business Financial Analysis Identifying Accounting Essay

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Sample Business Report: Identifying Accounting & Other Relates Issues, Performing Qualitative &
Quantitative Analyses, and Proposed Recommendations
ACCT 621 – Winter 2022
February 1st, 2022
(First Name) (Last Name)
Executive Summary
This section serves as a short summary of your report (150-300 words). The reader should be able to
gain a good understanding of your work with this quick read. Only the main points of your paper
should be emphasized here.
•
Tell the reader the purpose of the report
•
Tell the reader the overarching issues that your client is facing
•
Summarize your proposed recommendations in a concise and effective manner
Example:
After conducting comprehensive analysis of Mann Motors Ltd, we have identified lack of internal
controls and an outdated business model as the most immediate concerns. Although the family
business has an array of other issues including lack of inventory costing and capital asset depreciation
policies, a pressing need for short and long-term tax planning, and no recognition of industry shifts to
online retailing, our most urgent recommendations are to hire a CFO/controller, develop and
implement an internal controls policy, and streamline order fulfilment processes to reduce inventory
levels.
These changes will help significantly reduce loss of inventory and cash through theft and/or error.
Storage costs can also be significantly reduced if the company sells its historic downtown location and
rents a smaller warehouse outside the city. The company is giving too much leeway to executives and
sales agents, which is resulting in exuberant travel and entertainment expenses. It is unclear if
expensive conventions, business-class flights, and fancy meals with clients are actually helping
salespeople sell automobile parts. Each expense/ business strategy needs to be evaluated on its own
merit (cost/benefit trade-off) and stronger policies need to be designed and implemented.
Issues, Analysis, and Recommendations
This is the most important part of your report and should take up the majority of it as well. Here, you
should outline the issue at hand and why it is important that it is resolved for your client, or potential
solutions are considered. Next, provide your analysis and support the analysis with tables or
calculations either in the body of the analysis piece, or through the use of Appendices at the end of
your paper. Lastly, provide a well explained and thoughtful recommendation that is consistent with
your analysis. Your analysis should consider all options available, however, your recommendation
should be consistent with the findings in your analysis.
Example:
Issue #1:
Analysis:
Recommendation:
Issue #2:
Analysis:
Recommendation:
Issue #3:
Analysis:
Recommendation:
Conclusion
This will serve as a quick wrap-up to your report. Touch on your main findings and recommendations.
Here, the key to a successful conclusion is to tell your client what their next steps are to implement
your recommendations so they feel confident with your analysis, recommendations, and how they can
best proceed.
Appendices (OPTIONAL)
For this report, you will be required to perform extensive calculations and quantitative analysis. You
can either embed the tables and calculations within the ‘analysis’ component or in the
appendices section. Be consistent with your approach. If you are using an Appendix to
demonstrate your calculations, title it and provide a brief explanation of its purpose.
Example:
Appendix A – Supporting calculations and projections for Sky’s status quo, best-case, and
worst-case scenarios under her current business model
Status Quo
Selling Price ($)
Materials ($)
Labour ($)
Monthly Demand of
Skateboard Designs
(#)
Best-Case
Worst Case
Formatting & Submission Requirements
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Professional Font – Cambria, Georgia, Times New Roman, etc.
•
Size 11 Font, Black
•
1.5 Spacing
•
Normal/Generic 1’ Margins
•
Report headings should each start on a new page (e.g. Executive Summary,
Issues/Analysis/Recommendations, Conclusion, and Appendices)
•
Check spelling and grammar
•
Submit assignment in PDF format and Word format for Turnitin unless otherwise instructed
closer to the time of submission
ACCT 621 Individual Assignment- Sky’s Skateboards
Sky is the owner of a small business called Sky’s Skateboards. Sky, who grew up in a circle of avid
boarders, started the business last year, initially adding cool designs to her siblings’ and friends’
skateboards. Sky is 19 years old and has ambitions of starting her college degree within the next two
years.
Current Business Plan
For the past year, Sky has customized used skateboards for $30 each (the average job took $5 in
materials and an hour of her time). Initially, she averaged 15 designs a month. This number peaked in
the summer (beginning of June to the end of September) at about 30 designs monthly. By the end of the
year, the average had dipped to about 15 a month again. If Sky were to go and work for a local skate
shop, she would be paid $12 an hour for completing similar work. Sky is wondering what she should
project for this business activity next year, assuming demand increases by 5%, but is also curious as to
what her best- and worst-case scenarios might look like.
Worst Case Scenario
She believes that in a worst-case scenario, sales may decline by 20% throughout the year, with
exception to the June to end of September summer period, where sales may decline by 10% only. In this
scenario, she believes it would take 90 minutes per design, as opposed to an hour (status quo).
Best Case Scenario
In the best-case scenario, sales will increase by 12.5% year-round, reaching a 25% increase for the
summer months. In this scenario, she believes it would only take her 45 minutes per design, as opposed
to an hour (status quo).
Analysis
Can you please prepare an analysis to advise Sky on financial projections for the best case, worst case,
and status quo scenarios next year? Please demonstrate your calculations by using an appendix or by
embedding a table within the report to show your work. Sky enjoys working on old boards as it allows
her to connect with local members of her community and learning about their skating journeys. The
personal element of this business models makes her feel fulfilled at what she does. She also enjoys the
fact that these boards are not extremely time consuming to complete so she has more time to study and
spend time with friends. It is also a process she is familiar with and has gained a level of mastery at.
Potential (New) Business Plan
Over the holiday season, Sky had done some research and found she could order quality skateboards in
basic colours (black, white, blue, etc.) for $50 each. She expects to sell boards for $100 each after
designing them. If a customer wants to request a specific design, she will charge a premium and sell the
skateboard for $125. Sky anticipates that each new skateboard will require $10 in materials (after initial
purchase) and require two hours of her time. For custom designs, she is budgeting an extra 30 minutes
for communicating with her customer. For the time being, Sky will continue selling out of her parents’
garage as it keeps costs low. She is planning on relying on word-of-mouth marketing and perhaps some
newsletters too. Sky’s friend, Libby, says she can design and print unique newsletters monthly for $300
per month. Libby has not always been the most trustworthy friend to Sky but sees this as an excellent
opportunity to reap the benefits of her hard work. She would like Sky to sign a contract for the next 24
months, agreeing to pay her $300/month if she would like to use her advertising service. This would lock
Sky into a two-year contract with Libby starting next year when she is 20 years old. Before learning
about this offer, Sky had planned to distribute the newsletters herself to save money. Sky likes the idea
of advertising more through Libby’s unique newsletters but is wondering if the cost-benefit makes
sense. She is projecting 200 skateboard sales under this new business model, of which 25% are custom
design ($125). By advertising each month with Libby, there will be a 10% boost to her overall sales. Sky is
wondering what her income projections for the next year might look like if she chooses to pursue this
new venture with, and without the unique newsletter to boost sales.
Dilemma
Sky would like you to know your thoughts on whether she should continue her old business plan of
modifying used skateboards (using status quo figures, not best- and worst-case scenarios), her new
venture where she orders quality skateboards (without Libby’s advertising), or her new venture where
she orders quality skateboards with Libby’s advertising. She’d like to know which opportunity is the
most financially lucrative, and would also like you to provide a list of 2-3 pros and cons for each of the
three business opportunities.
Technical & Ethical Issues with Tax
Sky recently spoke to her father who is an experienced businessman because she isn’t sure about her
revenues and costs for the past year. Her dad vehemently stressed the importance of a sole proprietor
maintaining accurate records for business and tax purposes. Sky had grown impatient with the
conversation and ended it but is now curious about what her father may have meant. In Sky’s opinion,
as a sole practitioner, she can expense her cell phone (personal and business use), any costs surrounding
her personal car (maintenance, gas, insurance), and any meals she has with friends. She keeps the
receipts of their meals and would like to claim the entire amount as a business expense to reduce her
own tax exposure. Any inventory she purchases will be recorded as an expense on her income
statement to further reduce any tax exposure. Please advise Sky of why accurate tax reporting is
important in Canada and about any misconceptions she currently has. She would also like to know what
type of tax return she would have to file as a sole proprietor without an incorporated business and
Canadian/Provincial business number.
Investment Analysis & Accounting Treatment for New Asset
Sky is also considering acquiring a piece of machinery that helps her print designs on new or used
skateboards, regardless of which business plan she ends up selecting to move forward with. Please treat
this acquisition separate from any other analysis you prepare for income projections; it should not be
included in any projections you put together. Below, you’ll find the details of this purchase:
Initial Investment
Estimated useful life
Salvage Value
Estimated Annual Cash Flows
Increased Cash Inflows from Machinery
$75,000
12 years
$3,000
$7,000
Operating and Maintenance Costs
Reduction in Manual Labour
Net Annual Cash Flow
($2,000)
$3,000
$8,000
If she were to acquire this asset, she would have to take out a $75,000 loan for which 5% interest on
principal only will be charged annually.
She is wondering the following:
•
•
•
•
Is this a good investment and why or why not? Please discuss quantitative and qualitative
factors to consider.
She heard the term ‘pay-back period’, what does this mean and what would be considered a
‘good’ payback period for her?
What accounting entries (Debits and Credits) might she have to book upon purchasing the
asset?
What accounting entries (Debits and Credits) might she have to book after a full year of using
the asset, assuming she elects to use the straight-line depreciation method?
Sky’s Skateboards Format & Submission Requirements
Format:
•
•
•
•
•
•
•
•
•
Professional Font – Cambria, Georgia, or Times New Roman are recommended.
Size 11 Font, Black
1.5 Spacing
Completed in Microsoft Word
o Excel may be used only for the purpose of creating tables for calculations, but these tables must be
neatly embedded into your word document
Normal/Generic 1″ Margins
Report headings should each start on a new page (e.g. Executive Summary,
Issues/Analysis/Recommendations, Conclusion, and Appendices all to start their own pages)
Check spelling and grammar – students lose many marks by not doing so
No word count, but using 11 size font, regular margins, and 1.5 spacing, I would expect the content of the
paper to be 4 to a maximum of 8 pages in length, NOT including your cover page or any appendices
o I would expect a lot of you to be in the 5-6 page range but you will not be penalized for being
slightly over or under the page limit if you can fully address all of the issues – quality over
quantity
APA referencing should be used, however, this is a closed case, meaning you are not required to cite
external sources unless absolutely necessary – most if not all information can be found in the case or class
PowerPoints
Due Date: Sunday, May 29thth at 11:59pm Pacific Standard Time – late submissions will be docked 10%
automatically (i.e. an 80% grade received on a May 30th submission at 12:30am PST would now become 70% right
away). If you have any submission issues, I expect that the assignment be sent to my email on Moodle in advance of
the 11:59pm deadline, not after.
Issues, Analysis, Recommendation: You’ll notice that it may be challenging to neatly organize each requirement
into the format of ‘Issue, Analysis, and Recommendation’. This is by design to see how you are able to adapt and
present information in a meaningful and impactful way in this case study. If you have questions, I am always
accessible and happy to help you organize your thoughts
Submission: There will be a Turnitin portal set up in Moodle shortly to submit your assignment under Week 7. Your
file should be submitted as a Word Document. I will go over the submission process closer to the due date in Week
6 or 7. Unless you have Turnitin issues where you are unable to upload to the submission box ahead of the deadline,
I will not accept emailed assignments, or those sent to me on the Teams chat.
Grading: The individual assignment rubric used to grade your assignments can be found under Week 4 on the
course page, along with the sample report I have posted for your reference. The actual assignment, Sky’s
Skateboards, has also been posted under ‘Week 4’.

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Identifying Accounting

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