Financial Statements and Reports, Financial Analysis, Corporate
Order ID:89JHGSJE83839 Style:APA/MLA/Harvard/Chicago Pages:5-10 Instructions:
Financial Statements and Reports, Financial Analysis, Corporate
FIN534 Week 2 Scenario Script: Financial Statements and Reports, Financial Analysis, Corporate ratios and benchmarking Slide # Scene/Interaction Narration Slide 1 Scene 1 · Linda in her office
· Don enters with
· Linda’s Phone Rings
· End of scene
FIN534_2_1_Linda-1: Hello, I hope you are ready to get started today because Don gave us our first analysis project. He would like us to review some of TFC’s financial reports. FIN534_2_1_Don-1: Hello everyone. I just came from the accounting department where I was able to get TFC’s balance sheets and income statements for the prior two years. The accounting department also provided an estimate of TFC’s balance sheet and income statement after the acquisition, considering it occurs. I would like for you to review the statements and determine the financial strength of our company. We pride ourselves in having a strong cash base. We are hoping this project will keep our cash account strong.
Let’s go to the conference room so I can show you the reports and review some of the accounts with you.
FIN534_2_1_Linda-2: (Phone rings)Hello. (wait a few seconds). Thank you. I will be right over.
FIN534_2_1_Linda-3: Sorry I cannot join you as an important matter came up at one of our facilities.
FIN534_2_1_Don-2: Not a problem. I have faith in our Strayer intern. So, we will review the forms in the conference room.
Slide 2 Scene 2 · In conference room with spreadsheets up
· Put the three areas of Balance Sheet on a slide
· Show the formula
· Go to next slide
FIN534_2_2_Don-1: So, it looks like this one is all on you. Here is the balance sheet and the income statements. I was able to gather the information from the last two years of TFC’s annual report, which you know also includes the statement of stockholders’ equity and the statement of cash flows. FIN534_2_2_Don-2: Let’s take a quick look at the Balance Sheet. It shows a snapshot of TFC as of December 31st of the past two years as well as this year which is an estimated number. It is pretty much showing us what the company looks like at those points in time. The amounts can change significantly from one day to the next. For example.if there is a big cash payment, then the cash account will go down overnight! There are three main areas to a Balance Sheet and they include assets, liabilities, and equity. The Balance Sheet also says everything should add up or balance and the formula for this is: assets equal liabilities plus equity.
Slide 3 Scene 3 · Don shows Asset account
· Go to next slide
FIN534_2_3_Don-1: Assets are what TFC owns and the accounts consist of current and long term assets. Current assets are typically considered by TFC to be those accounts that will be turned into cash within one year. The long term assets also known as fixed assets are those that have longer than one year of an expected life on the books. Now let’s take a look at the other side of the Balance Sheet equation.
Slide 4 Scene 4 · Don shows Liabilities and Equity
· Go to next slide
FIN534_2_4_Don-1: Liabilities are what TFC owes to creditors. The same understanding applies to current liabilities as they are what TFC will pay in cash in the following year, while long term liabilities are more than a year. Also accounts payables are those payments that are due to other companies while notes payable are typically due to lending institutions. FIN534_2_4_Don-2: Equity basically represents the owners of the company and any net income that is not paid out in dividends over time gets transferred into our Retained Earnings account.
Please take some time to look over the balance sheet.
FIN534_2_4_Don-3: As you can see cash is a common theme and we need to have good management of it.
Slide 5 Scene 5 Check Your Understanding:
Review Balance Sheet Items
· List different accounts and the user needs to choose whether it is an Asset, Liability, Equity
· Would like to not have the user be able to open up the balance sheet. So maybe at this point don’t make the spreadsheet as a download – that will come later on
· Go to next slide
User: Use matching where user has to put account in proper bucket (Asset, Liability or Equity)
See addendum Scene 5 CYU
Slide 6 Scene 6 · Don shows Income Statement in conference room
· In comes Joe
· Go to next slide
FIN534_2_6_Don-1: I sure hope everything is fine with Linda. In the business world, these “putting out the fire” actions happen all the time. We are all about making the Body Builder’s experience the most enjoyable experience every time so when that standard is not being met, action needs to be taken A.S.A.P! FIN534_2_6_Don-2: Before I digress anymore let’s take a look at the income statement. This statement is different from the balance sheet as it occurs over a specific time instead of at one point in time. It, too, has a simple formula of revenue minus expenses equals profit or loss.
FIN534_2_6_Don-3: On our income statement we call revenue net Sales because we already have deducted any discounts we gave to our Body Builders. The expenses are also listed starting with depreciation.
FIN534_2_6_Don-4: Let’s talk about depreciation. It is a non cash item, meaning that when aLong Term Asset is purchased we own it, but since we plan on using it over a number of years, we spread the cost of it over years instead of all at once. Think of a work out building. Since we plan on having our Body Builders use it for years, we expense it or depreciate it over a number of years. We also have to make sure we are following accepted accounting rules when depreciating.
FIN534_2_6_Joe-1: I see you are discussing the financial statements. How is the company looking?
FIN534_2_6_Don-4: Funny, you should ask. We were just going to get into the analysis.
Slide 7 Scene 7 (Interaction- Multiple choice) · Don looks at balance sheet again
· Make sheet available for download
· Show formula : (Ending cash – Beginning Cash) / Beginning Cash
· Show calculation. (30,000,000-20,000,000)/20,000,000
· In conference room
· Answer Choices
· A. -33%
· B. -67%
· C. 33%
FIN534_2_7_Don-1: Well we reviewed what each statement is, now let’s dive in deeper by doing some analysis. The cash account is very important to us at TFC. Two years ago we had cash of twenty million dollars. Last year our cash position was thirty million dollars. That is a fifty percent gain. FIN534_2_7_Don-2: To get that we took the Ending Cash minus theBeginning Cash and divided that amount by the Beginning Cash.This year we are projecting to have a cash position of ten million dollars. What type of gain or loss would that be?
FIN534_2_7_Don-3: (Correct Answer): Nice work! It is a loss of sixty seven percent.
FIN534_2_7_Don-4: (Incorrect Answer): Try again. Remember, use the formula Ending Cash minus theBeginning Cash and divide that amount by the Beginning Cash.
Slide 8 Scene 8 FIN534_2_8_Don-1: Doing year over year comparisons are good to get an idea of the direction of the company. As you can see our cash account is expected to go down significantly which is a concern to us especially during this expansion. FIN534_2_8_Don-2: (Phone rings) Hello. (pauses a few seconds). Okay, I’ll be right there.
FIN534_2_8_Don-3: Well – another fire has to be put out. I have to go now but I am going to leave you with the financial statements and ask that you review them and draw some conclusions.