Introduction to Financial Statement Analysis Assignment

Assignment Task

Overview

The purpose of this assessment is to test your ability to apply the knowledge you have learned from this course, Financial Analysis. Below you will be presented with a briefing from a company known as Duran Ltd.

The company is looking to raise finance to fund its strategic plan for the next year. Duran is hiring you as a management consultant to complete an analysis of their finances, review their strategic plan, make recommendations on what actions the company can take to improve its financial position and whether their strategic plan makes sense based on your financial analysis.

Duran will provide you with all the financial information needed to make an analysis of their situation and strategy.

The Case Study document contains all the information necessary to complete your financial analysis, strategic review and to make your recommendations.

This is a simulated consulting project. Therefore, it is expected that you will write and present your report in a professional fashion with appropriate spelling and grammar. Write the report as though you were a management consultant providing it to a client.

On the next page you will find the Client Brief which is provided to you by the CFO of Duran. The Client Brief will provide you with all the requirements and what Duran expects in the final report. The final report itself constitutes your assignment and is what you will be graded on.

Company Summary

• Duran Ltd is a manufacturing company based in Australia. They manufacture and sell clean engine technologies for unmanned arial vehicles.
• Duran has been operating for 5 years and has recently listed on the stock exchange with shares trading at $1.2 each.
• The company provides both the design of engines as well as the manufacture and sale.
• Duran has been approached by the Australian Defence Forces with a contract of $20 million to design and manufacture engines for their unmanned drone program.
• You have been hired as a Management Consultant to analyse the current financial position of Duran and help them develop a budget and recommendations in order to fulfil the contract proposed by the Australian Defence Force.
• The Board of Directors have asked you to do a complete financial analysis of the company, complete a cash budget, review the strategic plan of the company, make recommendations on this strategy, and provide a statement on the solvency or insolvency of the company.
• The Board of Directors are especially interested in the viability of its strategic planning which will require significant debt financing to fund its implementation, which primarily involves investing in additional machinery.

Duran Ltd needs you to provide them with a thorough report on findings and recommendations for the following areas:

1. Write an executive summary that summaries your findings.

2. Provide a complete financial analysis of the company, including Viability, Liquidity, Working Capital Management and Solvency.

3. Create a monthly cash budget for the 1st quarter of 2023.

4. Review the current strategic plan for Duran. Determine the likely success of this plan and provide recommendations, based on the financial analysis, of how this plan can be improved.

5. Provide a statement on the solvency or insolvency of the company as it relates to the Indian Insolvency and Bankruptcy Code 2016. Are the board of directors meeting their obligations by running a solvent organization?

Duran’s Expectations

1. A thorough and in-depth financial analysis which provides very meaningful information about the financial position and performance of the company.

Note: The liquidity, working capital management and solvency analysis should be based on the 2022 and earlier financial information within the prospectus.

For the viability analysis, the company is interested in a break-even review for 2023 only. A review of the profitability ratios should be conducted for earlier periods. The information for the viability analysis is provided in the case study.

2. An accurate cash budget. The information necessary to complete the cash budget in the Cash Budget section of the Case Study.

3. A detailed account of the likely success of the current strategic planning based on the exact numbers from the financial analysis and cash budget. This should include recommendations on how the company might structure its strategic planning to achieve success based on the details from the financial analysis. Make sure to consider the financial consequences to the viability, liquidity and solvency of company if they executed their strategic plan as stated.

4. The Board of Directors require a review of their solvency position as it relates to Indian Insolvency laws. Are the company directors in compliance with their directors’ duties in India. Please provide appropriate references to the law to justify your findings.

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