FINANCIAL SERVICES TEAM DECISION MAKING EVENT PARTICIPANT INSTRUCTIONS

Transcription

1 CAREER CLUSTER Finance INSTRUCTIONAL AREA Financial Analysis FINANCIAL SERVICES TEAM DECISION MAKING EVENT PARTICIPANT INSTRUCTIONS The event will be presented to you through your reading of the General Performance Indicators, Specific Performance Indicators and Case Study Situation. You will have up to 30 minutes to review this information and prepare your presentation. You may make notes to use during your presentation. You will have up to 10 minutes to make your presentation to the judge (you may have more than one judge), followed by up to 5 minutes to answer the judge s questions. All members of the team must participate in the presentation, as well as answer the questions. Turn in all of your notes and event materials when you have completed the event. GENERAL PERFORMANCE INDICATORS Communications skills the ability to exchange information and ideas with others through writing, speaking, reading or listening Analytical skills the ability to derive facts from data, findings from facts, conclusions from findings and recommendations from conclusions Production skills the ability to take a concept from an idea and make it real Teamwork the ability to be an effective member of a productive group Priorities/time management the ability to determine priorities and manage time commitments Economic competencies SPECIFIC PERFORMANCE INDICATORS Interpret basic charts/tables. Interpret financial statements. Calculate financial ratios. Describe the relationship of accounting with emphasis on financial strengths/weaknesses of a business. Describe the relationship between economic conditions and financial markets and conditions. Apply information to accomplish a task. Conduct client conference. 1

2 CASE STUDY SITUATION You (the student team) work for Northern Community Credit Union as Commercial Relationship Managers. You have been asked to interpret data from the 2012 Balance Sheet and Income statement for Tyler s Store. Mr. Johnson is looking at purchasing this business and has asked you to analyze the balance sheet for Tyler s Store and to determine the financial condition of the company. You will be meeting with Mr. Johnson and asked to interpret key statistical data and note any trends that seem promising or troublesome for the business. You have also been asked to explain the economic factors that impact a business financial condition. Finally, you will make a recommendation whether or not Mr. Johnson should purchase this business. You are to present your findings to Mr. Johnson (judge). You and your team member will begin the presentation. For all its current economic woes, America remains a beacon of entrepreneurialism. Between 1996 and 2004 it created an average of 550,000 small businesses every month. Many of those small businesses rapidly grow big. The 2012 Kauffman Index data show the rate of business creation falling from 2011, returning for the first time to pre-recessionary levels. As explained above, because the Kauffman Index is calculated using non-employer businesses as well as employer businesses, a slowing business creation rate is actually an indicator of improving economic health. This cautiously optimistic sense of the national economic climate gleaned from the Kauffman Index is matched by most other indicators the jobless rate has fallen to a four-year low of 7.6 percent, the Dow and the S&P closed at historic highs on April 10, and The Economist s poll of forecasters has just ticked up. The Kauffman Index is only a piece of the puzzle, but its mix of high-detail demographic information and high-level, multi-year trajectory evidence provide an important, unique and timely perspective on entrepreneurship in the United States. Northern Community Credit Unions mission is to be the members primary services provider. The vision of NCCU is to provide superior products/services and deliver superior service to help improve the financial well being of its members. According to a recent member survey 47% of its members consider NCCU as their primary financial institution. You have been asked to make recommendations based on the information on the balance sheet and to meet with Mr. Johnson to present your findings. Situation When analyzing the 2012 balance sheet and income statement, you (the student team) will be presenting your findings to Mr. Johnson (judge) and are responsible for the following: Assist clients with establishing financial goals Interpret financial statements Calculate financial ratios Describe the relationship of accounting with emphasis on financial strengths/weaknesses of a business Describe the relationship between economic conditions and financial markets and conditions Apply information to accomplish a task Conduct client conference 2

3 Tyler's Store Balance Sheet December 31, 2012 Assets 31-Dec-06 Cash 87,000 Accounts Receivable 100,000 Inventory 350,000 Total Current Assets 537,000 Fixed Assets Building 518,400 Equipment 215,100 Vehicles 40,500 Total Fixed Assets 774,000 Total Assets 1,311,000 Current Liabilities Notes payable 28,800 Accounts Payable 69,500 Salaries Payable 45,000 Taxes Payable 32,000 Total Current Liabilities 175,300 Long term liabilities Mortgage on property 290,000 Notes payable (long term) 208,000 Total long-term liabilities 498,000 Total Liabilities 673,300 Net Worth 637,700 Total Liabilities & Owners Equity 1,311,000 3

4 Tyler's Store Income Statement 12/31/2012 Income Sales 400,000 Less sales returns 30,000 Net Sales 370,000 Cost of Goods Sold Beginning inventory 350,000 Purchases 240,000 Total mdse available 590,000 Ending inventory 350,000 Cost of Goods Sold 240,000 Gross Profit 130,000 Operating Expenses Variable Expenses Salaries and wages 50,000 Payroll taxes 6,800 Advertising and promotion 10,600 Utilities 2,900 Miscellaneous 1,200 Total variable expenses 71,500 Fixed Expenses Rent 3,600 Insurance 1,800 Total fixed expenses 2,900 Total Operating Expenses 79,800 Net Income (loss) from operations 50,200 4

5 STUDENT WORKSHEET FTDM-14 Please calculate the ratios/analysis ON YOUR SCRATCH paper. Calculate the current working capital ratio, total debt to tangible net worth and the ratio for the net income to net sales for Tyler s Store. For each ratio calculated in each year, analyze the financial condition of the business. Note any trends that seem promising or troublesome for the business. Please answer the following questions and discuss your findings with Mr. Johnson. *** PLEASE DO NOT WRITE DIRECTLY ON THIS SHEET *** What is the current working capital ratio for 2012? Total Current Assets Total Current Liabilities Analysis: What is the total debt to tangible net worth ratio in 2012? Total Liabilities Net Worth Analysis: What is the ratio for the Net Income to Net Sales on the Income Statement? 5

6 JUDGE S INSTRUCTIONS FTDM-14 You, Mr. Johnson (the judge) has contacted Northern Community Credit Union and asked their business loan department to interpret data from the 2012 Balance Sheet and Income Statement for Tyler s Store. Mr. Johnson is looking at purchasing this business and has asked the Commercial Relationship Managers (students) to analyze the balance sheet for Tyler s Store and to determine the financial condition of the company. You will be meeting with the Commercial Relationship Managers (students) and they will interpret key statistical data and note any trends that seem promising or troublesome for the business. They have also been asked to explain the economic factors that impact a business s financial condition. Finally, they will make a recommendation whether or not Mr. Johnson should purchase this business. The team will begin the presentation. For all its current economic woes, America remains a beacon of entrepreneurialism. Between 1996 and 2004 it created an average of 550,000 small businesses every month. Many of those small businesses rapidly grow big. The 2012 Kauffman Index data show the rate of business creation falling from 2011, returning for the first time to pre-recessionary levels. As explained above, because the Kauffman Index is calculated using non-employer businesses as well as employer businesses, a slowing business creation rate is actually an indicator of improving economic health. This cautiously optimistic sense of the national economic climate gleaned from the Kauffman Index is matched by most other indicators the jobless rate has fallen to a four-year low of 7.6 percent, the Dow and the S&P closed at historic highs on April 10, and The Economist s poll of forecasters has just ticked up. The Kauffman Index is only a piece of the puzzle, but its mix of high-detail demographic information and high-level, multi-year trajectory evidence provide an important, unique and timely perspective on entrepreneurship in the United States. Northern Community Credit Unions mission is to be the members primary services provider. The vision of NCCU is to provide superior products/services and deliver superior service to help improve the financial well being of its members. According to a recent member survey 47% of its members consider NCCU as their primary financial institution. You have been asked to make recommendations based on the information on the balance sheet and to meet with Mr. Johnson to present your findings. Situation When analyzing the 2012 balance sheet and income statement, you (the student team) will be presenting your findings to Mr. Johnson (judge) and are responsible for the following: Assist clients with establishing financial goals Interpret financial statements Calculate financial ratios Describe the relationship of accounting with emphasis on financial strengths/weaknesses of a business Describe the relationship between economic conditions and financial markets and conditions Apply information to accomplish a task Conduct client conference 6

7 JUDGES COPY OF STUDENT WORKSHEET On the attached sheet calculate the current working capital ratio, total debt to tangible net worth and the ratio for the net income to net sales for Tyler s Store. For each ratio calculated in each year, analyze the financial condition of the business. Note any trends that seem promising or troublesome for the business. Please answer the following questions and discuss your findings with Mr. Johnson. What is the current working capital ratio for 2012? 3.06 Total Current Assets (537,000) Total Current Liabilities (175,300) Analysis: Excellent shows that the business has more than enough cash to pay current debts. What is the total debt to tangible net worth ratio in 2012? 1.06 or 106% Analysis: Although not less than 100 percent, reflects a positive trend. Total Liabilities (673,000) Net Worth (637,700) What is the ratio for the Net Income to Net Sales on the Income Statement? 13.57% Net Income (50,200) Net Sales (370,000) 7

8 QUESTIONS AND SOLUTIONS During the last five minutes of the presentation, the following questions need to be asked of all the participant teams in order to test their understanding of the situation presented. Please make sure that EACH question needs to be asked of EACH student team in order to have consistency! 1. Why is it important to interpret data from the previous year? See trends Know what type of financial condition the business is in. 2. What economic factors impact a business financial condition? Inflation, location, layoffs, stock market, interest rates 3. What are fixed assets? Fixed assets are used over a period of years to operate business. Ie land, buildings, equipment, furniture and fixtures. 4. What is capital (referred to as net worth and owners equity) Capital is the difference between a firms assets and its liabilities. It reflects the owner s investment and subsequent profit earned and losses incurred. 5. How would you describe this company s financial landscape? Total assets to total liabilities represent a 2:1 ratio which is very good. Healthy company financials (Income statement) 8

9 JUDGING THE PRESENTATION FTDM-14 Team members, assuming the role of a management team for the business represented, will analyze a case situation related to the chosen occupational area. The team will make decisions regarding the situation, and then make an oral presentation to the judge. The role of the judge is that of an executive for the business. Participants will be evaluated according to the Evaluation Form. Please place the name and identification number label on the Scantron sheet (unless it has already been done for you). Participants will have a 30-minute preparation period and may make notes to use during the role-play. During the first 10 minutes of the presentation (after introductions), the team will present their analysis, their decisions and the rationale behind the decisions. Allow the teams to complete this portion without interruption, unless you are asked to respond. During the next 5 minutes, you may ask questions of the team to determine their understanding of the situation presented. Each member of each team should respond to at least one question. To ensure fairness, you must ask each team the same questions. After asking the standard questions, you may ask other questions for clarification specific to the current team. After the questioning period, please thank the team and state that they will be notified of your decision soon. Then complete the Evaluation Form, making sure to record a score for all categories. The maximum score for the evaluation is 100 points. The presentation will be weighted at twice (2 times) the value of the exam scores. A maximum score of Exceeds Expectations in any category means that, in your opinion, the information is presented effectively and creatively; nothing more could be expected of an employee. A Meets Expectations rating means that the information is present well. Though there may be a few minor problems or omissions, they are not significant. Creativity, however, is not shown to any great degree. A combined total score of 70 or better on the written and presentation sections will earn the participant team DECA s Certificate of Excellence at the international conference. A Below Expectations score means that the information presented does not meet minimum standards of acceptability. A Little/No Value score means either that some major flaw has been noted that damages the effectiveness of the presentation (this may be a major omission, a serious misstatement or any other major flaw) or that the information presented is of no value (does not help the presentation at all). We hope you are impressed by the quality of the work of these potential managers. If you have any suggestions for improving the event, please mention them to your series director. We thank you for your help. 9

10 FINANCIAL SERVICES TEAM DECISION MAKING, 2014 JUDGE S EVALUATION FORM DISTRICT EVENT Participant: Participant: I.D. Number: INSTRUCTIONAL AREA: Financial Analysis Did the participant: PERFORMANCE INDICATORS Interpret basic charts/tables. 1. Little/No Value Below Expectations Meets Expectations Exceeds Expectations Judged Score Interpret financial statements. Calculate financial ratios. Describe the relationship of accounting with emphasis on financial strengths/weaknesses of a business. Describe the relationship between economic conditions and financial markets and conditions. Apply information to accomplish a task. Conduct client conference. 21 st CENTURY SKILLS Reason effectively and use systems thinking? Make judgments and decisions, and solve problems? Communicate clearly and show evidence of collaboration? Show evidence of creativity? Overall impression and responses to the judge s questions TOTAL SCORE 10