C. The firm's ability to pay its debts as they mature. D. The firm's ability to invest in a number of projects with different objectives and costs. Answer: B Financial flexibility refers to a firm's ability to respond and adapt to financial adversity and unexpected needs and opportunities.
Feb 14, 2018 · Companies with high debt / asset ratios are said to be highly leveraged . The higher the ratio , the greater risk will be associated with the firm 's operation . In addition , high debt to assets ratio may indicate low borrowing capacity of a firm , which in turn will lower the firm 's financial flexibility .
Risk assessment process: Table IV presents the comparison between criteria on which risk assessment is performed in literature compared to the firm. It is evident that the firm only conducts risk assessment on seven of the fifteen criteria identified in literature. There are five supplier selection criteria highlighted in Table IV which have inconclusive data where …
Case Preparatory Questions: 1) What are the annual cash outlays associated with the bond issue? 2) What are the annual cash outlays associated with the common stock issue? 3) How would you respond to each director’s assessment (or concerns) regarding each financing alternative? 4) How should the acquisition of MPIS be financed, taking into account the issues of control, …
Defined as a method used to review and analyze the financial statements of a business entity, financial statement analysis provides insight into an entity's future performance by reviewing its past performance. This insight can also enhance the decision-making process by identifying problem areas.
Financial statement analysis uses analytical methods and ratios to evaluate the performance of a business, including the business’s liquidity, solvency, and profitability. Horizontal, vertical, and ratio analysis are common methods used to analyze financial statement information.
Flexibility aspects of the capital structure decision are very similar to risk problems and are analyzed in the same way. In contrast with a risk problem, a flexibility crisis is one of the large number of improbable but possible events that threaten the basic earning power of the business. These are events with which the firm ...
Typical of memorable flexibility problems was the bankruptcy of Rolls Royce, which created a flexibility crisis for Lockheed because Lockheed had been counting on using new Rolls Royce engines in the 1011 jet airliner. Several unfortunate food companies have experienced flexibility crises when a product was found to be contaminated.
If financial viability remains a risk following analysis of information provided, entities should consider seeking additional information where consistent with tender request documentation. In such cases, consideration should be given to any additional cost to both the entity and the tenderer.
A Financial viability assessment evaluates the risk that, over the life of a proposed contract, a tenderer:#N#may not be able to deliver the goods and services which are specified in the contract; or#N#may not be able to fulfil guarantees or warranties provided for in the contract.
Financial statements can be analysed to provide insight into a tenderer's financial stability. A range of financial ratios can be used to assess a tenderer's profitability, liquidity and financial stability. Care should be used in applying the ratios, as standards vary between industries.
Tender request documentation should include a mechanism to allow entities to exclude tenderers that are considered too high risk. The tender request documentation should also specify the documents that are required to undertake a financial viability assessment of the preferred tenderer.
Projects involving a large value procurement are generally more risky than those involving a small value procurement. However, procurement value should not be used as the sole indicator of project risk. In assessing financial viability risk, the value of a procurement within a project should be considered both in the context ...
Ratings entities can be a source of background information and financial viability information which can support a consideration of viability. In addition, regulatory registry information, including that held by the Australian Securities & Investments Commission, the Australian Business Register and various State and Territory registers can provide useful information for consideration in viability assessments.
Where project risk is low, a financial viability assessment may not be necessary. A Tenderer's Declaration as to financial viability may be an adequate indication of the tenderer's financial viability.