Name Instructor Date Assignment 2 Finance Accounting Senior

Nameinstuctordateassignment 2finance Accounting Senior Accounta

Assignment 2 FINANCE & ACCOUNTING – SENIOR ACCOUNTANT Analysis Due Date: Week 5 Note: While representative of possible situations faced by SunsTruck Sunglasses, all scenarios in this assignment are fictional. Real Business Large discount retailers like Target and Walmart employ large teams of Finance and Accounting professionals to help measure and understand the financial health of the business. Financial and accounting information helps these businesses make educated financial decisions, such as whether or not to continue partnering with a retail supplier. While often smaller businesses, it is equally important for these retail suppliers to use financial and accounting data to make educated decisions, such as the best approach to gaining additional funding.

Your Role This week, you’ll assume the role of Senior Accountant with SunsTruck Sunglasses. What Is a SENIOR ACCOUNTANT? Senior accountants take ownership of reporting costs, profitability, margins and expenditures for a given business. They use the principles of accounting to analyze sales information, create financial reports, make recommendations about the financial health of the company, and more. They are also responsible for training junior accounting staff.

For the last six months, SunsTruck has partnered with the discount retail store to run a pop-up sunglasses stand in their stores for a big summer promotion. Due to the high customer purchase rate, the store has requested stock for five additional stores. SunsTruck needs to increase its capacity to meet the additional demand. In order to do so, SunsTruck needs additional money. In this assignment, you will need to help determine which type of financing option is best for your company and train your junior accountants on the accounting cycle and financial statements.

Instructions

Step 1: FINANCING The junior accounting team has assembled a Financing Report that (a) offers three options for securing the additional funds required to meet the new order; and (b) details the criteria Shaun, the owner of SunsTruck, would like you to consider when choosing one of the three options. Based on this report:

• Identify which financing option you think is the best option for SunsTruck to pursue given Shaun’s constraints. Underline your selection:
• Option 1: Equity
• Option 2: Debt
• Option 3: Debt + Self-Financing
• Explain the rationale for your decision. Note: You should complete Steps 2 & 3 after reading the material in Week 5.

Step 2: ACCOUNTING CYCLE A junior accountant is working to get everything in order for the new financing and has come to you with a question about what do next in the accounting cycle.

• Read the email the junior accountant sent you and identify the best next step to take in the accounting cycle.
• Explain your reasoning.

Step 3: FINANCIAL STATEMENTS A potential investor has been identified, but before it is willing to commit, it has requested information about SunsTruck’s current debt from the junior accountants.

• Identify the correct financial statement for your junior accountants that will provide the investor with the information it has requested. Underline your selection:
• Income Statement
• Balance Sheet
• Cash Flow Statement
• Explain to your junior accountants why you are giving them this financial statement and where the debt information is located.

Step 4: FINANCIAL ANALYSIS

If you were the type of financier selected in Step 1, would you invest in SunsTruck? Explain the rationale for your decision.

Paper For Above instruction

The assignment requires a comprehensive analysis of SunsTruck Sunglasses’ financial strategy and decision-making process as a Senior Accountant. This involves evaluating the optimal financing method for expanding capacity, understanding the accounting cycle, and interpreting financial statements to support investment decisions. Each step demands a detailed rationale rooted in financial principles, alongside practical application tailored to the fictional scenario presented.

Introduction

As a Senior Accountant at SunsTruck Sunglasses, my role encompasses financial analysis, decision-making, and guiding junior staff through core accounting processes. The current scenario involves determining the best financing strategy for an expansion project and utilizing financial statements effectively for stakeholder communication. Accurate financial analysis and strategic decision-making are critical to ensuring sustainable growth and maintaining investor confidence.

Step 1: Evaluating Financing Options

The financing report presents three options: equity, debt, and a combination of debt and self-financing. Each has distinct characteristics impacting the company's financial health and strategic objectives. Equity financing involves selling ownership shares, diluting control but providing capital without repayment obligations. Debt financing entails borrowing funds that must be repaid with interest, increasing leverage but preserving ownership. A combination approach leverages both methods, balancing risk and control.

Given Shaun's constraints—possibly concerns about debt load or dilution of ownership—the best option appears to be Option 2: Debt. This choice allows SunsTruck to access funds without relinquishing ownership control, assuming the company's cash flow can handle debt repayments. Debt also often has tax advantages and can be quicker to secure compared to issuing equity.

The rationale for selecting debt includes a strategic focus on minimizing dilution, maintaining managerial control, and leveraging favorable borrowing conditions. A mixed approach (Option 3) might be advantageous if the company wants to mitigate risks, but prioritizing debt aligns better with Shaun’s apparent constraints and the need for swift expansion.

Step 2: Next Step in the Accounting Cycle

The junior accountant’s query pertains to the subsequent phase in the accounting cycle following the recording of a financial transaction. The primary next step after journalizing transactions is posting entries to the ledger accounts. This step consolidates transaction data, enabling the preparation of accurate trial balances.

This process ensures that all financial data is systematically organized, facilitating the detection of errors and preparing for the creation of financial statements. My reasoning centers on the importance of maintaining a complete and accurate ledger, which serves as the backbone of reliable financial reporting.

Step 3: Financial Statement for Debt Information

The correct financial statement to retrieve current debt information is the Balance Sheet. This statement provides a snapshot of the company’s assets, liabilities, and shareholders’ equity at a specific point in time. The company's current debt obligations are recorded under liabilities, making the balance sheet the primary source for debt information.

By providing the investor with the balance sheet, I explain that it offers an aggregated view of all short-term and long-term liabilities, including outstanding loans or credit lines. The debt information is located within the liabilities section, often itemized under current liabilities (due within a year) and non-current liabilities (due after a year).

Step 4: Investment Decision Based on Financial Analysis

If I were the financier opting for debt funding, my investment decision would hinge on the company’s ability to generate sufficient cash flows to service debt and its overall financial stability. I would assess key ratios such as debt-to-equity, interest coverage, and profitability margins, alongside qualitative factors like market position and growth prospects.

Assuming SunsTruck demonstrates strong sales growth, manageable debt levels, and positive cash flows, I might decide to invest. The rationale is that the company’s expansion supports revenue growth and could enhance profitability, thus enabling debt servicing and providing potential returns on investment.

Conversely, if the company exhibits weak financial metrics or high leverage, the risk of default would deter investment. Therefore, my decision is contingent on thorough financial analysis, aligning with industry benchmarks and the company’s strategic outlook.

Conclusion

In summary, selecting debt as the optimal financing strategy balances control preservation with growth opportunity. Ensuring accurate accounting procedures, particularly in posting transactions and reporting liabilities, underpins decision-making processes. The balance sheet is the key document for understanding current debt levels, crucial for investor relations and internal assessments. As a financier, careful analysis of financial ratios and market potential determines whether investing in SunsTruck aligns with risk tolerance and return objectives. Sound financial practices and prudent strategic choices are essential for sustainable growth and competitive advantage in the retail sunglasses market.

References

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