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Slide 1: Hello everyone, Thank you for joining. My name is Moe and today I will discuss the financial engineering of ABC Corporation’s financial statements. 

Slide 2: In this instance, the main objective of financial engineering is to raise stakeholder value, it involves increasing the value of ABC Corporation’s stock for its shareholders while also considering multiple interests from employees, customers, and suppliers (Davis, 2020). The ABC Corporation meet impressive revenue and also have high market value, but there are some concerns to take into account. The 2019 Price/Earnings ((P/E) ratio proposed a promising future for the company’s progress and profitability. Nonetheless, the volatility in earnings per share is a concern, as it decreased from 2017 to 2019. For the improvement of shareholder value, the corporation should prioritize correcting declining earnings per share, prioritizing asset usage, and analyzing industry changes regularly. Immediate measures which includes diversifying revenue streams, cutting costs, or entering new markets may be required to meet with long-term profits.

Key Financial Tools

Slide 3: Many financial utensils can be used to conduct a comprehensive study to recommend examining the financial status of ABC Corporation. Some of the essential financial tools are mentioned below:

Financial Statements

ABC Corporation’s financial statements, which include the balance sheet, income statement, and cash flow statement, can give vital information about the company’s financial performance and position. These statements can provide information on a company’s profitability, liquidity, solvency, and financial health (Fridson & Alvarez, 2022).

Ratios

             Financial statements are used to generate the ratios and give a quick mean for the comparison and evaluate the financial performance of two institutions or any institution and benchmark. Important ratios which includes liquidity, profitability, and leverage ratios can assist investors in assessing a company’s financial health and making informed decisions  (Baydaş & Pamučar, 2022).

Industry Trends

Studying industry trends and benchmarks tell about the setting and better understand the companies’ competitive landscape. For checking the company performance an investor can determine by comparing its performance to industry averages (Hongal & Kinange, 2020).

Capital Structure 

A company’s capital structure, including its debt-to-equity and interest coverage ratios, can provide insight into its financial risk and ability to handle debt. A corporation with a high debt-to-equity percentage may be perceived as riskier than a low ratio (Naomi, 2023).

Competitive Analysis 

A competitive analysis can tells investors in understanding the companies’ qualities and weaknesses compared to their opponents. This review may include a look at market share, client base, pricing strategy, product offerings, and distribution networks (Irfan et al., 2019).

Determining the Project’s Feasibility

Slide 4: Several capital budgeting measures were used to examine the feasibility of the proposed project, including Net Present Value (NPV), Internal Rate of Return (IRR), payback period, and Profitability Index (PI).

Net Present Value (NPV) 

To calculate the current value of future cash flows while accounting for the time value of money NPV is used. NPV calculates the potential profitability of a project in today’s dollars by discounting future cash flows at a specific rate. The positive NPV in this situation shows that the project will likely yield profitable outcomes (Le, 2021).

The Internal Rate of Return (IRR) 

It is the discount rate used to compare the present value of future cash inflows to the initial investment. The IRR tells about the potential return on investment, and a greater IRR implies a more appealing investment option. This project’s IRR increases the needed rate of return, indicating that it is likely to generate returns that surpass the cost of capital (Wang, 2021).

The Payback Period

 It is the right scenario it takes for the initial investment to be returned by cash inflows from the project. This metric tells the time period required to recover the primary investment and start producing handsome income. The payback period in this example is lower than the needed period for the company, indicating that the project is likely to return positive cash flows within an acceptable time range (Saługa et al., 2020).

The Profitability Index (PI) 

PI is the present value of future cash inflows divided by the initial investment. A PI more significant than one suggests that the project will generate positive returns, and the higher the PI, the more appealing the investment prospect. This project’s PI is more than one, indicating that it will likely yield positive returns (Nandiyanto et al., 2023)

Stakeholder Value Maximization Suggestions and Strategies

Slide 5: We examined various financial data from ABC Corporation, such as its financial statements, industry trends, and competitor analysis, to provide evidence-based suggestions. The financial data identified that the company’s earnings per share had been dropping recently, which should be tackled to optimize long-term stakeholder value.

To deal diminishing earnings per share, the company should prioritize cost-cutting initiatives and operational optimization to increase efficiency. One approach emphasizes asset use, such as new technology and production procedures, to improve operational efficiency. To streamline operations and enhance financial performance, the corporation might also consider divesting underperforming assets whose performance is not upto the mark (Harrigan & Wing, 2021).

In order to remain competitive in the market, ABC Corporation should routinely evaluate industry changes in addition to addressing diminishing earnings per share. To remain relevant, the organization must keep up with the newest technical breakthroughs, market trends, and client preferences. This allows the organization to change its strategy to stay ahead of the competition and maximize stakeholder value.

Many financial models and theories might be mentioned to support these recommendations. The NPV and IRR, for example, can be used to assess the financial feasibility of investment projects, while the payback period can be used to calculate how long it takes an investment to pay for itself. The profitability index can be used to assess and compare the profitability of various investment possibilities (Chang et al., 2020).

Strategic Goals

Slide 6: The team at ABC Corporation can focus on the following tactical objectives to implement the recommended tactics of addressing declining profits per share, focusing asset usage, and routinely monitoring industry trends,

Boost revenue by introducing new items or broadening your consumer base with focused marketing initiatives. This can be accomplished by identifying profitable client groups and tailoring marketing efforts to their demands using customer segmentation approaches. History Example: In 2001, Apple Inc. released the iPod, a game-changing product that changed the music business and helped the company expand revenue and market share (Alzoubi, 2022).

Costs can be reduced by increasing operational efficiency through process optimization and automation. This can be accomplished through process analysis and implementing best practices such as the Lean Six Sigma approach. Toyota Motor Corporation used the Toyota Production System, a lean manufacturing philosophy that resulted in significant cost reductions and increased quality (Reinkemeyer, 2020).

Improve asset utilization by improving inventory management, decreasing idle time, and increasing asset turnover. Just-in-time inventory management, preventative maintenance programs, and asset monitoring technologies can help achieve this. IKEA Inc. is renowned for its excellent inventory management system, allowing the corporation to maintain low inventory levels while ensuring that products are constantly available (Zhang, 2019)

Regularly analyze financial and non-financial performance measures, do market research, and benchmark against industry leaders to keep track of industry developments and competition. This is possible through SWOT analysis, PEST analysis, and Porter’s Five Forces analysis. Amazon Prime Inc. revolutionized the video rental market by providing a subscription-based streaming service suited to evolving customer desires for on-demand and tailored entertainment. This was accomplished by ongoing innovation and thorough observation of industry trends and rivals (Schauerte et al., 2020).

ABC Corporation may improve its financial performance and maximize stakeholder value in the long run by implementing these tactical objectives.

Finance Instruments for Tactical Monitoring

Slide 7: The following financial tools can be used to track the progress of the tactics mentioned above,

Financial Statements 

Regularly monitoring financial statements, such as the income statement, balance sheet, and cash flow statement, can aid in tracking the company’s performance and identifying development opportunities. Monitoring the income statement, for example, can assist in tracking changes in earnings per share, whereas watching the balance sheet can assist in identifying changes in asset use (Fridson & Alvarez, 2022b).

Ratios 

Various financial ratios can be used to track and compare a company’s performance to industry benchmarks. The Return on Assets (ROA) ratio, for example, can be used to assess a company’s efficiency in utilizing its assets, whereas the Debt-to-Equity (D/E) ratio can be used to assess a company’s capital structure (Awaysheh et al., 2020).

Industry Trends 

On consistent basis monitoring industry trends and changes can help a company in maintaining competitivess and detect new chances or dangers. Tracking changes in consumer preferences or technological advancements, for example, can assist the company in adapting its products and services to meet changing demands (Allal-Chérif et al., 2021).

Competitor Analysis

Analyzing competitors’ performance can provide valuable insights into industry trends and identify potential areas of improvement for the company. Comparing the company’s financial ratios to those of its competitors can assist in identifying areas where the company may be underperforming (Liu et al., 2022).

The Reason for these Tactics

Slide 8: The logic for these recommendations is that they provide a comprehensive way to track the tactics mentioned above’ progress. While financial statements and ratios provide quantitative performance measurements, tracking industry trends and competitors can provide qualitative insights into the variables influencing the company’s performance. By combining these technologies, the company can better understand its performance and make educated decisions to optimize stakeholder value.

A corporation like Apple, for example, checks its financial statements, ratios, industry trends, and competitors frequently to make informed judgments regarding its product offerings and business strategy. Despite increased competition from firms such as Samsung and Huawei, Apple’s focus on innovation and customer experience has helped it preserve its position as a leader in the electronics industry. Apple has been able to make strategic decisions that have helped it optimize shareholder value over the long term by employing a combination of financial instruments and tracking industry trends (Robinson, 2020).

Conclusion NURS FPX Assessment 3 Financial Engineering to Enhance Stakeholder Value

Slide 9: In order to increase long-term shareholder value, ABC Corporation should organize correcting declining profits per share, focusing on asset usage, and continuously analyzing industry developments. These ideas can be turned into strategic goals such as cost reduction and improved supply chain management. Financial methods like financial statements, ratios, and industry trend research can be used to track success. Ultimately, long-term success requires a proactive approach to money management.

References

Alzoubi, H. (2022). Does BLE technology contribute towards improving marketing strategies, customers’ satisfaction and loyalty? The role of open innovation. International Journal of Data and Network Science6(2), 449–460. http://m.growingscience.com/beta/ijds/5238-does-ble-technology-contribute-towards-improving-marketing-strategies-customers-satisfaction-and-loyalty-the-role-of-open-innovation.html 

Awaysheh, A., Heron, R. A., Perry, T., & Wilson, J. I. (2020). On the relation between corporate social responsibility and financial performance. Strategic Management Journal41(6). https://doi.org/10.1002/smj.3122 

Baydaş, M., & Pamučar, D. (2022). Determining Objective Characteristics of MCDM Methods under Uncertainty: An Exploration Study with Financial Data. Mathematics10(7), 1115. https://doi.org/10.3390/math10071115 

Chang, V., Baudier, P., Zhang, H., Xu, Q., Zhang, J., & Arami, M. (2020). How Blockchain can impact financial services – The overview, challenges and recommendations from expert interviewees. Technological Forecasting and Social Change158(1), 120166. Ncbi. https://doi.org/10.1016/j.techfore.2020.120166 

Davis, F. D. (2020). Perceived Usefulness, Perceived Ease of Use, and User Acceptance of Information Technology. MIS Quarterly13(3), 319–340. https://doi.org/10.2307/249008 

Fridson, M. S., & Alvarez, F. (2022a). Financial Statement Analysis: A Practitioner’s Guide. In Google Books. John Wiley & Sons.  https://books.google.com.pk/books?hl=it&lr=&id=2cl6EAAAQBAJ&oi=fnd&pg=PA25&dq=ABC+Corporation%27s+financial+statements 

Fridson, M. S., & Alvarez, F. (2022b). Financial Statement Analysis: A Practitioner’s Guide. In Google Books. John Wiley & Sons. https://books.google.com.pk/books?hl =it&lr=&id=2cl6EAAAQBAJ&oi=fnd&pg=PA25&dq=Monitoring+the+income+statement

Harrigan, K. R., & Wing, B. M. (2021). Corporate Renewal and Turnaround of Troubled Businesses: The Private-Equity Advantage. Strategic Management Review2(2), 363–390. https://doi.org/10.1561/111.00000032 

Hongal, P., & Kinange, U. (2020). A Study on Talent Management and its Impact on Organization Performance – An Empirical Review. International Journal of Engineering and Management Research. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3559991 

Irfan, M., Zhao, Z., Ahmad, M., Batool, K., Jan, A., & Mukeshimana, M. C. (2019). Competitive assessment of Indian wind power industry: A five forces model. Journal of Renewable and Sustainable Energy11(6), 063301. https://doi.org/10.1063/1.5116237 

Le, S. (2021, December 15). The Applications of NPV in Different Types of Markets. Www.atlantis-Press.com; Atlantis Press. https://doi.org/10.2991/assehr.k.211209.171 

Liu, P., Zhu, B., Yang, M., & Chu, X. (2022). ESG and financial performance: A qualitative comparative analysis in China’s new energy companies. Journal of Cleaner Production379(56), 134721. https://doi.org/10.1016/j.jclepro.2022.134721 

Nandiyanto, A. B. D., Ragadhita, R., Setiyo, M., Obaidi, A. S. M. A., & Hidayat, A. (2023). Particulate Matter Emission from Combustion and Non-Combustion Automotive Engine Process: Review and Computational Bibliometric Analysis on Its Source, Sizes, and Health and Lung Impact. Automotive Experiences6(3). https://doi.org/10.31603/ae.10259 

Naomi, I. W. (2023). Debt Financing and Financial Performance of Manufacturing Firms in Kenya. African Journal of Commercial Studies. African Journal of Commercial Studies3(2), 86–95. https://doi.org/10.59413/ajocs/v3.i2.1 

Reinkemeyer, L. (Ed.). (2020). Process Mining in Action. Springer International Publishing. https://doi.org/10.1007/978-3-030-40172-6 

Robinson, T. R. (2020). International Financial Statement Analysis. In Google Books. John Wiley & Sons. https://books.google.com.pk/books?hl=it&lr=&id=Q7nEDwAAQBAJ&oi=fnd&pg=PR15&dq=A+corporation+like+Apple 

Saługa, P. W., Szczepańska-Woszczyna, K., Miśkiewicz, R., & Chłąd, M. (2020). Cost of Equity of Coal-Fired Power Generation Projects in Poland: Its Importance for the Management of Decision-Making Process. Energies13(18), 4833. https://doi.org/10.3390/en13184833 

Zhang, X. (2019). http://166.62.7.99/conferences/LNEMSS/FEMS%202020/20FEMS055.pdf 

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