Management Accounting – Strategic Evaluation and Balanced Scorecard

Background:

For this assignment, you will work in a four to six person team and select a U.S. based public company for analysis.  Choose wisely by:

• Gathering financial data and strategy related information about a few interesting companies.
• Developing an analysis plan.
• Mapping the available data and information to your analysis plan.
• Selecting a company with enough data and information for you to produce the project deliverables.

It is important that you select a company with readily available (online) financial statements and information on its strategic business plans.  For public companies, this kind of information can normally be found via:

• Annual Reports to Shareholders (through company investor relations web sites)
• SEC filings such as “10-Q”s and “10-K”s (available at sec.gov under “EDGAR Filers”)
• Business news agencies (e.g., wsj.com, www.money.com, www.foxbusiness.com, etc.)
• Any internet search engine J

Please obtain instructor approval of your company no later than Friday February 20, 2015.  To obtain approval, email [email protected] with your team members’ names and the company you would like to analyze.  If there are multiple requests for the same company, they will be approved on a first-come, first-approved basis.

Deliverables: 

Your analysis should have a body of no more than five pages.  Any number of appendices can be included as long as they add value to your analysis.  The following should be part of your report:

• Executive summary of your analysis, findings and recommendations.
• Description of the company’s business.
• Description of the company’s industry, including identification of its key competition.
• Spreadsheet printout evaluating the company’s operational trends over the last five years.
• Spreadsheet evaluation of a key competitor’s performance over the same five years.
• Explanation of your findings including the key factors, cost structure and operational trends observed for the company.
• Description and evaluation of management’s stated strategy.
• Potential Balance Scorecard target measures (e.g., financial, customer, operations, quality) for your company to support management’s strategy as discussed in Chapter 11 of the textbook.
• Description of your scorecard measures and calculation of the company’s performance over the last three years for each measure.
• Spreadsheet showing a three-year budget and cash flow requirements for the company’s operations. (be sure to identify and explain any assumptions you make when creating the budget)
• Spreadsheet showing how the budgeted values above would be reflected on your scorecard.
• Evaluation of the scorecard measures as a management tool.

To maximize your points, be sure to:

• Produce all deliverables using professional standards (e.g., proper branding and identification of report elements, appropriate templates for printed reports and presentations, etc.).
• Be clear and concise in your explanations (e.g., use of complete sentences, proper grammar, appropriate punctuation, etc.).
• Be active participants reviewing each other’s work to assure a quality product
• Perform a final edit of all work to be sure it has ‘one voice’.

Methodology:

• Document the company’s business.

Provide a short summary of the company’s mission and describe its core business activities.  Items to consider are:

1. Industry sector (https://www.census.gov/cgi-bin/sssd/naics/naicsrch?chart=2012)
2. Core products and / or services offered
3. Key types of suppliers and the ‘stuff’ purchased
4. Key types of customers and the ‘things’ produced
5. Locations where the company operates

• Document the company’s industry and identify one of its key competitors.

You should consider and highlight any key differences and potential similarities between the company you selected and the industry or key competitor in terms of:

1. Core products and / or services
2. Supplier relations
3. Customer relations
4. Locations

• Evaluate the company’s operating trends by creating a spreadsheet based model using annual data from the last five fiscal years.

Attempt to determine some causal factors and / or business related activities that drive the revenues and costs of your company by using graphic and statistical analysis methods available in Excel.  Potential examples of factors / activities for consideration include:

1. Financial measures like operating assets, long-term debt, revenues…
2. Activity related measures like number of employees, stores, locations, customers…
3. External economic indicators like interest rates, unemployment, consumer confidence…

• Evaluate the company’s key competitor using the model you developed above.

Use your analysis to determine if a key competitor is performing ‘better’ / ‘worse’ by:

1. Analyzing a competitor’s annual data for the most recent five fiscal years.
2. Compare the results to your company’s and identify any material differences.

• Document the results of your analysis by identifying the type of cost factors and operational trends you observe for the company and its competitor.
• Compare your analysis to management’s stated strategy.

Review management strategy as indicated in the news and / or annual reports.  Does the strategy appear consistent with your analysis?  In other words, do they appear to be doing the right thing based on your numbers?

• Develop a potential balanced scorecard with at least two measures for each of the following:
  1. Financial performance
  2. Customer satisfaction
  3. Operational efficiency
  4. Continuous process improvement
• Apply the scorecard you create above to your company for the last three fiscal years and evaluate the results. Document your findings.
• Develop a spreadsheet model that produces a three-year company operating budget (i.e., income statement) and matching cash flow requirements (i.e., cash budget) based on the company’s strategy identified above. (be sure to clearly identify and explain any assumptions you make)
• Apply your scorecard measures to the budgets you produce and evaluate the results. Document your findings.  
  

Appendix A

As part of your analysis, you will want to calculate selected metrics to determine how well / poorly your selected company is operating.  For each of the last five fiscal years, calculate the following metrics (references for each are contained in your text books) along with any others you feel will help you understand the company.  Include the results as Appendix A of your analysis and explain, as best you can, potential reasons for any changes during the analysis period.  In addition, you should make a judgment (i.e., good, bad or no change) about the financial progress of the company as of the end of its last fiscal year.