This note introduces fundamental financial tools and techniques employed by financial managers and analysts to evaluate and enhance the financial position of a business. Forms of ownership, statement of cash flows, financial ratio analysis, projected financial statements, sensitivity analysis, credit, sources and types of financing, and bankruptcy are discussed in this note.

Amway of Canada is faced with decisions surrounding the replacement of photocopiers at its Canadian headquarters. As the lease has expired on its current copiers, Amway is beginning the process of evaluating new copier brands, vendors and related technologies. However, what initially appeared to be a rather straightforward rebuy purchasing situation is becoming a more complex organizational decision. Specifically, the number of potential vendors is .....more

One of the founders of a small business owners' purchasing cooperative organized four months earlier, was reflecting on its successful performance. The members of the co-op were willing to share responsibilities in the management of the co-op's primary activities of obtaining price quotes, invoicing members, and making delivery arrangements. The members were currently considering the possibility of extending the types of materials purchased .....more

Up-In-Smoke is an inventory valuation exercise using the periodic method. Completed in two steps, students are first required to value the total goods available for sale by considering items such as duty, taxes, returns, discount terms, FOB, and purchase prices. Once completed, various methods to value the inventory ending balance can be applied and compared, namely FIFO, LIFO and the weighted-average-cost method.

After one year of operations, the new manager of a tennis pro shop and bar lounge must prepare, with the help of the company's accountant, financial statements from notes kept throughout the year. The case is intended to be an introductory exercise in accounting for simple transactions relating to assets, liabilities, revenues and expenses. Adjusting entries such as amortization and cost of goods sold are required. Students are asked to complete .....more

An entrepreneur was investigating the feasibility of opening an Italian fast food franchise called Rosa's Palas. He spoke to the franchisor concerning a few franchise break-even points, and his return on investment for his restaurant. With this information, the entrepreneur felt he could decide whether he would invest in the franchise.

Mr. Stuart Foreman, assistant manager of the London, Ontario branch of the Central Canadian Bank, was reviewing information he had received from Maple Leaf Hardware Limited. Mr. Robert Patrick, president and manager of Maple Leaf Hardware Limited had requested an increase in his line of credit with the bank to cover seasonal working capital needs. Mr. Foreman, who had just received a transfer and promotion to the London branch, realized he would have .....more

The mechanics of preparing projected financial statements are described to provide an understanding of the methods used in preparation, and to outline how these projections can be modified and used in financial planning and management decision making.

This note discusses cost behaviour, break-even analysis contribution and projected income statements. In addition to the theoretical framework, two examples are presented and analyzed.

One month's worth of purchases and sales at a restaurant supply company must be recorded, the ending balance in accounts receivable and accounts payable must be determined, and the revenue and cost of goods sold sections of an income statement must be prepared. This exercise is suitable for an introductory course in financial accounting.