JWI531 Week 1 | Management in Business - Strayer university

JWI531 FINANCIAL MANAGEMENT II

Week 1 Discussion Two Rules in Investing In the HBO video above, Warren Buffett discusses Graham's two rules of investing. In addition, you have read about the role of the CFO and how finance managers work every day to ensure their company is a value to their investors and owners. Take a minute to reflect on your experience with finance and what you want to learn about investing. Introduce yourself and tell us if you have any financial management responsibilities in your current or former job(s), such as department budgets, or developing sales, marketing, operational, or other strategic plans. What experience do you have investing in stocks, and what would you like to learn more about? This week only, post your initial response by Friday, midnight of your time zone, and reply to at least 2 of your classmates' initial posts by Sunday, midnight of your time zone.??

JWI531 FINANCIAL MANAGEMENT II

Week 2 Discussion Identifying and Balancing Risk and Reward Name one of the biggest strategic risks and one of the biggest financial risks that you face in your business or industry, and briefly explain how each of these can impact your business. For one of these, provide your ideas on the steps your company should take to significantly mitigate these risks.

JWI531 FINANCIAL MANAGEMENT II

Week 3 Discussion Measuring What Matters There is an adage in business that says, “You get what you measure.” This suggests that we must introduce performance tracking metrics if we want to improve business results like increasing productivity, mitigating costs, or improving employee engagement. What is an important performance tracking metric that your company uses, and what is the likely business result they are trying to influence (such as increasing revenue, lowering costs, managing risks, etc.)? Briefly describe how your company calculates and communicates this metric, and share your opinion on the extent to which this performance tracking is helping to improve business results. Share your ideas on how else the company could improve this performance tracking process.

JWI531 FINANCIAL MANAGEMENT II

Week 4 Discussion To Merge or Not to Merge…? Mergers or acquisitions only make sense when the combined entities create greater value together than they can separately. Locate and provide a link to a recent news story from The Wall Street Journal or other reputable news source about a merger or acquisition that has been announced between two publicly-traded companies in the last year. In your own words (not simply copied from the article), describe how the combined entities were expected to create greater value together than separately (e.g., how they were going to increase revenue, lower costs, and/or better manage risks). Be descriptive and thorough in explaining these potential synergies. To support your response, include specific references to M&A strategies discussed in Chapter 6 of The CFO Guidebook. Applying your business acumen and emerging CFO skill base, provide your assessment and supporting rationale about whether this merger makes sense from three perspectives: Does the merger make sense from a strategic fit perspective? Does the valuation of the deal seem reasonable? Identify the biggest risk(s) you think the acquirer will confront in extracting the synergies post-transaction.

JWI531 FINANCIAL MANAGEMENT II

Week 5 Discussion Forecasting This week, we learned about the importance of forecasting future sales and profit for companies. Of course, there are many factors which can affect the reliability of these forecasts, such as interest rate fluctuations, competitive innovations, new customers, etc. But still, finance leaders must make every attempt to build their business strategy on forecasts that are as accurate as possible. As you think about your company’s ability to forecast future sales and profit, what are two or three of the most significant variables that are difficult to predict? What information and data would you use to improve the forecast accuracy? How can you go about collecting and leveraging this data?

JWI531 FINANCIAL MANAGEMENT II

Week 6 Discussion Aligning Strategy and Budget In Chapter 9 of The CFO Guidebook, we are introduced to the tools of capital budgeting. Making specific reference to what you read in that chapter, respond to the following questions: Which metrics and methodologies are the most useful when evaluating a capital investment? Why? How can finance leaders be more effective partners to managers and business leaders in developing capital budgets that align with the risk tolerance and mission of the organization? What can be done to make sure everyone understands the connection between the strategy and the capital budget?

JWI531 FINANCIAL MANAGEMENT II

Week 7 Discussion Putting Cash to Work Locate and post a recent news story from The Wall Street Journal or other reputable source about a publicly-traded company that has been criticized for its cash management practices and/or the amount of debt it is carrying. What were the criticisms leveled against the company? Was it accused of being too conservative and hoarding too much cash, or of taking unnecessary risks such as being too highly leveraged? How did the CFO or CEO address this criticism? How has the stock performance been impacted by these cash management practices? What are three ways, other than revenue growth, that the company could generate significant cash growth? Hint: take a look at the cash flows.

JWI531 FINANCIAL MANAGEMENT II

Week 8 Discussion Welcome to Shark Tank You have a great idea about a new business opportunity. You’ve run the numbers and are confident that with an initial investment of $500,000, you can turn a profit in three years and generate $150,000 in operating income per year. But you realize there are no guarantees. Further, you anticipate that there is at least a 50/50 chance the economy will enter a recession within the next two years. What factors will be most important in determining if you want to fund your venture through equity or take a loan for the $500,000? If you meet all your projections, will you be happier in five years that you used equity to fund the venture or debt? Why? If the company goes bankrupt in five years, would you have a different answer? Why?

JWI531 FINANCIAL MANAGEMENT II

Week 9 Discussion Going Public Locate a recent story from The Wall Street Journal or other reputable news source about a company that has gone public through an Initial Public Offering (IPO) within the last year. How did the company arrive at the valuation for the IPO? Yes, we know there are multiple valuation methods and also supply and demand based on hype, but what was said publicly by the CEO/CFO and/or the bank that took the company public to defend the initial stock price? Was the IPO price justified? How has the price changed since the IPO? Be sure to consider overall market and segment performance to support your position.

JWI531 FINANCIAL MANAGEMENT II

Week 10 Discussion Circle of Competence Locate and post a link to a recording of the most recent earnings call or to a press release from a company you are personally interested in How did the CEO and/or CFO present the company in a positive light and address concerns and questions? What did they say that demonstrated the competence of the senior leadership team and the company's strategy to manage risks and drive growth? Include at least two specific examples to support your response. Reflect on your Week 1 Discussion response. Share what you learned since then. How has your own circle of competence in finance grown?

JWI531 FINANCIAL MANAGEMENT II

Assignment 1

Enterprise Risk Management and Moat Strength Congratulations! You have just gotten the opportunity of a lifetime to work as a senior financial advisor for Warren Buffett. You will be responsible for conducting financial analyses on two companies Mr. Buffett is reviewing, AMD and Intel, and providing recommendations for action to the CFOs of those companies.

Instructions

In this assignment, you will evaluate several risk scenarios and make recommendations on how to position the company for success by putting in place “reasonable” protections against downsides. To prepare for the assignment: (1) download and review the latest annual reports for both companies from the Investor Relations page of each company’s website; (2) read the Shareholder Letter and the Risks section carefully, and (3) read the Morningstar Analyst Reports with particular emphasis on the Moat and Risk sections. A. Complete the Assignment 1 Worksheet to create risk profiles for both companies. The guidance for this is found on pages 24-29 of The CFO Guidebook. B. Summarize your Analysis and Recommendations by addressing the following questions: i. Where is each company in its corporate lifecycle (startup, growth, maturity, or decline)? Explain. ii. Based on your review of the analysts’ reports and the 10-K reports, which company appears to have more risk? Why? iii. Which categories of risk pose the greatest threat to each organization? Why? iv. Which company has the stronger economic moat? Explain. v. For the company that has the weaker economic moat, what two risk factors should they prioritize to improve their risk mitigation and strengthen their competitive advantage? Make specific reference to the applicable risk management tools discussed on pages 30- 63The CFO Guidebook.

Submission Requirements

A. Complete and submit the Assignment 1 Worksheet component of the Workbook, along with your written work for Part B, through the assignment link in Blackboard.

B. Format your written responses for Analysis and Recommendation as follows:

• Typed, double-spaced, professional font (size 10-12), including headings and subheadings (to identify main topics and subtopics), with one-inch margins on all sides.
• References must be included and provide appropriate information that enables the reader to locate the original source.

o Application and analysis of course materials and resources is expected. o At least one additional source beyond the course materials must be cited to support your analysis and recommendations.

• Include a cover page containing the title of the assignment, your name, the professor’s name, the course title, and the date.
• The maximum length is 4 pages, excluding your cover page, completed worksheets, and reference list

JWI531 FINANCIAL MANAGEMENT II

Assignment 2

Performance Management and Valuation The risk analysis work you did in the first assignment was a great start. It helped to paint a picture of where AMD and Intel are in their corporate lifecycles, the threats and opportunities each faces, and the defensibility of their economic moats – a metaphor that Buffett loves to use. In this assignment, you will continue your analysis by comparing key performance management metrics of our two companies, identifying areas of relative strength and weakness, and suggesting ways that each company could improve, thereby increasing its valuation. To do this, you will examine trends in order to identify variances and comparisons to: (1) establish benchmarks, (2) identify best practices, and (3) look for signs of superior performance. This analysis is critical in determining the value of each company, as well as evaluating whether potential acquisition or merger opportunities exist which could create greater value and synergies than those of operating the companies as separate entities.

Instructions

To prepare, reread the Morningstar Analyst’s Report and the most recent annual reports for both companies with a particular focus on the Income Statement and Statement of Cash Flows. A. Complete the Assignment 2 Worksheet to compare key performance metrics and ratios for both companies in order to see how performance can be impacted by manipulating certain financial levers. The guidance for this is found on pages 78-100 of The CFO Guidebook. B. Summarize your Analysis and Recommendations by answering the following questions:

i. Performance Metrics:

a. Which company is a more efficient generator of income? b. Which company is growing faster? c. Using financial health ratios, which company is more profitable? d. Which company has stronger valuation ratios? e. Overall, which is the better run company and why?

ii. Merger Synergies:

a. If there was an acquisition, which company is the most likely acquirer? Why? b. Would you recommend a merger or acquisition to increase the moat strength of the combined companies? Why or why not?

• If you support a merger or acquisition, identify 3 performance metrics that could be improved by a merger and explain how they would be improved. Guidance for this is found on pages 101-110 of The CFO Guidebook.
• If you do not support a merger or acquisition, explain your rationale and why the value of each company is best preserved/increased by remaining separate. The guidance for this is found on pages 111-117 of The CFO Guidebook.

Submission Requirements

A. Complete and submit the Assignment 2 Worksheet component of the Workbook, along with your written work for Part B, through the assignment link in Blackboard.

B. Format your written responses for Analysis and Recommendation as follows:

• Typed, double-spaced, professional font (size 10-12), including headings and subheadings (to identify main topics and subtopics), with one-inch margins on all sides.
• References must be included and provide appropriate information that enables the reader to locate the original source.

o Application and analysis of course materials and resources is expected. o At least one additional source beyond the course materials must be cited to support your analysis and recommendations.

• Include a cover page containing the title of the assignment, your name, the professor’s name, the course title, and the date.
• The maximum length is 4 pages, excluding your cover page, completed worksheets, and reference list.

JWI531 FINANCIAL MANAGEMENT II

Assignment 3

Forecasting In the first two assignments, you looked at: (1) how AMD and Intel are positioned to take advantage of opportunities and manage risks, and (2) how well each is currently managing their performance. As part of this analysis, you identified potential areas for improvement and considered whether a merger or acquisition could strengthen their financial performance. Based on your insights and recommendations, Buffett is now asking for an assessment of what the future holds for these businesses. In order to deliver this, you must be able to accurately forecast cash flows (the money that comes in and the money that goes out). Like any predictions about the future, these forecasts require the collection and analysis of reliable data, including leading indicators in the broader economy as well as the market forces that impact competitive dynamics. This analysis will enable you to make smarter decisions about how to plan for the future in order to maximize returns, minimize risks, and beat the competition.

Instructions

For this assignment, you will continue to use the published data from the most recent annual reports you have been studying, as well as analyst reports and other resources available on the Internet. A. Complete the Assignment 3 Worksheet to assemble and assess your forecasts of working capital. The guidance for this is found on pages 131-163 of The CFO Guidebook. B. Summarize your Analysis and Recommendations by addressing the following questions: i. Which metrics/trends are most critical for forecasting future performance and for budgeting? To answer this, you must include an analysis of both past trend performance AND the applicability and reliability of key forecast indicators. In your response, consider: a. Which company has the stronger income statement? Explain. b. Which company has the stronger cash flows? Explain. c. Which company has the stronger operating performance? Explain. ii. Why are the metrics/trends in the data sets above so critical? How reliable are they as predictors of future performance? iii. Based on the data you have analyzed, which metrics would you focus on to improve the performance of the weaker company against the stronger one? Why? a. How would you do this? What specific financial tools would you apply? Why? b. What would “realistic” improvement look like? c. How would you measure success? v. If you were given the opportunity to join either of these two companies as the new CFO, which one would you pick, and why? In considering your answer to this question, the majority of your compensation plan will be tied to the improvements you can help to drive. Therefore, you should not base your decision on which company is currently performing better, but on which company’s performance – and valuation – has the greatest potential for growth.

Submission Requirements

A. Complete and submit the Assignment 3 Worksheet component of the Workbook, along with your written work for Part B, through the assignment link in Blackboard.

B. Format your written responses for Analysis and Recommendation as follows:

• Typed, double-spaced, professional font (size 10-12), including headings and subheadings (to identify main topics and subtopics), with one-inch margins on all sides.
• References must be included and provide appropriate information that enables the reader to locate the original source.

o Application and analysis of course materials and resources is expected. o At least one additional source beyond the course materials must be cited to support your analysis and recommendations.

• Include a cover page containing the title of the assignment, your name, the professor’s name, the course title, and the date.
• The maximum length is 4 pages, excluding your cover page, completed worksheets, and reference list.

JWI531 FINANCIAL MANAGEMENT II

Knowledge Check 1