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Financial Analysis

Analyze financial data, prepare annual plans, assess strengths and weaknesses, determine financial needs, and select optimal options for a manufacturing company in a changing market.

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Financial Analysis

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  1. Financial Analysis linking managerial actions with results

  2. Financial Analysis Your role is that of financial analysts and your task is to: • Prepare an annual plan • Analyse the last year’s results • Analyse the next year’s projection • Decide financial needs • Select the right options

  3. The Business Situation • A typical manufacturing company • Cost inflation is about 5% • As is the market growth You have several options to choose from E.g. • Change Prices • Enter New Markets • Launch New Products You have a total of 27 to choose from

  4. Financial Information A computer model will do the arithmetic needed to calculate: • A Profit & Loss Account • The Balance Sheet (assets & liabilities) • Other Published Data And • Key Measures • Business Type • Profitability • Financial Strength

  5. Business Objectives When developing your plan you need to consider objectives in terms of: • Profitability • Growth • Survival And decide which measures you wish to use and what are going to be the criteria.

  6. Your Task Your task involves the following: • Familiarisation • Determine strengths & weaknesses • Determine needs • Investigate the options available • Create plans • Select the “best” plan • Compare and discuss results

  7. Documentation You have the following • Financial Analysis • Explains your task and using the simulator • Financial Options • Lists & describes your options • Financial Definitions • A dictionary of financial terms • Financial Measures • An explanation of measuring a business using money.

  8. The Simulator • Initially identify yourself with a team name (that can be used to recover your plans after recessing.) Then from the menu: • Review Current Plan • Compare Plans • Explore Options • Create Plan • Show Influences • Recess Planning

  9. Review Current Plan Display • Last Year & Current Plan, Difference & % Difference Report Options • Options in the Plan • Profit & Loss Account • Assets • Liabilities • Other Published Data • Key Measures • Business Type • Profitability • Financial Strength

  10. Compare Plans Same display options as when Reviewing the Current Plan But the plans are shown side by side in a table.

  11. Explore Options This allows you to investigate each option separately before combining into a plan. • Select Option to investigate • Test your knowledge of what results are effected. • See the monetary impact of the Option on results.

  12. Create Plan Involves combining one or more of the options to create a plan. But • some of the Options are mutually exclusive • You cannot create more than 10 plans and so think very carefully before you proceed

  13. Show Influences This allows you to move backward from a measure to find how results need to change E.g. To increase Profit before Tax you might • increase Sales or Turnover • reduce Cost of Sales, Distribution Costs, Administration, Interest Paid or Other Costs or all of these.

  14. Observations • Think before you act (do not waste your plans) • Ask for help if you need it • There is no right or wrong answer (your best plan will be the one that best meets the financial objectives you decide) • Enjoy the challenge

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