Question

List and discuss two major difficulties discussed in class associated with attempting to analyze a business by examining its financial statements: ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ To address the issues raised above, compare and contrast the use of ‘dashboards’ with financial ratios in evaluating business performance: Define ‘Dashboard:’ _________________________________________________________________________________________________________________________________________________________________________________________________________________________________ How does the use of a Dashboard measure address the issues raised in Question 1, above? (why do most business owners insist on the necessity of knowing what the financials will look like a long time before they are ready for release?)______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Please discuss and calculate the impact of price policy on gross margin, fixed costs, and capacity: Impact of cutting selling price by 7% when beginning from: A cost plus markup of 1.35 Volume increase required __________ Implications for capacity and fixed costs ____________________________________________________________________________________________________________________________ A cost plus markup of 1.73 Volume increase required __________ Implications for capacity and fixed costs ____________________________________________________________________________________________________________________________ Impact of increasing selling price by 9% when beginning from: A cost plus markup of 1.40 Volume decrease permitted ____________ Implications for capacity and fixed costs ____________________________________________________________________________________________________________________________ A cost plus markup of 1.85 Volume decrease permitted __________ Implications for capacity and fixed costs ____________________________________________________________________________________________________________________________ Discuss how sales mix is reflected in gross margin: ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Please discuss how product/service/industry life cycle is reflected in the financial statements with respect to profits, cash flow, growth rates, level of customer sophistication, and competitive intensity in the following stages: Emergence: ____________________________________________________________________________________________________________________________________________ Growth: ______________________________________________________________________________________________________________________________________________________ Maturity: ______________________________________________________________________________________________________________________________________________________ Decline: ______________________________________________________________________________________________________________________________________________________ Describe the concepts of ‘Float,’ and operating cycle, and calculate their respective values for the March financials you have developed. Float: $ value as of March 31 statements ______________ Concept: ________________________________________________________________________________________________________________________________________ Operating cycle: $ value as of March 31 statements ______________ Concept: ________________________________________________________________________________________________________________________________________ Give examples of three drivers of business value which are reflected on the financial statements but not measured directly by them, and discuss dashboards you might develop to measure them directly. _________________________________________________________________________________________________________________________________________________________________________________________________________________________________ _________________________________________________________________________________________________________________________________________________________________________________________________________________________________ _________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Answer 1

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Ans 1) One difficulties that we come across in analysing the business in examining its financial statement is that it does not include the impact of inflation, that is a big one. Also, the second difficult that we come across is it will be only quantitative analysis the qualitative analysis wont be possible in analysing the financial statement. Ans 2) Dashboard basically is a kind of scorecard or progress card for company or any other department of the company, It is bascially a KPI. It helps in analysing the business in nutshell. Ans 3) The look of financial statements are important because it should be user friendly and error free and that is why it is given so much importance to it.