Solved by verified expert:Analyze the pro forma statements and analysis created in the previous module and create a detailed PowerPoint presentation with speaker’s notes to demonstrate why the bank should give your company a loan. The amount requested and loan terms should be financially manageable and you need to justify the amount requested in your presentation. Your presentation should include:A clear explanation of how much money is being requested from the lender and how the money will be used to expand the business.General explanation of the business; who are the customers, where is it located, how long has it been in existence, etc.An overview of the 12 Month Pro Forma Budgeted Income Statement created in the previous module with ratios.An analysis of the year end income statement that includes key financial ratios.An overview of the financial strengths and weaknesses of the company and an explanation of how those elements will be leveraged and minimized to ensure that the loan will be a good solid investment and financially manageable. Make sure to use financial ratios to support your argument and help sell this idea to the lender.Finally, keep in mind that the audience of this presentation will be the lender and that the goal of this presentation is to sell the Cloud Ware company as a good investment to the potential lender.
lflatin_module_04___financial_performance_012718__1_.docx
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Running Head: FINANCIAL PERFORMANCE
Financial Performance
Lisa K. Flatin
Rasmussen College
January 21, 2018
Author Note
This paper is being submitted on January 21, 2018 for Roxanne Visser’s D279/ACG2062C
Section 02 Computer Focused Principles course.
1
FINANCIAL PERFORMANCE
Cloud Ware Company – compare the profit and loss account for November and December
Use of financial Ratios need to be used
Equity to debt ratio as at 30th Nov
E: D = (total assets – total liabilities): total liabilities
= ($82,655.11 – $26,820.000): $26,820.00
= 55835.11: 26820
= 2.082: 1
= 1: 0.48
Equity to debt ratio as at 31st Dec
E: D = (total assets – total liabilities): total liabilities
= ($73,685.51 – $20,000.00): $20,000.00
= 53685.51: 20000
= 2.684: 1
= 1: 0.37
Current ratio as at 30th Nov
Current ratio = current assets/ current liabilities
= $72,655.11 / $26,820.00
= 2.7
Current ratio as at 31st Dec
Current ratio = current assets/ current liabilities
= $65,285.51/ $20,000.00
= 3.2
Profit margin as at 30th Nov
=Net income/ net sales
2
FINANCIAL PERFORMANCE
3
= -4,164.89/ 0
=0
Profit margin as at 31st Dec
=Net income/ net sales
= 6,314.49/ $260.00
= 24.3
The financial position of the company as at 30th November can be analyzed through several
metrics. Analysis of current assets and liabilities is one means to this end. From the balance sheet
of the business as at 30th November, the company has total current assets worth $72,655.11
compared to total liabilities of $26,820.00. This highlights that the company is in a position of
meeting its debts. Use of current ratio is another way of evaluating the financial position of the
company. The current ratio for the company is 2.7, and this suggests that the company financial
position is health in meeting current debts. Use of equity to debt ratio is another way of analyzing
the financial well-being of the business. At the end of the month, the ratio was 1: 0.48 and this
underscores capability of the business in ensuring returns for shareholders. However, analysis of
the profit margin highlights a concern due to 0 revenues made in the bank. This undermines the
financial viability of the business in the future (Heikal, Khaddafi, & Ummah, 2014).
The financial performance of the company improved substantially in December as illustrated by
the balance sheet as at 31st December. The volume of receivables is raised to $260 from 0 in the
previous month. The equity to debt ratio also changes to 1: 0.37 from 1: 48 and this signals and
improvement in viability of the business to shareholders. The current ratio for December rises to
3.2 from 2.7 in the previous month. To this end, the company is better placed to address its debts
soon compared to its position in November. The profit margin also improves from 0 to 24.3 and
this further signal improvement in the financial position of the business (Delen, Kuzey & Uyar,
2013).
Pro Forma for strengths and weaknesses
Areas of strengths
Current assets
Equity
Areas of weaknesses
Receivables
Net income
FINANCIAL PERFORMANCE
4
Areas for opportunities in the future for the business include receivables. The company can
improve the volume of receivables to boost its current assets even further. The company can also
improve the net income to reduce liabilities (Heikal, Khaddafi, & Ummah, 2014).
The viability of the company to lenders can be justified by forecasting performance of the company
about current assets and current liabilities using available information. Simple linear aggression
method is the most viable approach to this end. It can be used to predict this relationship, therefore,
justifying the company to lenders (Delen, Kuzey & Uyar, 2013).
FINANCIAL PERFORMANCE
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References
Delen, D., Kuzey, C., & Uyar, A. (2013). Measuring firm performance using financial ratios: A
decision tree approach. Expert Systems with Applications, 40(10), 3970-3983.
Heikal, M., Khaddafi, M., & Ummah, A. (2014). Influence analysis of return on assets (ROA),
return on equity (ROE), net profit margin (NPM), debt to equity ratio (DER), and current
ratio (CR), against corporate profit growth in automotive in Indonesia stock exchange.
International Journal of Academic Research in Business and Social Sciences, 4(12), 101.
…
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