FINANCIAL DECISION MAKING / BUSINESS
Welcome Aboard!”
You have just landed a job as a financial analyst at IPS, a company that manufactures drives, processors, and other vital components for computer systems. On your first day, the CFO greets you: “Welcome! We are so glad to have you on board. Management has been anxious to set some new strategic goals, but the board recognizes that, at the moment, we just don’t have the information to proceed.”
She continues: “As you know, IPS’ premiere product is the MiniZ and we would like to grow our share of the market. We think we can do that by diversifying our product line. The board is expecting recommendations at an early date.”
You know that the task before you requires an understanding of the industry, fixed and variable costs, optimal level of production, and profit. Timely and accurate financial statements will be essential.
You decide that your first step should be to schedule a meeting with the company controller and his staff. In the meantime, you spend a few hours online searching for information about your new employer. You come across a couple of items that spark your interest: one about a client that went bankrupt, and another about the sale of a factory and its equipment. You also learn that there are only a few major players in the digital components industry.
When you meet with the controller, you ask about the online news stories. The controller admits that they are understaffed and haven’t gotten around to updating the financial statements to show the impact of the client’s bankruptcy and the sale of the factory.
He says, “The CFO will provide the demand figures for the MiniZ, and also the production specs.” He gives you access to the firm’s technical database. You leave his office thinking that you finally have all the information you need to do your job, but the CFO has requested one last piece of the puzzle: insight into the financial viability of two other companies in your industry. You agree and get to work immediately!
This project will require you to determine the structure of the industry of your firm, and its impact on production quantities and prices. You will prepare and analyze the financial statements of your firm to evaluate its financial health and its future prospects.
Begin with “Step 1: Analyze Industry Structure, Costs, Prices, and Optimal Production Levels.”
Question 1:Â Your first task is to determine whether your firm is in a competitive industry.
Based on the following demand function for the firm’s product, what would you answer?
Q = 50,000 – 25*P
Q is the amount produced and P is the price.
Before starting your calculations, review materials on industry structure demands and prices and price, cost, and profit analysis.
Submit your Competitive Industry Report and Calculations to the dropbox below. Be sure to show your calculations in Excel and provide a narrative analysis in PowerPoint. Your narrative analysis should summarize the results of your analysis and make recommendations for the benefit of company.
Now that you have examined whether your firm is in a competitive industry, let’s take a look at some questions related to price, cost, and profit analysis.
Question 2:Â At the profit-maximizing level, what is the relationship between marginal cost, marginal revenue, price, and average cost for firms in competitive and oligopolistic industries?
The CFO has provided the following information to you:
She wants you to analyze the fixed and variable costs, optimal level of production, and profit for the MiniZ component.
Question 3: Find Q, P, average cost, and profit for the MiniZ at the profit-maximizing level. (Again, the demand function for the MiniZ is: Q = 50,000 – 25*P.)
Submit your Price, Cost, and Profit Analysis Report and Calculations to the dropbox below. Be sure to show your calculations in Excel and provide a narrative analysis in PowerPoint. Your narrative analysis should summarize the results of your analysis and make recommendations for the benefit of company.
When you have submitted both your Competitive Industry Report and Calculations and your Price, Cost, and Profit Analysis and Calculations, continue to the next step, where you will make corrections to financial statements, prepare a Comparative Analysis Report, and submit a Comparative Risk Assessment Report.
Before you submit your assignment, review the competencies below, which your instructor will use to evaluate your work. A good practice would be to use each competency as a self-check to confirm you have incorporated all of them in your work.
The Controller of IPS showed you the most recent draft financial statements (Balance Sheet, Income Statement, and Statement of Cash Flows). He admitted that major transactions had not been entered. Your task is to correct the financial statements. Apparently, the following three events were missed when preparing the financial statements:
Question 4:Â Calculate the impact of the missing transactions on the major financial statements: the Balance Sheet, Income Statement, and Statement of Cash Flows. Which elements in the financial statements change and by how much?
Once you have completed your calculations, combine your responses to the questions and the supporting data into a single report on the financial viability of IPS.
Before starting your calculations, review materials on the preparation of financial statements, the Basic Accounting Equation, and Financial Statements.
Submit your Financial Viability of IPS Report and Calculations to the dropbox below. Be sure to show your calculations in Excel and provide a narrative analysis in PowerPoint. Your narrative analysis should summarize the results of your analysis and make recommendations for the benefit of company.
The CFO’s last request was for a comparison of the financial performance of two companies in the same industry as IPS. She asked for figures on company growth, source of cash flow, return on equity, profit margin, and net revenue and for information on issues such as management decision making, risk factors, and recent business developments. You have decided to analyze two major publicly held companies: Advanced Micro Devices (AMD) and Intel (INTC). You will need to examine data from their Balance Sheets, Income Statements, and Cash Flow Statements.
Go to the SEC website (www.sec.gov) and locate Search Edgar for Company Filings. One by one, enter the name of each company (AMD, Intel). In the box titled Filing Type, enter 10-K and then Search to obtain annual information. The Documents heading will reveal information about the following:
The heading Interactive Data will allow you to view financial statements that can be copied into Excel.
Alternatively, you can find the same information on finance.yahoo.com. The ticker symbols are AMD and INTC. Look for the items under Financials on the left-side menu bar of each firm’s page.
Â
Please provide in-text citation for all information and reference pade
Project does not have any attached files
