CFO Presentation Background
• This is a presentation to a banker who the company
wants a loan from and is a targeted financial statement
analysis.
• This is NOT a sales job. You are presenting the facts
only regardless of how good or bad they might be.
• This is a focused financial analysis and everything you
talk about should be restricted to information that you
think will be of use to the banker
• The banker is NOT interested in lots of detail, but only in
the areas that will affect the company’s ability to pay.
CFO Presentation
Question A1
• A1. Key Points – This is analogous to the Horizontal, Vertical and
Trend Analysis in Task 1, but restricted to accounts that the banker
is interested in.
– The banker is concerned about Profitability, Liquidity and Solvency.
– Don’t use ratios since you’ll be talking about them in A3.
– State the line item, provide a status, describe why the line item is
important to the banker.
CFO Presentation
Question A2
• A2. Risks – Put yourself into the shoes of the banker and define
risks that a banker might be concerned about in looking at Custom
Snowboards’ financial statements and how the company can
mitigate them.
– Key Thought: What is going to give the banker nightmares? What
worries the banker? These are NOT internal control risks, but risks
associated with poor performance of the company.
– You’ll need three or so risks. You can base them on line items that you
discus in A1. e.g. Declining Sales could be a risk.
– You might think of writing down the risks and how CS will work to
mitigate on two sides of a piece of paper to make sure you’ve got both
the risks and the mitigations included with you answer.
CFO Presentation
Question A3
• A3. Ratio Analysis – Discuss the key ratios that a banker will be
most interested to detect the company’s ability to pay the interest
payments and the loan principal. Useful tab: Horizontal Analysis –
ratio section.
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Ratios should address Profitability, Solvency and Liquidity
What is the ratio?
What is the current status of the ratio (like Task 1)
Why is it important to the banker and the company’s ability to pay?
CEO Presentation
Bring the Board Up to Speed
– B1, B1a, and B2 are questions that follow an
informational discussion with the Board of
Directors.
– This is another targeted financial analysis to
give the Board an idea of how the company
has performed in the past three years.
– Do not contemplate the European expansion.
CEO Presentation
Question B1
– B1. Historical Analysis – This analysis
is more broad than the Key Points
answer in the CFO presentation,
because the Board is interested in more
aspects of the company and ‘how we
got here’ kind of information
• Show selected accounts – Year 12 to Year 13 to Year
14
• Useful tabs: Horizontal Analysis, Vertical Analysis
CEO Presentation
Question B1a
– B1a. Future Performance – The historical
analysis is extended to project the future results
of the company. The prime focus is on the past
three years and how they lead up to the results
forecasted in the next three years.
• Outline the sales changes in dollars and percentages
• The Horizontal and Vertical Analysis might provide a
bit more perspective and what trends in the first three
years might provide indicators of what could happen in
the three future years.
• Useful tabs: Trend Analysis
CEO Presentation
Question B2
– B2. Improvement – Discussion on what you would
do to improve operational results. It is suggested to
come up with at least two cost improvement
programs, one being Activity Based Costing.
• Useful tabs: Activity Based Costing
• ABC counts as only one measure and you should bring data in from
the spreadsheet that shows how Custom Snowboards can use ABC
to reduce costs.
• You can discuss another big program like Just In Time inventory,
Six Sigma quality control or Lean Manufacturing. You need to
make sure that you include discussion on how that program will
benefit Custom Snowboards.
– Describe the cost control program
– Provide a paragraph that outlines how Custom Snowboards can specifically
benefit from the program.
CEO Presentation
The Expansion
• The rest of the task deals with your presentation to the
CEO of your analysis of various aspects of the European
Expansion.
• B3 questions are business risks
• B4, B5, and B6 are based on the same principles
discussed in Task 3.
– B4 – Capital Budgeting, Lease/Buy
– B5 – Merger/Acquisition
– B6 – Capital Structure
CEO Presentation
Questions B3 and B3a
• B3. Internal and External Risks – Use the European
expansion as the basis for risk identification. You are
NOT discussing internal control risks, but general
business risks.
– Internal risks are things that management has some control over
(e.g. technology transfer, work environment, information
systems)
– External risks come from outside the company (currency,
regulation, economy, competition)
– Suggestion: Three internal risks and three external risks
– There are no tabs required for the B3 questions
• B3a. Recommendation – Discuss in detail how the above
identified risks will be mitigated.
– Make sure that for each risk you have defined a mitigation.
– Mitigations may not solve the risks, but minimize their effects.
CEO Presentation
Question B4
• B4. Potential Returns – This is similar to the Capital
Budgeting question in Task 3, but there are no multiple
scenarios.
– Please state that this project is the Build a New Plant in Europe (or
Direct Expansion) alternative… Not merger, not acquisition.
– Define NPV and IRR. Why are they important measures?
– What is the goal (hurdle rate)?
– Discuss the impact of your interpretation of the result on the Build
expansion option decision
– Lease/Buy tab is applicable as additional financing options to be
considered if the Build option is chosen.
• Lease/Buy is a secondary decision AFTER you choose to build a new plant in
Europe.
– Useful tab: Capital Budgeting for overall discussion. Lease /
Purchase tab for lease vs. purchase discussion
CEO Presentation
Question B5
• B5. Summary – Discuss and choose a specific expansion
alternative in this question.
– Discuss the Pros and Cons of Merging, Acquisition, and Build a
New Plant. Suggest a separate paragraph for each alternative.
You need to determine which of the alternatives are financially
viable.
• Build: discuss result of Capital Budgeting (B4)
– Lease/Buy, if applicable
– Other pros and cons.
• Merger: Business combo with ESF via Stock Swap
– Discuss the result of EPS affects and stock dilution effects.
– Other pros and cons.
• Acquisition: Business combo with ESF via Stock Purchase
– What is NPV? (total present value – investment = NPV)
– Other Pros and Cons
• Your decision.
– Useful tabs: Merge/Acquire, Capital Budgeting
CEO Presentation
Question B6
• B6. Presentation –Present a specific choice on best
capital structure alternative for your recommendation.
– State expansion choice
• If merger, will it require large cash outlay? If it doesn’t will you finance the
merger?
• Regardless of your expansion decision, you still must discuss the capital
structure as if company has to raise significant capital.
– Similar to Task 3 Questions 1 and 1a, complete Capital Structure
tab.
– Which capital structure has optimum EPS for the entire 5 year
period? That is your final financing recommendation.
– Make sure you state all four capital structure alternatives along
with the five-year EPS results.
• Pertinent tab: Capital Structure
Submission Tips
• For your discussions, make your point/decision obvious and
back it up with detail found in the spreadsheets. Insufficient
data and insufficient analysis will result in a rejection.
• Remember to always apply analysis. Don’t just put in the
numbers, but explain why they are different and if you can
put them in a context with other numbers do so. A lack of
analysis will result in that element not passing.
• Make sure you organize your work according to the rubric
questions, so that the grader can easily identify your specific
answers.
• Don’t overthink your answers, but base them on the
information given. If in doubt on details, refer back to the
story line or the spreadsheet. If you find yourself guessing,
it’s better not to guess and stop your discussion.