Use of Financial Data to Evaluate Risks and Prospect Sustainability

Useof Financial Data to Evaluate Risks and Prospect Sustainability


Useof Financial Data to Evaluate Risks and Prospect Sustainability

Analyzingthe financial data is the process of evaluation of businesses,project, and budget entities purpose i.e. the evaluation conductedfor the tenacity of determining the aptness for an investment of abusiness entity. The main aim of the financial analysis is todetermine liquidity, solvency, stability and profitability ratio ofbusiness (Benlian &amp Hess, 2011 Pai, Hsu &amp Lin, 2013). Aprofessional, who works by preparing reports with the aid of ratiosthat, contains information from the financial statements and otherreports, carries out analysis of financial data.

Throughanalysis of financial data, a company manages to assess its abilityto pay back debts, both long term and short term to its creditors.The balance sheet of a company shows its liquidity ratio. Theprofitability of a firm, which is its ability to stand its growth inboth short term and long term and earn income, is determined byanalyzing the financial data of a company. Financial data analysisreports about the ability of a company to sustain affirmative cashflow in addition to satiating of its current debts (Benlian &ampHess, 2011). This helps to know whether the company will manage tocarry on for a long period or it cannot withstand the currenteconomic issues. The stability of a company implies that it canmaintain its survival in the long-term period. The process ofanalyzing and assessing the financial data of a company involves theuse of income statements, balance sheets as well as other financialand non-financial indicators that play a main part in the process. Assuch, the assessment of the three sample plans to identify and assessrisks and future sustainability will provide a framework on how firmscan evaluate its going concern and longevity.

Riskassessment of a project is the measure of consequences andprobability of a given goal. The uncertainty of a project involvesthe costs and the project timing. The uncertainties are caused bysupply delays, outcomes of critical tests, weather and laborshortages. In every business proposal, the manager need to develop arisk management strategy prior to instigation of the project (Benlian&amp Hess, 2011 Pai, Hsu &amp Lin, 2013).A project should quantifythe risks, offer contingency plans and the effect of the project.

Agood risk assessment should be strategic fit in, such that it hasclearly linked to the objective goals of company. Services andproducts of a given firm should be assessed, in such that it willsurvive the risks involved in the market involved. The risks involvedshould involve uncertainties such as in accurate information, badtiming estimates and poor communication. Risk should ascertain of agiven project to ensure that it will survive in the long term.


TheAcme consulting as a company aims to market high-technology productsin global markets. Acme is to provide expertise as a technologycompany and develop new products. As indicated in the plan (AcmeConsulting, 2003), the company expects to engage in new markets andattract new customers in the consulting field. The amount of moneyinvested is $50000 and the profit expected to be made per year isbetween $646 -$21780. The average profit ratio is 3.7133%. From theprofit and loss account of Acme consulting, it is going to makelosses in a period of six months. Analyzing the information given byAcme is sufficient to say that the company will not have a long-termexistence. The performance of Acme consulting is low. In fact, thecompany has not identified a high-risk framework thus, its viabilityand sustainability in the market is low.

CoffeeExport business plan

Theproposal given of the Silver &amp Sons Arabica coffee, which will begrown in Brazil for exportation, reflects interesting risks andreturns for the plan. The exportation is targeted on America andlocal Brazilian wholesalers. Coffee export business is to be amongthe top five most competitive in the global market (as indicated inthe sample). The production capacity of coffee will increase per yearby 120-160000/ 60 kg per year. The profit of coffee exportation willincrease by the rate of 40% per annum. The coffee product willenlarge its markets up to 30% in its first year of operation. Fromthe financial data given, the coffee business is to perform well inthe market and its profit will grow in an ascending order yearly.From the proposal given and the bar chats shown the coffee exportbusiness is to survive in the short-term period but it is not certainit will survive in the long term. From the analysis, the performanceof the coffee export business is medium.

Truckstop business plan

Thecompany is to deal with interstate travelling. It is expected tomajor in Texas and Dallas cities. The trucking business will alsoconsist of restaurants, gas, diesel islands, amenities of thetrucking businesses and conveniences stores. From the financial datagiven by the Janet and smith who owns the company, profits are goingto increase in a slow manner year after year (as indicated in thesample). Out of the $436 billion revenues collected in U.S five centsof every dollar comes from transport sector. Trucking business hasclaimed 79% of the U.S freight transportation. The ratio of cashinjected to cash flows realized is 40%. As such, the plan has a highperformance, although its risk portfolio is very high. In fact, theproject will have a short-term and a long-term viability andsustainability.

Fromanalyzing the financial data, the truck business should use a highdiscounting rate to compute the cash flows of the project. The profitof the truck business is 7.36% per annum. The truck business is riskfree hence, it will survive both short term and long-term effects.Coffee export business is risk neutral according to the proposal andit should have a moderate discounting rate. The coffee business hasan average profit of 5.88% per annum. Acne consulting has a profit of3.17%, this shows the project is risk averse. The discounting rateused by acme consulting supports a low performance.


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Pai,P. F., Hsu, M. F., &amp Lin, L. (2013).Enhancing decisions with lifecycle analysis for risk management.NeuralComputing and Applications,1-8.

Silveraand Sons. (2010, April 16). Coffee Export Business Plan.Sample.Retrieved June 12, 2014, from

StopBusiness Plan. (2010, March 16). Truck Stop Business Plan.Sample.Retrieved June 12, 2014, from