Making informed financial decisions begins with understanding how to use the information available. During this workshop you have become more acquainted with financial statements and how they can be used to support managerial decisions. This mini case presents a common real-life situation: evaluating the strength of an organization to assess whether it is ready for growth.
Upon successful completion of this assignment, you will be able to:
- Use given financial data to construct basic financial statements.
- Interpret financial statements to form conclusions about the financial health of an organization.
- Textbook: Analysis for Financial Management
- Textbook: Principles of Accounting: Volume 1, Financial Accounting
- Website: Connect
- File: Higgins Chapter 1 Slides
- File: Financial Accounting Chapter 2
- File: Assignment 1.6 Worksheet
In this workshop, you have learned about the vital nature of cash flow to a company’s survival, much less success. To the surprise and dismay of many business leaders, success and growth often lead to cash flow problems. This is the problem faced by Tad Marks of Sunset Boards. The company is profitable, and demand for its products is quickly growing. As a result, Tad Marks is considering expanding the business and has brought you in as a financial analyst to weigh in on the decision. As a consultant, you will first construct income statements, balance sheets, and a cash flow statement for a company and then attempt to apply your understanding to evaluate the company’s growth plans.
- Review the rubric to make sure you understand the criteria for earning your grade.
- Review Higgins Chapter 1 Slides and the Financial Accounting Chapter 2 PowerPoints.
- Using Assignment 1.6 Worksheet, prepare the following financial statements for the mini-case “Financial Statements for Sunset Boards, Inc.”
- Income Statement for 2018 and 2019
- Balance Sheet for 2018 and 2019
- Cash Flow Statement for 2019
- Tad Marks, the company’s founder, is considering expanding the business, which will require a substantial investment. Evaluate the financial statements you have developed and Sunset Board’s cash flow. In your Excel document or a separate Word document, write a paragraph explaining whether you feel expansion would be a wise choice and why.
- When you have completed your assignment, save a copy for yourself and submit a copy to your instructor by the end of the workshop.