6-1 Project Two Submission: Assessing Financial Performance

Competency

In this project, you will demonstrate your mastery of the following competency:

• Assess current performance of an organization through analysis of financial statements.

Scenario

In Project One: Applying Strategic and Operational Thinking, you prepared Key Performance Indicators (KPIs) for the marketing and sales departments of your product line.

Now, the CEO has provided you with a revised set of KPIs. You need to apply these KPIs toward the analysis of a proposed marketing and sales initiative to increase loyalty card memberships in neighborhoods with predominantly low-income populations, whether the populations are in rural, suburban, or city locations.

The CEO wants this analysis so that she can chart the sustainability and growth of the initiative while assuring it meets standards for Corporate Social Responsibility.

The CEO has provided you with several documents, available in the Supporting Materials section of this project. She wants you to use the provided Triple Bottom Line Balanced Scorecard to assess the strategic plan's compliance with the KPIs and summarize your findings in a memo.

Directions

answer the following to provide the analysis required by the CEO:

1. Identify the financial records that indicate commitment to TBL.
   1. Outline which financial and other records marketing and sales maintains where TBL can provide data.
2. Using the TBL scorecard, evaluate the alignment of the strategic plan with KPIs. Remember, there may be multiple outcomes of this exercise. Your focus should be to apply your understanding of the scenario and evaluate the plan accordingly.
   1. Which ideas in the plan support the KPI criteria? Cite specific ideas that meet the criteria.
   2. Explain how they meet the criteria.
3. In your memo:
   1. Describe how the TBL data relates to the KPIs.
   2. Identify which additional TBL financial line items are needed to measure the cost for each criterion. For example, should there be a line entry for hiring temporary workers?
   3. Referring back to the SWOT analyses from Project One, explain how functional considerations of individual departments contribute to financial performance.

What to Submit

submit the following:

KPI and Triple Bottom Line Balanced Scorecard

• develop and submit the KPI and Triple Bottom Line Balanced Scorecard.

KPI and Triple Bottom Line Balanced Scorecard (Marketing and Sales) Bottom Line Areas of Impact (Key Performance Indicators) SMART Objective Measurement Criterion To be a global contributor to the communities we operate in. People Example: Community contributions based on points i L . 550,000 by EQY 2021 Charitable contributions from program achieved Identify one additional people-focused KPI, a related SMART objective, and its measurement criterion in this row. To promote and use a platform of reuse, recycling, and sustainable energy use. Planet Example: Reduction in packaging costs from i . . 3% Reduction by EOY 2021 Cost of packaging recycled materials Identify one additional planet-focused KPl, a related SMART objective, and its measurement criterion in this row. To reach a global audience with healthy and sustainable products. Profit Example: Grow market share 1% increase by EQY 2021 Market share performance tracking Identify one additional profit-focused KPI, a related SMART objective, and its measurement criterion in this row. Consolidated Balance Sheet $ thousand $ thousand $ thousand 31-Dec-18 31-Dec-17 31-Dec-16 Assets Current assets Cash and cash equivalents 6,121 4,272 3,317 Inventories B.164 4,301 3.962 Question to consider Accounts and other receivables 14.178 10.482 9,21 - Is the company active in collecting on its accounts (profit)? Prepaid expenses 1397 472 488 860 19,527 16.986 Questions to consider Is the building LEED Certified (planet)? Non-current assets - Is the equipment new and energy efficient (planet)? - Is the plant minimizing waste (planet]? Property, buildings and equipment 17.062 11,088 10,270 Is the property focused on preserving natural resources (planet ? Intangible assets 7.962 7,152 6,520 Is the equipment effectively producing more and safer products (people, profit)? Goodwill (See notation below ) 8,000 3,000 8,000 Long-term Financial assets 3.427 1072 016 Questions to consider 36,451 27.312 25.606 - Is the company using its financial assets to support communities (people)? Total assets 66.311 46.839 42.792 - Is the company increasing its financial assets by decreasing waste (planet, profit)? Is the company focused on investing in funds of TOL companies (planet, profit]? Is the company's stock portfolio diversified (people, planet, profit)? Liabilities Current liabilities Accounts and other payables 7.768 7.457 6.428 Question to consider - Is the company managing liabilities to limit short-term interest Short-term deb 3,691 2,613 7.378 payments (profit)? Deferred revenue 898 1,445 1.088 Other current liabilities 620 324 25 12.977 12.139 5,417 Non-current liabilities Long-term debt 5.499 5,784 8,158 Other non-current liabilities 339 346 1200 5.838 5.130 3.358 Total liabilities 18,815 8,269 24.775 Equity Shareholders' equity Common Stock 134 120 110 Additional Paid-in-Capital 3.574 2.227 2.107 Question to consider Retained earnings 43,788 26,223 15.800 - Is the company reinvesting its retained profit into TEL initiatives Total equity 47.496 28.570 8,017 Total liabilities and equity $6,311 16.835 12.792 Notation: Goodwill is defined as "an intangible asset that is created when one company acquires another company for a price greater than its net asset value." It has nothing to do with charitable or philanthropic efforts.Consolidated Cash Flow Statement for the year ended 31 December $ thousand $ thousand $ thousand 2018 2017 2016 Cash Flow from Operating Activities: Net Income 18.565 $ 11,423 10.784 Adjustments to Reconcile Net Income to Net Cash Flow from Operating Activities Change in Accounts receivable (3.696) (1.2631 (2.750) Change in Inventory (3.863) 339) 1.335) Change in Prepaid expense (925) 16 (2.250) Depreciation and amortization 1,000 390 800 Change in Accounts Payable 311 1,031 (1,525) Change in Short term debt 1,078 (4.765) 240 Change in Deferred revenue (547) 357 432 Change in Other current liabilities (4) 93 33 Questions to consider: - Is the company experiencing positive cash flows from operating activities (profit)? Net Cash Flow from Operating Activities 11,919 7.449 1.429 - How is the company generating cash flow from sustainable/environmentally friendly operations [planet/profit)? Cash Flow from Investing Activities: Cost of new Property, buildings, and equipment (6,974) (1,708) (200) purchased Cost of new Intangible assets (810) (632) Cost of new Other current assets [2.355) (56 251 Question to consider: Net Cash Flow: Investing Activities (10,139) 2.396) 2251 - How is the company investing in other companies and their efforts to support TEL? Cash Flow from Financing Activities: Payments of Long-term debt (285) (2,374) (1,150) Change in Other noncurrent liabilities (7) (854) (24) Issuance of Common Stock 14 10 Change in Additional paid-in-capital 1.347 20 Payment of Dividends (1.000) (1,000) (1.000) Question to consider: Net Cash Flow: Financing Activities 69 4,098) 2.174) - Is the company experiencing positive cash flows from financing activities (profit)? Total Cash Flow increase/(decrease) 1,849 355 2,030 Cash Balance, Beginning 4,272 3,317 1,287 Cash Balance, Ending December 31 6,121 $ 4,272 3,317Consolidated Income Statement for the year ended 31 December $ thousand S thousand S thousand 2018 2017 2016 Questions to consider - - L N Sales Revenue 5 174,090 $ 150,000 S 130,000 - Are we seeing year-over-year growth in revenues? - i i ? Cost of Goods Sold 93,000 88,000 75,000 Is this growth attributable to our CSR and TBL efforts? Gross Profit 81,090 62,000 55,000 Operating Expenses: Selling expenses