1 Remember your Effective Communications courses; use the 7 C's of communication. Assignment 3 - Managerial Decisions, Forecasts and Investment Decisions Assignment Overview: Apply course concepts to a real-world scenario, interpret and apply the findings of financial analysis, and utilize them to make managerial decisions, forecasts, and investment decisions. This assignment builds on the work done in Assignment 2. Continue with the same organization as in Assignment 2. Estimated completion time: 4-6 hours. Steps to Complete: Managerial decisions: 1. Using the financial analysis from the previous assignment and considering the organization's strategy, what would you recommend that managers focus on? 2. Provide some examples of additional information that managers would need to make informed decisions. The description of the information should include what internal systems may be used to provide the additional information. 5-year forecast: 3. Using the financial analysis from the previous assignment, what would you take into consideration when developing a 5-year forecast for the organization? What are the key considerations for the forecast? What are your assumptions? Investment decisions:2 Remember your Effective Communications courses; use the 7 C's of communication. 4. Using the financial analysis from the previous assignment, what would you take into consideration when identifying investment decisions? Are there any capital items or projects that should be considered, why? Provide four criteria that the organization should take into consideration when selecting which capital assets or projects to invest in. Explain why you chose them. Submission should not exceed 10 pages in length, not including the cover page, references . Tips: Ensure you are referring to your course materials or other academic/reliable literature and resources to provide insight into the organization's results and recommended plans for the future.

This was my second assignment.

. The data below shows the Financial Statements of Access Credit Union Limited

Access Credit Union Limited

Consolidated Statement of Financial Position

For the Year 2023

	2023	2022
Assets
Funds on hand and on deposit	376,758,088	273,304,544
Investments	869,812,364	868,627,116
Income taxes recoverable	6,552,924	4,089,200
Member's loans	10,946,657,786	9,445,850,032
Others Assets	36,430,539	36,108,701
Property and equipment	79,761,483	64,053,140
Investment Property	12,831,286	13,469,650
Intangible Assets	28,615,358	27,994,375
Investment in Associates	2,683,799	2,691,410
Deferred tax Assets	8,879,066	10,744,000
Goodwill	13,039,489	13,039,489
Total Assets	12,382,022,182	10,759,971,657
Liabilities
Loan Payable	15,000,000	-
Member's savings and deposits	10,771,534,609	9,473,717,124
Other Liabilities	39,906,500	33,658,700
Securitized Borrowing	820,921,786	621,730,744
Lease Liability	2,903,159	1,955,181
Total Liabilities	11,650,266,054	10,131,061,749
Member's Equity
Member's shares	44,657,820	49,194,537
Retained Surplus	301,522,813	253,429,057
Contributed Surplus	385,575,495	326,286,314
Total Member's Equity	731,756,128	628,909,908
Total Liabilities and Equity	12,382,022,182	10,759,971,657

Reference:https://www.accesscu.ca/media/4049/access-full-fs_2023-final.pdf

2. A brief description of the business:

Access Credit Union Limited is a Canadian credit union formed by multiple mergers of smaller Southern Manitoba credit union. It is a cooperative financial institution that is owned by its members and offers a variety of financial products and services to them. The credit union provides both online and in person banking services with their numerous branches.

Industry

Access Credit Union Limited works in the banking sector of the financial services industry. It is categorized as a credit union sub-industry.

Main products and Services:

It provides a wide range of financial services and products, such as business banking solutions, credit cards, investment services, personal, vehicle, and mortgage loans, as well as checking and savings accounts. They also offer banking services on mobile devices and online.

Description of the organization's business strategy:

The business strategy of Access Credit Union Limited seems to focus on expanding through mergers and acquisitions to solidify its position as a significant participant in the credit union industry in Manitoba. Increased market share, a wider range of services, and improved financial strength are all made possible by this approach. At the same time, they place a strong emphasis on offering a wide range of financial services and products to meet the various needs of their members, both personally and professionally.

As a member-focused cooperative, Access Credit Union likely prioritizes community relationships and financial stability, which influence its cautious capital and risk management strategies.

Their dedication to digital banking promotes accessibility and convenience for members. To preserve a solid reputation in the community, the credit union probably makes member loyalty and satisfaction a top priority in its long-term strategy.

3. Relevant financial ratios in the analysis.

a. Equity to Assets Ratio

Formula:

EquitytoAssetsRatio=TotalAssets TotalMembers'Equity

TotalAssets

Calculation: = 731,757 =0.0591or5.91%

12,382,022

Interpretation: This shows that Access Credit Union finances 5.91% of its total assets through member equity. A higher ratio indicates financial stability and strong capital support.

This is a fundamental indicator of a credit union's ability to absorb unexpected losses. An increase from 5.84% in 2022 to 5.91% in 2023 shows a slight strengthening of the capital base.

b. Liabilities to Equity Ratio

Formula:

LiabilitiestoEquityRatio =TotalLiabilities

TotalMembers'Equity Total

Calculation:

= 11,650,267 =15.92

731,757

Interpretation: For every $1 in equity, the credit union has $15.92 in liabilities. This is a high leverage ratio, common in financial institutions, but requires strong risk management.

c. Loan to Savings and Deposits Ratio

Formula:

LoantoSavingsRatio= NetMembers'Loans

Members'SavingsandDeposits

Calculation: = 10,910,227 =1.013or101.3%

10,771,535

Interpretation: This indicates that Access Credit Union has loaned out more than its total savings and deposits, suggesting aggressive lending. While this shows efficiency, it may also pose liquidity risks.

A ratio over 100% implies that the credit union may be relying on other sources (e.g., securitized borrowing or equity) to fund loans, which introduces potential liquidity risks.

Financial Ratio Analysis of a Credit Union

1. Equity to Assets Ratio

Justification:This ratio is a fundamental indicator of the credit union's financial strength and its ability to withstand asset depreciation or unexpected losses. A higher ratio typically suggests a stronger capital base and greater resilience.

Insight:The Equity to Assets ratio has slightly increased from 5.84% in 2022 to 5.91% in 2023. This indicates a marginal strengthening of the capital base relative to the growth in assets. Generally, a higher ratio is viewed favorably, suggesting a more resilient financial position.

1. Liabilities to Equity Ratio

Justification:This ratio provides insight into the credit union's financial risk by showing how much it relies on borrowed funds (liabilities) compared to its own capital (equity). Lower ratios are typically indicative of lower financial risk.

Insight: The Liabilities to Equity ratio has decreased from 16.11 in 2022 to 15.92 in 2023. This indicates a slight decrease in financial leverage, meaning the credit union is relying less on liabilities to finance its assets compared to its equity. This can be seen as a positive sign of reduced financial risk.

1. Loan to Savings and Deposits Ratio

Justification: This ratio is important for understanding the credit union's core business activity of lending and how it utilizes its deposit base.

Insight: The Loan to Savings and Deposits ratio has increased from 99.3% in 2022 to 101.3% in 2023. This suggests that in 2023, the credit union's net loans outstanding slightly exceeded the total members' savings and deposits. This could indicate strong loan demand or a need to attract more deposits to fund lending activities. It's important to monitor this ratio for potential liquidity implications.

5.Comments on Cash Position and Overall Financial Performance

Despite the claimed net gain in cash resources for the year (based on reconciliation, though with identified anomalies), the largest takeaway is the substantial negative cash flow from operating operations in 2023. This implies that although the credit union's cash holdings grew, its primary causes were not related to its core business.

Overall Assessment of Financial Performance:

Strengths: Notable Revenue Growth: Principally due to a notable rise in interest revenue from member loans, total financial income jumped sharply from $275,703 thousand in 2022 to $513,410 thousand in 2023. Strong Profitability Growth: From $29,552 thousand in 2022 to $49,314 thousand in 2023, income and comprehensive income for the year rose dramatically, demonstrating greater profitability. Better Financial Margin: A notable improvement in the financial margin, which is calculated as total financial income less cost of funds, suggests that core earnings production has improved.

Controlled Provision for Impaired Loans: Although it increased marginally in absolute terms, the provision for impaired loans continued to represent a comparatively small portion of the expanding loan portfolio. Increase in Cash Resources: The credit union had larger cash resources at the end of the year, according to the reconciliation of the Statement of Cash Flows.

The growth in retained surplus and contributed surplus further strengthens the equity base, supporting future expansion and absorbing financial shocks.

5.Consideration of the Organization's Business Strategy in the Financial Assessment

The company's business plan, as inferred from the financial statements and the publicly available data, had a big impact on how I evaluated its financial performance. It is a member-focused cooperative with a growth strategy, a strong lending focus, and dedication to the community. If growth is sustainable and properly managed, a credit union actively developing its loan portfolio to serve its members may be less concerned about a negative operational cash flow than a fast-expanding traditional bank. Thus, the business strategy offers the required background to evaluate whether the financial results show areas that require improvement (in balancing operational cash flow with profitability in a growing organization), adequacy (in balancing member needs with financial sustainability), or strength (in member service and growth).

Conclusion

In summary, Access Credit Union Limited has shown strong financial growth and stability in 2023, driven by its strategic focus on expansion through mergers and a commitment to serving its members. Key financial ratios such as the Equity to Assets and Liabilities to Equity ratios indicate a stable capital structure with a slight reduction in financial risk. The Loan to Savings and Deposits ratio suggests effective use of member deposits to support lending activities, although it also highlights the need for careful liquidity management.

Despite a notable negative cash flow from operating activities, the increase in cash resources and significant growth in net income and financial margin demonstrate that the credit union is effectively generating profits from its core business. The increase in retained and contributed surplus further strengthens the organization's equity base, supporting future growth and enhancing its ability to absorb potential financial shocks.

Overall, Access Credit Union's financial performance in 2023 reflects the success of its member-focused strategy and positions it well for continued growth, provided that operational and liquidity risks are managed effectively.

Reference:https://www.accesscu.ca/media/4049/access-full-fs_2023-final.pdf