Coursework Brief: Global Innovations Ltd$.$ Case Study

Background: Global Innovations Ltd$.$ is a mid$-$sized technology company specializing in developing sustainable energy solutions. The company was founded in $2015$ and has experienced significant growth over the past few years. As a newly appointed financial analyst at Global Innovations Ltd$.,$ you have been tasked with preparing and analysing key financial statements for the company's board of directors.

Financial Information: Use the following financial data for Global Innovations Ltd$.$ to complete the assigned tasks. All figures are in millions of British Pounds.

Year $2023($in million $)$:

$$ Revenue: $450($amount for the year $1/1/2023-31/12/2023)$

$$ Cost of goods sold: $270($amount for the year $1/1/2023-31/12/2023)$

$$ Operating expenses: $90($amount for the year $1/1/2023-31/12/2023)$

$$ Interest expense: $15(($amount for the year $1/1/2023-31/12/2023)$

$$ Tax rate: $25\%$

$$ Depreciation: $30($amount for the year $1/1/2023-31/12/2023)$

$$ Accounts receivable: $60($as on $31/12/2023)$

$$ Inventory: $45($as on $31/12/2023)$

$$ Property, plant, and equipment $($net$)$: $320($as on $31/12/2023)$

$$ Accounts payable: $40($as on $31/12/2023)$

$$ Short$-$term debt: $50($as on $31/12/2023)$

$$ Long$-$term debt: $180($as on $31/12/2023)$

On $1/1/2023$ the company had:

$$ Common stock: $100$

$$ Retained earnings: $160$

$$ Long$-$term debt: $40$

$$ Accounts payable: $0$

$$ Accounts receivable: $0$

$$ Short term debt: $0$

$$ Cash: $0$

$$ Inventory: $0$

Additional information:

$$ The company purchased new equipment for $50$ million in cash during the year. This is included in the property, plant and equipment $($net$)$ figure above.

$$ During the year the company issued $30$ million in new common stock.

$$ The company paid dividends of $20$ million for the year.

Questions:

$($a$)$ Prepare and present the following financial statements for Global Innovations Ltd$.$ for the year $2023$: a$)$ Income Statement b$)$ Statement of Financial Position $($Balance Sheet$)$ c$)$ Statement of Cash Flows $($using the indirect method$)$

For each statement, explain the purpose and significance of at least three key line items, and discuss how they relate to the company's overall financial position and performance.

$40$ Marks

$($b$)$ As a financial analyst, you've been asked to evaluate Global Innovations Ltd$.\text{'}$s working capital management. Using the financial information provided:

$$ Calculate the company's working capital and explain its significance.

$$ Identify and discuss two potential areas of concern related to the company's working capital management.

$$ Propose and justify two specific strategies the company could implement to improve its working capital position.

In your answer, consider the nature of the technology industry and the potential impact of these strategies on the company's operations and financial sustainability.

$30$ Marks

$($c$)$ The board of directors is considering expanding the company's operations and is evaluating various financing options. They have asked for your input on the following:

$$ Explain the differences between internal and external sources of finance, providing two examples of each that would be suitable for Global Innovations Ltd$.$

$$ Critically evaluate the advantages and disadvantages of debt financing versus equity financing for the company's expansion plans. Consider factors such as cost$,$ control, and financial risk.

$$ Based on your analysis of the company's current financial position and the industry context, recommend and justify the most appropriate financing strategy for Global Innovations Ltd$.\text{'}$s expansion plans.

Your answer should demonstrate an understanding of the key factors influencing financing decisions in a technology company and the potential long$-$term implications of different financing choices.

$30$ Marks