - The graduate demonstrates the use of working capital management and working capital acquisition concepts to balance the related trade-off between profitability and risk.

326.4.4: Risk Evaluation and Mitigation - The graduate evaluates internal and external risks and recommends risk mitigation strategies and techniques to an organization.

JET Task 5

Key points of the company’s financial picture

To analyze the key points of this company’s financial picture, it is ne

cessary to focus onthe three areas of profitability, liquidity, and solvency. These are the areas that will be of mostinterest to the banker when considering the loan for the European expansion.Profitability focuses on how much money the company makes. Profitability is driven bysales and expenses. Sales declined by 6.44% in year 13, but have made a slight increase in year 14 by 1.28% over year 13. This is important to the banker because it shows that, while there wasa decline in sales in year 12, the sales are rebounding slightly. Gross profit and selling expensesalso declined in year 13 by 6.44% and increased slightly in year 14 by 1.28%, which is directly proportional to the sales figures. This is important to the banker because it shows that thiscompany did a good job of maintaining its cost of goods sold and its selling expenses in thoseyears. General and administrative expenses increased by 7.24% in year 13 and by 6.5% in year 14. This is important to the banker because it shows that the company did not do a good job of managing those expenses during that time.All of these factors played a role in the decline in net earnings of 67.66% in year 13 and72.11% in year 13. This is important to the banker because, although sales rebounded slightly inyear 14, overall net earnings declined drastically in both year 13 and year 14.Liquidity focuses on how much money a company has to spend. Liquidity is driven byassets. Current assets increased in year 13 by 12.3% due to an increase in cash of 64.1% and inshort-term investments of 20%, but decreased in year 14 by 16.6%, due in great part to adecrease in short term investments in this year of $150,000. Furniture, fixtures, and equipmentincreased by 66.7% in year 14, meaning that the company most likely cashed out most of itsshort term investments to purchase additional assets of some type. This is important to the banker because it shows that the company is using its capital to reinvest in the company.Accounts receivable decreased by 6.4% in year 13 and in year 14 it increased by 1.3%, whichwas proportional to the sales figures. This is important to the banker because it shows that the

company’s receivables are remaining steady.

Total assets declined in year 13 by .5% and in year 14 by 2.3%. This is important to the banker

because it shows that while the company’s sales decreased by over 6%, it was able t

omaintain a decrease in assets of only $47,585, which is just 2.7% in the 3-year period.

Solvency focuses on the amount of the company’s outstanding debt. Current liabilities

decreased by 3.7% in year 13 and increased by .7% in year 14. Accounts and notes payable