Businesses and other organizations must regularly measure their financial performance and health in order to make operational and strategic decisions affecting the organization’s future. Management professionals utilize income statements, balance sheets, cash flow statements, and a limitless variety of other reports and techniques to evaluate an organization. They also work closely with professionals from departments across the organization—including marketing, human resources, and operations—to ensure that the business runs smoothly and that financial decisions are not made in isolation.
For this project, you will use the accounting and finance skills you learned in the course to review the past and current financial performance and health of a global, publicly traded company. Based on that analysis, you will create initial financial projections that forecast the Walt Disney Company performance under different scenarios and identify internal risks and opportunities in order to begin planning future activities.
This assessment addresses the following course outcomes:
Specifically, your financial analysis and projection report must include the following critical elements:
1. Executive Summary. Clearly and concisely summarize your principal findings, projections, and recommendations with an eye to persuading busy executives to support your ideas and to read further.
2. Approach. Provide your intended audience with a solid, but brief, sense of the parameters of your analysis and who else you would consult in refining it further and why. Remember, your goal is to convince readers of the validity of your observations, while recognizing limitations that affect business decisions.
3. Financial Performance and Health. In this section, you will evaluate the organization’s recent financial performance and current financial health, given its organizational context. In particular, you must cover:
1. Organizational Context
1. What key features of the organization (e.g., major products or services, customers, location, etc.) help set the boundaries for business decisions? In other words, what key goods or services does your organization provide, for whom, where, and why?
2. How is the company organized and managed (e.g., by product groups, geographic region, function, etc.)? How does that affect accounting and financial information and subsequent business decisions?
2. Recent Financial Performance
1. Assess what the organization’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?
2. Assess what the organization’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?
3. Assess the organization’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?
3. Current Financial Health
1. Assess how the organization 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 organization have enough cash for payroll and other bills? Does it have the right mix of debt versus equity (stock)? How do you know?
1. Does the organization have the right amount of cash and other resources (e.g., key people, technologies, reputation, physical assets, etc.) 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?
2. 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?
1. Success Factors and Risks. Use this section to discuss the factors that may affect current and future performance. Specifically:
1. How do the organization’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 organization’s approach to risk and short- versus long- term planning horizons?
2. How might the organization better capitalize on non-financial factors such as market share, reputation, human resources, physical facilities, or patents? Support your response with relevant research and analysis.
3. 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 cyber-attacks? Loss of high-talent personnel? Production disruptions?
2. Projections. Based on what you know about the organization’s financial health and performance, forecast its future performance. In particular, you should:
1. Project the organization’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, your supervisor is interested in fresh perspectives, so you should not just replicate existing financial statements, but should add other relevant calculations or disaggregations to help inform decisions.
2. 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.
3. Discuss how your assumptions, forecasting methodology, and information gaps affect your projections. Why are your projections appropriate? For example, are they consistent with the organization’s mission and priorities? Aggressive but achievable? How would changing your assumptions change your projections?
3. Business opportunities. In this section, discuss the incremental impact of a hypothetical, but reasonable, 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:
1. Based on your knowledge of this organization, 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.
2. Evaluate the approximate costs and benefits of the investment you identified, explaining how these would affect your spreadsheet projections and business decisions. Estimates are sufficient, but should be grounded in common sense and insight into the organization.
C. How does the potential investment affect 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?
VII. Recommendations. What should you and your manager do next? Support your recommendations with evidence from your financial analysis. For example, should the company pursue the new investment you identified? Implement process changes to decrease risks and/or improve performance?
Your financial analysis and projection report should be approximately 6–8 pages long (excluding title page, spreadsheets and graphs,and references list). It should be double spaced, with 12-point Times New Roman font and one-inch margins, and should use the latest guidelines for APA formatting for references and citations. Please also include your name, course name, and submission date on the title page.
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