Second Assessment of Turners and Growers

Second Assessment of Turners and Growers

Introduction

The paper aims at evaluating various aspects of the current and projected financial performance of Turners and Growers. The paper divides relevant information into six applicable tasks. In the task 1, the paper provides estimates and projections of cash flows and financial statements for the coming three years (2013-2015). In the task 2, the paper compares and contrasts two available investment opportunities for Turner and Growers. Furthermore, the task 3 evaluates available investment opportunities on the basis of two appropriate capital budgeting techniques. In the section of task 4, the paper explores possible impact of capital structure on risk and return of the business and calculates weighted cost of capital for the company. In addition to this, task 5 sheds light on appropriate use of working capital to manage business in the current situation and identifies various important financial tools.

Discussion

Task 1 - Forecast Cash flows and Financial Statements

Analysis of the current financial position and market performance helped to estimate the future financial performance of Turner and Growers. On the basis of certain assumptions, financial statements and cash flows of the company are projected (see Appendix A). Projections are made on the predefined methodology of moving average basis with other things constant (Turners & Growers, 2012).

Forecasted Income Statement

On the basis of two years moving average, it is projected that the company will post improvement in the annual sales turnover for the coming three years. Estimates show average 0.29% decline in the source of other operating income for the business, which result in successive operation loss. Nonetheless, the company is projected to post results less than expectations.

Forecasted Balance Sheet

Analysis of the balance sheet trend shows that the company will show mix trend of current assets and non-current assets. The overall worth of the company is expected to be $ 356, 109m in 2013, $ 350, 645m in 2014 and 353, 377 in 2015. Overall projections show little improvement in the financial position of the firm.

Forecasted Statement of Cash Flows

In the light of selected methodology, projections show improvement in the net cash flow during 2013-2015. In response to negative cash from operation activities, the business will be able to generate sufficient amount of funds through financing activities in order to support business operations.

Task 2 - Comparison and Contrast of Investment Options

Analysis of the current internal and external environment identifies different investment opportunities for the exporting firm i.e. Turners and Growers. However, there were two options with better prospects and same investment outlay (Turners & Growers, 2012). Analysis shows that Turners and Growers can make a strategic investment by entering into a venture with local fruit producer. It will add long term benefits to the business. On the contrary, the firm can make investment in setting up a new small scale plant to improve the current business capacity and productivity (Turners & Growers, 2012).

Investment Opportunities

Option 1

Venture with local fruit producer in NZ

Option 2

Install Small Plant in NZ

Comparison of the two available options identifies certain benefits ...