Performance Evaluation

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Description

Write a 1-2 page executive summary, along with an appendix of supporting information, in which you analyze an organization's financial performance as well as their level of risk for lending and make and present a recommendation to help leadership make a loan decision.

Introduction

This portfolio work project will help you complete a thorough review of an organization’s financial performance as well as their level of risk for lending. Your recommendation will help leadership create a loan portfolio, and your executive summary will clearly and concisely communicate your review to others in the organization.

Scenario

You work for an organization that provides loans to businesses. You are working with a client who is requesting a loan that will require a review of financial and related performance documents. You have been asked to review the documents and summarize your findings in a loan recommendation for your management team.

You may apply this scenario to either Option 1 or Option 2, described in Requirements below.

Your Role

You are a loan manager for a lending organization, and your responsibilities include reviewing loan requests and providing recommendations in regard to whether the loan requests should be funded.

Requirements

Option 1:

Your client works for Ace Company. Assume Ace Company requested a $3 million 10-year loan to purchase production equipment and develop accompanying software. Use the Ace Company Data document for this option.

Option 2:

Use a firm or scenario of your choosing.

Before choosing a company, read the assessment thoroughly to ensure:

  • The company fits the assessment requirements.
  • You have access to the financial statements and related performance documents needed to assess risk and make a loan recommendation. You will need information for this year and last year.
  • You can distribute the financial statements and related performance documents without disclosing confidential company information.
Loan Recommendation

To arrive at your recommendation, analyze the financial performance of the requesting company and present it to your organization’s upper-management team. The management team will take your recommendation into consideration as they finalize loan requests.

Analyze the company's performance and performance trends. Include the following in your analysis:

  1. Analyze the trend for accounts receivable collections.
    1. Identify the trend.
    2. Explain the relevance of the trend.
    3. Determine if the trend is improving or getting worse.
  2. Compare the company's average inventory turnover to the industry average inventory turnover rate. Note that the average industry turnover rate for Ace Company is 10 times per year.
    1. Consider whether the company’s average inventory turnover is higher or lower than the industry average.
    2. Explain whether a higher or lower average is better.
    3. Determine whether the trend is improving or getting worse.
  3. Evaluate the company's short-term and long-term credit worthiness based on financial performance and trend (comparing this year to last year). Include in your evaluation:
    1. Information about performance and trends.
    2. Information about other relevant financial information you consider important to the decision.
    3. Your recommendation regarding whether the bank should grant the loan based on the financial data.

Deliverable Format

The management team of your organization requests this information in the form of a 1–2 page executive summary along with a title page, references page, and appendix of supporting information. The executive summary must highlight the key findings from your review and will provide your recommendation and rationale. The appendix must include data used in your analysis for others to review. Assume that this document is the only communication in regard to your analysis and recommendation and that you will not be with the team to explain anything as it deliberates. In other words, the documentation you provide must be well organized and include information for the management team to clearly see your recommendation and rationale.

Related company report standards:
  • The executive summary is a professional document and should therefore follow the corresponding MBA Academic and Professional Document Guidelines, including single-spaced paragraphs.
  • In addition to the executive summary, include:
    • A title page.
    • A references page.
    • Appendix with supporting materials. If you are using a firm or scenario of your choosing, ensure faculty has sufficient information to understand how you reached your recommendation.
    • At least two APA-formatted references.

Evaluation

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies through corresponding scoring guide criteria:

  • Competency 1: Explain how accounting concepts and practices impact financial reporting.
    • Analyze the trend for the company’s accounts receivable collections.
    • Compare the company’s average inventory turnover ratio to an industry average.
  • Competency 2: Apply principles of accounting to assess financial performance.
    • Evaluate the company’s short-term and long-term credit worthiness.
  • Competency 4: Communicate financial information with multiple stakeholders.
    • Communicate accounting information clearly.

Faculty will use the scoring guide to review your recommendation as if they were a member of your organization’s management team. Review the scoring guide prior to developing and submitting your assessment.

Criteria Non-performance Basic Proficient Distinguished
Analyze the trend for the company’s accounts receivable collections. Does not analyze the trend for accounts receivable collections. Identifies the trend but the analysis is incomplete or missing information. Analyzes the trend for the company’s accounts receivable collections. Analyzes the trend for accounts receivable collections and explains findings clearly and in sufficient detail that helps managers make decision.
Compare the company’s average inventory turnover ratio to an industry average. Does not compare the company’s average turnover ratio to the industry average. Compares the company’s average turnover ratio to the industry average, but the comparison is incomplete or missing information. Compares the company’s average inventory turnover ratio to an industry average. Compares the company’s average inventory turnover ratio to the industry average and explains the difference it makes in the company’s financials in detail and with clarity that will help bank managers make a loan decision.
Evaluate the company’s short-term and long-term credit worthiness. Does not evaluate the company’s short- and long-term credit worthiness. States a belief about the company’s short- and long-term credit worthiness but does not provide an analysis. Evaluates the company’s short-term and long-term credit worthiness. Evaluates the company’s short- and long-term credit worthiness for this year compared to last year and explains and includes information that will help bank management make a loan decision.
Communicate accounting information clearly. Does not communicate accounting information clearly. Communicates accounting information, but some information is not clear. Communicates accounting information clearly. Communicates accounting information clearly and engages the reader with the fluidity of expression. There are few if any errors of mechanics, grammar, or style.

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Explanation & Answer

Thank you for working with me

Running head: PERFORMANCE EVALUATION
1

Performance Evaluation
Name:
Institutional affiliation

PERFORMANCE EVALUATION
2
Performance Evaluation
In 2015, the total accounts receivable amounted to $3,800,000 which represents 23.75%
of the total sales. In 2016, there was an increase in the accounts receivable by $100,000 to
3,900,000 with sales of $18,000,000. However, the percentage of accounts receivable to net sales
reduced to 21.67%. In the 2017 financial year, Ace Company made total sales of $20,000,000
with account receivable of $4,000,000. The percentage of the debtors to sales over this period
reduced to 20%. The implication is that even though both net sales and accounts receivable
increased during this time, the percentag...


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