Financial Analysis ICS

Financial Analysis ICS - Assessing a New Ventures Financial...

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Assessing a New Venture’s Financial Strength and Viability Chapter 8
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Financial Management Financial management deals with two things:  raising  money  and managing a company’s finances in a way  that achieves the highest rate of return Financial management deals with: How a new venture tracks its financial progress through preparing,  analyzing, and maintaining past financial statements. How a new venture forecasts future income and expenses by preparing pro  forma (or projected) financial statements.
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Financial Objectives of a Firm
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Financial Objectives of a Firm • Profitability Is the ability to earn a profit. Many start-ups are not profitable during their first one to three years  while they are training employees and building their brands. However, a firm must become profitable to remain viable and provide a  return to its owners. • Liquidity Is a company’s ability to meet its short-term financial  obligations. Even if a firm is profitable, it is often a challenge to keep enough money  in the bank to meet its routine obligations in a timely manner.
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Financial Objectives of a Firm Efficiency Is how productively a firm utilizes its assets relative  to its revenue and its profits. Southwest Airlines’ turnaround time, is the lowest in the airline industry. Twitter made was cash positive for the first time, only after improving its  efficiency. Stability Is the strength and vigor of the firm’s overall  financial posture.   For a firm to be stable, it must not only earn a profit and remain liquid  but also keep its debt in check. Apple became debt-free in 2004, after  paying off its $300M long term debt ($40B reserves).
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This note was uploaded on 09/26/2011 for the course ICS 394 taught by Professor Papabithini during the Winter '10 term at DePaul.

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Financial Analysis ICS - Assessing a New Ventures Financial...

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