University Financial Analysis: New Ice Hockey Arena Project Report

This report conducts a financial management analysis of the New Ice Hockey Arena project. The analysis focuses on the project's investment viability, potential profitability, and associated risks. It examines the initial investment of $555 million, the sources of funding, including government and owner contributions, and the projected financial statements. The report highlights the potential for high returns after the initial year, with a projected 40% profitability, and emphasizes the role of financial leverage. It also considers the potential risks, such as initial losses, and the long-term financial stability of the project. The analysis references relevant literature on financial management, transnational management, and e-commerce, and concludes with a recommendation for the Director of Business Development to proceed with the project. The report also mentions the use of debt funding and the impact of low-interest rates on investment opportunities.

RUNNING HEAD: Financial management analysis of New Ice Hockey Arena 0
Name of the student
Topic- Financial management analysis of New Ice Hockey Arena
University Name

Financial management analysis of New Ice Hockey Arena 1
1 Memorandum
To: The Director of Business Development
From: Financial analysis
Date:
Subject- Project investment for setting up of New Ice Hockey Arena
It is analysed that The Director of Business Development should accept the New Ice
Hockey Arena project. This project will provide good amount of return on the investment.
However, setting up of New Ice Hockey Arena will require Canadian 555 million dollar
investment.
Moving forward with the project
After analysing the projected financial statements of company, it could be
inferred that company has loss in the first year. However, after that, the new project would offer
40% profitability. Financial leverage of New Ice Hockey Arena is also stable which reflects that
company could also increase more capital form the debt funding. Therefore, it could be inferred
that Director of Business Development should undertake the New Ice Hockey Arena for its
investment purpose. However, there are contingence chances that company might face abnormal
losses but within 10 years company would easily cover all the initial investment (Toomla et al.
2018).
Areas of concern

Financial management analysis of New Ice Hockey Arena 2
Initial investment in the present year may result to high loss of value to the investors in the
present year. The best part of this project is related to the project investment. It is analysed that
1/3 of the investment is made by government and 2/3 would be contributed by the owners.
Viability of the project
This project offers good amount of profit to owners. They could also redeem their capital by
issue of more capital and debt funding in market. The bank interest rate is also very low which
could be used by the owners to raise funds from the market (Brigham and Ehrhardt, 2013).

Financial management analysis of New Ice Hockey Arena 3
2 References
Bartlett, C.A. & Beamish, P.W., (2018). Transnational management. Cambridge University
Press.
Brigham, E.F. &Ehrhardt, M.C., (2013). Financial management: Theory & practice. Cengage
Learning.
Laudon, K.C. & Traver, C.G., (2013). E-commerce. Pearson
Maveyraud, S. & Parent, A., (2018). The international contagion of short-run interest rates
during the Great Depression. In Coping with Financial Crises (pp. 17-46). Springer,
Singapore.
Otieno, D.A., Ngugi, R.W. & Muriu, P.W., (2018). The impact of inflation rate on stock market
returns: evidence from Kenya. Journal of Economics and Finance, pp.1-18.
Toomla, S., Lestinen, S., Kilpeläinen, S., Leppä, L., Kosonen, R. & Kurnitski, J., (2018).
Experimental investigation of air distribution and ventilation efficiency in an ice rink
arena. International Journal of Ventilation, pp.1-17.
3 Appendix
Please double click on the box to directly link to the excel file
Computation of financial data
Details (New Ice Hockey Arena for the Calgary Flames (All the
Total revenue
Cost of goods sold
Gross profit
Operating profit
Net profit
Interest
Inventory
Current assets
Cash and cash equivalents
Receivables
Current liabilities
Payables
Shares outstadning
Equity
Total liabilities
Total assets
Market share price
Description Formula
Profitability
Rqturn on equity Net profit/revenues
Return on assets Net profit/Equity
Financial leverage EBIT / EBIT - Interest
Asset turnover total assets / total sales *365
Earkings per share Net income - pref div / shares outstanding
Description
Liquidity
cash ratio cash equivalents + cash / current liabilities
Current ratio Current assets/current liabilities
Quick Ratio Current assets-Inventory/current liabilities
Receivable turnover Receivables/ Total sales*365
Inventory turnover Inventory / cost of goods sold *365
Description Formula
Times inteest earned EBIT / Interest expenses
Cash coverage ratio EBIT + non cash expenses / interest expenses
Debt to Equity Ratio Debt/ Equity