Ratio Analysis and Recommendation, business and finance homework help

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kbknatvr123

Business Finance

Description

For this part of the course project, you will demonstrate your ability to evaluate the strengths and weaknesses of a company through financial analysis.

This is a two-part assignment. To complete this assignment, do the following:

Part 1: Cash Flow Analysis

Your client, Jennifer Logan, is a relatively inexperienced investor and is trying to make a decision whether to sell her investment in ABC Company or continue to hold her equity position in it. Ms. Logan has asked you to analyze to analyze ABC's cash flow statement and provide a recommendation. Using ABC Company's Statement of Cash Flows, write an analysis and recommendation for Ms. Logan.

  1. Download and read ABC Company's Statement of Cash Flows.
  2. Write a 3-4 page document for Ms. Logan that includes the following information:
    1. Define and explain balance sheet, income statement, and statement of cash flows.
    2. Describe how the statement of cash flows relates to the income statement and balance sheet.
    3. Explain why the analysis of a statement of cash flows is important to investors.
    4. Analyze and judge the cash flow from operating activities at ABC Company. Is ABC effective at utilizing funds within the company?
    5. Analyze and explain the significance of each item from the investing section of the statement.
    6. Analyze the cash flow from the financing section of the statement and describe why the dividends section is important to your client.
    7. Summarize your analysis and give your opinion on how effective ABC Company is at managing its cash flow, from an investor's perspective. Also explain whether you think ABC Company has enough cash on hand to sustain it in the long term.
    8. Recommend whether Ms. Logan should hold or sell her investment in ABC Company.

  3. Adhere to professional formal and stylistic principles, and be sure to cite sources when necessary.

Part 2: Executive Summary

Write a 2-3 page executive summary of how the Federal Reserve's monetary policies may affect economic growth, both from a corporate and a personal finance perspective. In order to ensure that your response is complete, please be sure to include commentary on the following concepts:

  • The banking industry
  • TVM
  • Personal and corporate saving rates
  • Equity financing vs. debt financing
  • Financial analysis

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Explanation & Answer

Hello ,Xoxangie 123,I have recieved your question and I have started working on it,have a nice time.
Attached.

Definition and explanation of balance sheet, income statement, and statement of cash flows.
Balance sheet is the summary of a partnership, sole proprietors or company’s financial accounts
at a given financial period. It is also referred to as statement of position. It has three major sections
which includes the assets which lists all the assets of the company, the liabilities section which
summarizes all the liabilities of the company and finally the equity section which shows what
finances the company has. Income statement, also referred to as, profit and loss account, on the
other hand is a statement which shows the revenues and expenses a company has incurred at a
given period. It also shows the net effect which is the net income of the company. It is always a
comparison between two periods unlike balance sheet and cash flows which can be for a specific
date. Finally, cash flows refers to a statement which indicates the changes shown by the statement
of financial position and revenue to the cash and cash equivalents of a company. It categorizes the
analysis to operating activities, investing activities and financing activities, (Frank.W, Alen.S,
2011)
Describe how the statement of cash flows relates to the income statement and balance sheet.
In accounting, Cash flow statement, Income statement and balance sheet are much related. First,
we shall start by examining how financial statement is related to the cash flows. The balance sheet
explains much about the assets and liabilities of the company and how the management used them
at a given financial. On the other hand cash flow statements shows how such company uses its
cash and cash equivalent, this items are in the balance sheet and therefore showing the relationship
on the two statements. Each statement shows a particular part of the financial report of a company
but together they provide a complete report of the books of accounts of a given company. The cash
flow statement and income statement relate on the section of the operating activities majorly. This
means that cash flows are prepared after preparation of the income statement has been prepared.
The first item in the cash flow operating activities is the net income which can only be found in
the income statement. This therefore brings about the relationship between the income statement
and the cash flow statement.
Importance of cash flow statement to investors
To every investor, actual cash a company generates is what matters mostly. The cash flow is
distinct from other statements of financia...


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