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Financial analysis theory
Analysis of cash flow statement
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In this assignment I was asked to carry out a financial analysis of a proposal for the NOVA Corporation and to include analysis concerning the possible impact of a price change for their product in question. I was asked to consider several sales growth scenarios and expected to obtain the NPV of the project for over a five-year period. The model also needed to allow for measuring NPV as change in sales volume, price and labor cost occurred. I first needed to acquire additional information to complete a spreadsheet that would compute the cash flows for the analysis. I learned cash flow in any year depends on sales volume and profit margin per unit in that year. I learned that sales volume is a function of price. Also profit margin per unit is calculated by the difference between price per unit and costs per unit. After filling in the table data for years 2008-2012 …show more content…
But in this assignment I had a few things that I have never been subjected to or had to do before. That is what is great about taking these classes and having the ability to broaden your knowledge and know how. A wide variety of data sources can be used to import data into Excel. In this assignment we imported data from a text file into a worksheet. The use of the Import wizard helps to examine the files you are importing and ensures that you can import it in the way you need to. I have imported data into Excel and have also imported/exported data to Access from Excel. This portion of the assignment was not difficult to me. Pivot tables are a powerful feature in Excel. It allows you to sort large amounts of data easily and allows for certain distinction in what is pulled and sorted. I currently use pivot tables daily with my job and have used them in my past work experiences. They ability to sort data is vital; it allows you so many different options for how you can display important information in your
1. I am asked to compute the before-tax Net Present Value or NPV of a new ski lift for Deer Valley Lodge and advise the management there of the profitability. Before I am able to make this calculation there are a few calculations that I will need to make first. First the total amount of the investment, this will be the cost of a lift itself $2 million plus the cost of preparing the slope and installing the lift $1.3 million.
In MOD’s excel workbook I have used many macros to create shortcuts to different sheets and also macros to perform various tasks. Overall using macros will speed up how fast the end user can use and navigate the sheet and also make it easier to use. I have also used auto-sum, this automatically entered in a certain formula that I had chosen. By using auto-sum I saved time by not having to enter in long formulas. I have also used an automated filter tool, this tool filters out any data that the user decides is unneeded, which will help the user as it does not show data that useless to them or is unneeded.
Wolford General Partnership (WGP) operates plumbing supply business which is also an exclusive supplier for certain stable construction firms. Because of its excellent reputations and services, WGP is able to an extremely profitable entity for the business. WGP uses an accrual method of accounting and has been using June 30 fiscal year for the tax report purpose after its election of §444 since its formation.
The 3 percent decline in sales causing a 21 percent decline in profits can be attributed to the identification of the accounting concept of operating leverage. Operating leverage is what business managers apply to boost small changes in revenue into sizable changes in profitability. Fixed cost is the force managers use to attain disproportionate changes between revenue and profitability. Therefore, when all costs are fixed every sales dollar contributes one dollar toward the potential profitability of a project. Once sales dollars cover fixed costs, each additional sales dollar represents pure profit. A small change in sales volume can significantly affect profitability (Edmonds, Tsay, & Olds, 2011). So, therefore, if sales volume increases,
...er what career field you may enter. The data has to be collected properly without it being so time consuming ,and it’s not only the functions that was collected in chapter 9 but the concepts that the entire Microsoft excel workbook is teaching can impact ones career effectively in a positive way. Excel creates a way for individuals to be on top information that is highly needed, without excel calculating this data will then become time consuming and then inaccurate, be smart about it and know what is what when dealing with different types data that’s needed depending on your career. It doesn’t if you’re a teacher, doctor, contractor, musician, or any other profession out there. Collect data the smart way. Be your own boss, and know what it takes.
Discounted Cash Flow Method takes the forecast free cash flows during forecasted horizon. Then we estimate the cost of capital (weighted average cost of capital) and estimate continuing value (value after forecast horizon). The future value is discounted to the present value. We than add back cash ($13 Million) and non-current assets and deduct total debt. With the information provided several assumptions had to be made to obtain reasonable values (life period of 30-years, Capital expenditures not to exceed $1 million dollars, depreciation to stay constant at $1.15 Million and a discounted rate of 10%). Based on our analysis, the company has a stand-alone value of $51 Million at the end of fiscal year end 1990 with a net present value of cash flows of $33 million that does not include the cash and non-current assets a cash of and non-current assets.
This analysis shows that the projects NPV as 13.37 million dollar. Our result is slightly different than the presenting team because of rounding. But both of our teams had positive NPV which suggest that the project should be accepted.
The issues of two impacts are in two ways. The first one, more efficient plants are likely to cannibalize sales from the Rotterdam plant. The second one, the forecasted rate of return for customers needs to account for a ramp up period before it is possible to reach the 7% additional revenue of the project. Furthermore, the two impacts should be calculated in the project's cash flows for the final evaluation purposes.
While analyzing the data for The Body Shop International case, I noticed some trends and have compiled my assumptions for the next three years. I have compiled pro-forma statements for the fiscal years 2002, 2003 & 2004. These figures are based on the percentage of sales method for pro-forma financial modeling. Simply put, I used the sales figures from the past three years 1999, 2000 & 2001 and applied a growth rate of 13% increase to sales. Below are some additional assumptions that I have created to illustrate how the firm can become profitable while increasing market share and maintaining stockholder interest within the firm over the next three years.
The sales director proposed that if the firm were to reduce the price of Item 345 to FF15.00/m, they would be able to increase sales to 175,000 units (or 25% of industry volume). But if they were to keep the price at the current value of FF20.00/m, they would be able to sell not less than 75,000 units (or 11% of industry volume).
During the last few years, Harry Davis Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program that had been proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice president. Your first task is to estimate Harry Davis’s cost of capital. Jones has provided you with the following data, which she believes may be relevant to your task.
A spreadsheet is a document that stores data in cells within a table of columns and rows. Rows are usually labelled using numbers (1, 2, 3, etc.), while columns are labelled with letters (A, B, C, etc.). Cells are the individual box that found between row and column for example B1 and C5 would be individual cells. Each cell can store extraordinary information. By entering information into a spreadsheet, data could be put away in a more organized manner than utilizing plain content the column/row structure likewise enables the information to be analysed utilizing equations and calculations.
Highly proficient in Microsoft Access and Excel, I routinely developed databases and processes involving complex queries, macros, and pivot tables that produced clear statistical synopses for distribution to middle and executive management. Accomplishments include:
Alignment was very important in this spreadsheet as without the right alignment cells could be uneven in size and some of the writing would not be visible in the cell as it is too small. This was done by highlighting the cells and choosing which alignment to choose, such as currency values would be aligned to the right.
Was there information or insights that helped you that you didn’t expect to learn at the outset of the course?