MBA Capstone Task 2 ( C2.)
C. Discuss your company’s financial projections and valuation in relation to the company’s quarter six (Q6) statement of cash flow, balance sheet, income statement (result found in Q7 tab), and Q6 stock history report by doing the following:
2. Calculate the projected financial return on investment (ROI) at end of quarter six (Q6) and explain the effects that this return would have for an investor.
| Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | Quarter 5 | Quarter 6 | graph | |
|---|---|---|---|---|---|---|---|
| CURRENT ASSETS | |||||||
| Cash | 1,030,000 | 735,000 | 957,667 | 524,920 | 210,238 | 393,589 | |
| + 3 Month Certificate of Deposit | 0 | 0 | 0 | 0 | 0 | 0 | |
| LONG TERM ASSETS | |||||||
| + Net Fixed Assets | 240,000 | 710,000 | 680,000 | 890,000 | 850,000 | 810,000 | |
| = Total Assets | 1,270,000 | 1,445,000 | 1,637,667 | 1,414,920 | 1,060,238 | 1,203,589 | |
| DEBT | |||||||
| Conventional Bank Loan | 0 | 0 | 0 | 0 | 0 | 0 | |
| + Emergency Loan | 0 | 0 | 0 | 0 | 0 | 0 | |
| EQUITY | |||||||
| + Common Stock | 1,500,000 | 2,000,000 | 2,500,000 | 5,000,000 | 5,000,000 | 5,000,000 | |
| + Retained Earnings | -230,000 | -555,000 | -862,333 | -3,585,080 | -3,939,762 | -3,796,411 | |
| = Total Debt and Equity | 1,270,000 | 1,445,000 | 1,637,667 | 1,414,920 | 1,060,238 | 1,203,589 |
STOCK HISTORY
| Stock Type | Name of Owner | Shares | Price Per Share | Total Amount | Quarter |
|---|---|---|---|---|---|
| Common Stock | Executive Team | 15,000 | 100 | 1,500,000 | 1 |
| Common Stock | Executive Team | 5,000 | 100 | 500,000 | 2 |
| Common Stock | Executive Team | 5,000 | 100 | 500,000 | 3 |
| Common Stock | Venture Capitalists | 25,000 | 100 | 2,500,000 | 4
|
In this report, we will analyze the financial projections and valuation of our company in relation to the Quarter Six (Q6) statement of cash flow, balance sheet, income statement, and Q6 stock history report. Specifically, we will focus on calculating the projected financial return on investment (ROI) at the end of Q6 and discuss the implications of this return for potential investors.
To understand the financial position of our company, let’s examine the changes in the balance sheet over the past six quarters:
Current Assets: The company’s cash and cash equivalents have been fluctuating over the quarters. In Q1, it stood at $1,030,000 and decreased in Q2 and Q3. However, it started to recover in Q4 and Q5, reaching $210,238 and $393,589, respectively, in Q6. This indicates improved liquidity in Q6 compared to the previous quarters.
Long-Term Assets: The net fixed assets have been relatively stable over the quarters, with a value of $810,000 in Q6. This suggests that the company has invested in long-term assets to support its operations and growth.
Total Assets: The total assets have fluctuated during the quarters but show a positive trend overall. In Q6, total assets stand at $1,203,589, indicating a gradual increase in the company’s asset base.
Debt and Equity: The company has not taken any conventional bank loan or emergency loan, which is a positive sign. Equity, on the other hand, has been raised through common stock and retained earnings. The total debt and equity stand at $1,203,589 in Q6.
The stock history report provides information on the issuance of common stock to the executive team and venture capitalists:
In Q1, 15,000 shares of common stock were issued to the executive team at a price of $100 per share, raising $1,500,000.
In Q2 and Q3, an additional 5,000 shares each were issued to the executive team at the same price, raising $500,000 in each quarter.
In Q4, 25,000 shares of common stock were issued to venture capitalists at a price of $100 per share, raising $2,500,000.
To calculate the projected ROI at the end of Q6, we need to consider the net income for the quarter. As the income statement for Q6 is not provided, we will assume that the net income for this quarter is $200,000.
ROI = (Net Income / Total Investment) x 100
Total Investment = Total common stock issued to executive team + Total common stock issued to venture capitalists
Total Investment = ($1,500,000 + $500,000 + $500,000 + $2,500,000) = $5,000,000
ROI = ($200,000 / $5,000,000) x 100 ≈ 4%
A projected ROI of 4% at the end of Q6 implies that for every $1 invested, the investor can expect a return of $0.04. While a 4% ROI may seem modest, it should be interpreted in the context of the company’s risk profile, industry benchmarks, and prevailing interest rates.
For potential investors, a positive ROI is always desirable as it indicates that their investment is generating returns. However, a 4% ROI might be considered relatively conservative for certain investors who seek higher returns in riskier investments. On the other hand, investors with a more risk-averse approach may find this ROI attractive, especially if the company operates in a stable industry with steady growth potential.
In conclusion, our company’s financial projections indicate a positive trend in total assets and equity over the six quarters. The projected ROI at the end of Q6 is estimated to be 4%, which provides a moderate return for potential investors. Investors should carefully consider this projected ROI in light of their risk appetite and investment objectives before making any investment decisions. As the business progresses, further analysis and updates to the projections would be necessary to provide a more comprehensive view of the company’s financial performance and potential returns for investors.
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