留學生金融學essayMGMT 1000 Financial Modelling Instructions

Purpose of the Exercise
Students will increase their understanding of several topic areas as a result of the “lab” exercise and subsequent discussion, including:

• Understanding of Financial Statements - students should have a better feel for balance sheets and income statements and how they are put together.
• Understanding of the DuPont Model - the exercise will reinforce the 4 profit variables as well as the impact of asset turnover on both profits and cash needs.
• Role of Industry Norms - in establishing benchmarks for performance.
• Appreciate the Need for Projections - as a tool for financial planning and strategy formulation.
• Appreciate Spreadsheeting Skills - as a tool for financial modeling in preparing business cases/plans.

The Exercise
Familiarize yourself with the website and associated multimedia exercises. Complete the following steps in moving the company to industry benchmarks:

Consultation Business

1. Income Statement - Look at the norms for the industry. Determine the impact of performing within industry norms by moving the company to industry norm for each of, expenses, client visits, billing per hour and direct cost per hour. How much has profit increased for the year as a result of this change? How much has the December bank loan declined as a result of the increase in profit.

2. Balance Sheet - Move the company to industry norms for each of accounts receivable days, inventory investment, fixed asset investment and accounts payable days. Calculate the decline in cash needs in December as a result of moving to the industry norms. (The amount the December bank loan declined.)

Retail Business

3. Income Statement - Look at the norms for the industry. Determine the impact of performing within industry norms by moving the company to industry norm for each of, gross margin, and expenses. How much has profit increased for the year as a result of this change. How much has the December bank loan declined as a result of the increase in profit.

4. Balance Sheet - Move the company to industry norms in the following categories: accounts receivable days, inventory turns, net fixed asset turnover and accounts payable days. Calculate the decline in cash needs in December as a result of moving to the industry norms. (The amount the December bank loan declined.)

The Report
Based on the experiences in the online exercise and from class discussions write a report (2 pages, 1,000 words max) that documents your understanding of the following:

1. The role of financial modeling as a planning tool.
2. The importance of an assumption sheet.
3. The value of industry standards and other bench marks in planning.
4. A personal statement on whether you would build your own financial model or would contract it out to an “expert”.
5. The role model building could play in the preparation of your project.#p#分頁標題#e#

Footnote
You are welcome to use this model as the basis for preparing financial projections for your project. I also have a library of models for a variety of industries from students in prior classes. With minor adjustments they may be adapted to most situations.

Tips For Completing the Exercise

Navigation:
It is suggested that you make one change, take note of the impact, make the next change and then make note of the incremental impact. Alternatively you can make a change, observe, return to original values, and make the next change observe and so on.

Choose One Month
As you observe the impact of a change, locate your cursor on one cell in the income statement (total profit for the year) and one in the balance sheet (December bank loan) and scroll back and forth among the sheets.

Certification of Authorship:
Each assignment submitted will include the following on the cover page:
“I hereby certify that I am the author of this document and that any assistance I received in its preparation is fully acknowledged and disclosed in the document. I have also cited all sources from which I obtained data, ideas, or words that are copied directly or paraphrased in the document. Sources are properly credited according to accepted standards for professional publications. I also certify that this paper was prepared by me for this purpose.”

Marking Rubric – To be included on the cover page of the assignment along with the certification of authorship!!!!!

Component Value Score
Certification of authorship (deduction if not present) -.5
Role of financial modeling as a planning tool 1
Importance of assumption sheet 2
Value of industry standards and bench marks 1
Personal Statement 2
Role of model building 2
Presentation – Grammar, spelling, layout 2
Total 10

% Description Definition
9.0 & Up Excellent
A+ to A- Considerable evidence of original thinking; demonstrated outstanding capacity to analyze and synthesize; outstanding grasp of subject matter; evidence of extensive knowledge base.

8.5-8.9
8.0-84
7.5-7.9 Good
B+ to B- Evidence of grasp of subject matter, some evidence of critical capacity and analytical ability; reasonable understanding of relevant issues; evidence of familiarity with the literature.

7.0-7.4
6.5-6.9
6.2-6,4 Satisfactory
C+ to C- Evidence of some understanding of the subject matter; ability to develop solutions to simple problems benefiting from his/her university experience.

5.8-6.1
5.5-5.7
50-54 Marginal Pass
D Evidence of minimally acceptable (except in programs where a minimum grade of C is required) familiarity with subject matter, critical and analytical skills.

Financial Modelling Assignment

Before this lab I had always been under the assumption that if I am to ever own my own practice I would hire an accountant to take care of the books or a business consultant to develop my financial planning model. Not knowing or understanding how this is done did not seem to be a big concern to me. From this lab I have been able to see that being able to read, understand, and develop a financial plan with balance sheet, income statement, and assumption sheet is a huge asset when running your own practice. The knowledge of how the financial side of a practice works is an advantage to plan for the future of the practice and assess how the practice is developing. Personally, without this knowledge I would not feel comfortable planning for the future of the practice, clinically or financially, which is the responsibility of a small business owner. #p#分頁標題#e#

Financial models provide guidelines for which to plan the financial side of your practice. It is the architecture for your business because it describes the mechanisms for which to provide product or service, and collect revenue to achieve the ultimate goal of profit. By understanding the relationships in your financial model will you be able to recognize a flaw which may have severe consequences. During the exposure to the models in this lab I was able to understand how dependant the bottom line and the expected cash need was on the other variables of a business. This type of guide is useful in giving information about where a business needs to improve or change, and where there is potential growth for that business. The financial model is therefore essential in planning for the future of a business or setting up a business plan.

Another important component of the financial model is the assumption sheet. The assumption sheet allows you to see and understand the relationship between variables, how a change in one impacts another. The assumption sheet provides an analysis tool to run your business/practice that can help you predict future events. If something was to change within your business, for example a supplier wants you to pay your bill sooner, you must be able to visualize how that change will affect your business before you can make a decision, your assumption sheet allows you to visually analyze this change.

Along with financial modeling the standards at which the industry is functioning at is important to consider. The industry standards are the norms at which similar practices operate successfully. They are important in planning because they enable you to see where your competitors are operating and what is expected of a practice. Information about how much time to bill for, salary, and amount of inventory are all available by the industry standards. With industry norms you can assess problems you may not have known you had and they can help you plan for future problems. In the lab, by moving the assumptions made on the income statement toward industry norms it was easy to see how the norms could influence or change things within your business. In the income statement moving toward industry norms had an affect on pofit and expected cash. When a business is in trouble or a problem develops having the industry norms made available could help problem solve and potentially save the business. By taking these industry norms into consideration when planning a business some problems may be avoided and the business may be able to operate at a successful level. Other bench marks that influence planning are the profitability of the proposed business, how much debt carry is typical for a specific business, what sort of financing is available or utilized, and what types of loans are given to a specific business. All of these are crucial to consider when planning a business becausehttp://www.400190.com/thesis_sample/Canada_Thesis_Sample/  they all will affect the total profits of a business and it’s overall success.

As I stated before, my opinion has changed about understanding the financial side of a practice. I do belief with this basic knowledge and now a sparked interest that I would be able to understand and help develop a financial model for a business or practice in the future. If I owned a practice I would want to see and understand every aspect of the practice. Because of this I would definitely have a hand in building my own financial model, and I would employ some help from an expert. As the practice progressed I would want to review all of the monthly statements, monitor the progress of the practice, and make decisions about how to adjust areas of the practice for improvement. However this would not be my sole purpose in the practice and I would therefore employ the appropriate expert to keep track of the books.#p#分頁標題#e#

This section of the course has been an eye opener to the other areas of owning an operating a practice. I’m excited to learn these things and intrigued to see how all the pieces fit within occupational therapy and practice.