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Expansion Recommendation

Prepare either a 3-4 page report or a 12-slide presentation in which you analyze financial information and risks associated with an investment to expand an organization and make a recommendation on whether or not to invest in expansion.

Introduction

This portfolio work project will allow you to review information and risks associated with an investment to expand an organization. As this information will be shared broadly across the organization, you will have a choice in your final deliverable audience and will organize your deliverable to meet the needs of that audience.

Scenario

ZXY Company is a food product company. ZXY is considering expanding to two new products and a second production facility. The food products are staples with steady demands. The proposed expansion will require an investment of $7,000,000 for equipment with an assumed ten-year life, after which all equipment and other assets can be sold for an estimated $1,000,000. They will be renting the facility. ZXY requires a 12 percent return on investments. You have been asked to recommend whether or not to make the investment.

Your Role

You are an accounting manager. Your boss has asked you to review and provide a recommendation on the expansion based on information that has been provided.

Requirements

In preparing and supporting your recommendation to either make the investment or not, include the following items as part of your analysis:

  • Analysis of financial information.
  • Identification of risks associated with the investment. Consider:
    • How risky the project appears.
    • How far off your estimates of revenues and expenses can be before your decision would change.
    • The difference if the company were to use a straight line versus a MACRS depreciation.
  • Recommendation for a course of action.
  • Explanation of criteria supporting your recommendation.

Financial Information

As part of your analysis you might find that additional information from marketing, accounting, or finance would be useful in making an informed and well-supported recommendation. In a real workplace setting you would have the ability to ask for that information. However, for the purposes of this assessment, you can make assumptions about the values of that data or ratios in support of your recommendation.

Accounting worked with the marketing group to create the ZXY Company Financial Statements spreadsheet for the new products business and the new facility.

Notes about the financial information:

  • The expense line labeled SQF FDA Mandates refers to the costs of complying with Food and Drug Administration requirements.
  • Depreciation expense is calculated using 7-year life modified accelerated cost recovery system (MACRS).

Deliverable Format

Depending on the audience you choose to address, use one of the following options:

  • Report for a mid-management audience. Prepare a 3–4 page report detailing your recommendation and the information you used to make your recommendation.
  • Presentation for top leadership. Prepare a presentation of at least 12 slides detailing your recommendation and the information you used to make your recommendation. You may use your choice of presentation software. Include notes with additional details.

Keep in mind that your recommendation may be shared with others, so your materials should be designed for clarity and readability.

Related company standards for either format:

  • The recommendation report is a professional document and should therefore follow the corresponding MBA Academic and Professional Document Guidelines, including single-spaced paragraphs.
  • In addition to the report or presentation, include:
    • Title (slide or page).
    • References (slide or page).
    • Appendix with supporting materials.
    • 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 2: Apply principles of accounting to assess financial performance.
    • Analyze financial statements for decision support.
    • Explain risks associated with an investment decision.
  • Competency 3: Analyze accounting information to support business decisions.
    • Recommend a course of action based on financial information.
    • Explain how financial criteria support a decision.
  • Competency 4: Communicate financial information with multiple stakeholders.
    • Communicate accounting information clearly.

Faculty will use the scoring guide to review your deliverable as if they were your boss. Review the scoring guide prior to developing and submitting your assessment.

ePortfolio

This portfolio work project demonstrates your competency in applying knowledge and skills required of an MBA learner in the workplace. Include this in your personal ePortfolio.

Note: Faculty may also use the Writing Feedback Tool to provide feedback on your writing. In the tool, click the linked resources for helpful writing information.

Performance Evaluation

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.

ePortfolio

This portfolio work project demonstrates your competency in applying knowledge and skills required of an MBA learner in the workplace. Include this in your personal ePortfolio.

Note: Faculty may also use the Writing Feedback Tool to provide feedback on your writing. In the tool, click the linked resources for helpful writing information.

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