8-10 pg (excluding spreadsheets, graphs, and references), double spaced 12pt Times New Roman APA format.
After having evaluated the company’s financial health, research and assess the company’s strategic priorities and behavior. Investigate internal risks and non-monetary factors that may affect current and future performance and decisions. To justify findings and projections, produce accurate and relevant data tables, explaining how the numbers were informed by existing information and modeling different scenarios.
1. Success Factors and Risks.
Discuss the factors that may affect current and future performance. Specifically:
A. How do WFC’s financial and strategic priorities affect accounting procedures and business decisions? How might that affect business success? For example, is management growth-oriented or efficiency-oriented? What is WFC’s approach to risk and short- versus long-term planning horizons?
B. How might WFC better capitalize on non-financial factors such as market share, reputation, human resources, physical facilities, or patents? Support your response with relevant research and analysis.
C. What are the most significant internal risks to the company’s financial performance? Give evidence to support your response. For example, is the company vulnerable to technological changes or cyber-attacks? Loss of high-talent personnel? Production disruptions?
Based on what you know about WFC’s financial health and performance, forecast its future performance. In particular, you should:
A. Project WFC’s likely consolidated financial performance for each of the next three years. Support your analysis with an appendix spreadsheet showing actual results for the most recent year, along with your projections and assumptions. Remember, your supervisor is interested in fresh perspectives, so you should not just replicate existing financial statements, but should add other relevant calculations or disaggregations to help inform decisions.
B. Modify your projections for the coming year to show a best- and worst-case scenario, based on the potential success factors and risks you identified. As with your initial projections, support your analysis with an appendix spreadsheet, specifying your assumptions and including relevant calculations and disaggregations beyond those in existing financial reports.
C. Discuss how your assumptions, forecasting methodology, and information gaps affect your projections. Why are your projections appropriate? For example, are they consistent with WFC’s mission and priorities? Aggressive but achievable? How would changing your assumptions change your projections?
These solutions may offer step-by-step problem-solving explanations or good writing examples that include modern styles of formatting and construction of bibliographies out of text citations and references. Students may use these solutions for personal skill-building and practice. Unethical use is strictly forbidden.According to Wells Fargo (2018), the five strategic priorities that provide direction for WFC’s business decisions are: focusing on the customer, building the best team, enhancing risk management, managing performance and finally strengthening financial performance. These strategic priorities are important because WFC’s financial statements are based in part on assumptions and estimates which, if wrong, could cause unexpected losses in the future. WFC’s management is responsible for formulating and overseeing the implementation of accounting procedures, thus the company’s accounting procedures and business decisions are likely to be affected by financial and strategic priorities because the company’s management is responsible for both. Additionally, WFC’s financial statements depend on the company management’s internal controls over financial reporting, therefore they are likely to be affected by management’s perspectives regarding financial and strategic priorities (Wells Fargo, 2018).
Pursuant to U.S. GAAP, the management of WFC is required to use certain assumptions and estimates when preparing annual financial statements. One of the areas where management makes assumptions is determination of reserves such as credit loss, mortgage repurchases and litigation among others. Additionally, management estimates the fair value of certain assets and liabilities and as pointed out earlier, one of WFC’s strategic priorities is to strengthen financial performance. This strategic priority raises the likelihood of management’s overestimation of certain assets or under-allocation of reserves. It is also important to note that WFC accounting policies require management to make difficult, subjective and complex judgments about matters that are inherently uncertain (Wells Fargo, 2018). Consequently, there is high likelihood of WFC experiencing material losses if management’s assumptions or estimates underlying the company’s financial statements are incorrect.
WFC’s executive management’s strategic plan for the period 2016 to 2021 which is the period under which the projections discussed in this paper lie imply a growth-focused management, so the company is expected to continue on its recent growth trajectory. The company’s vision statement is to satisfy customers’ financial needs and help them to succeed financially (Morningstar, 2018), thus the WFC management’s focus is to reinforce the company’s risk infrastructure, diversify its portfolio. Additionally, the company aims to become more productive and integrated, capitalize on its global capabilities, achieve rising recognition and increase focus on relationship banking. WFC’s key areas of improvement over the next few years include increasing digital sales, upgrading compliance infrastructure, building a differentiated brand positioning, improving the quality of its end-to-end processes and finally cultural shift to improve satisfaction (Wells Fargo, 2018).
The most significant internal risks to WFC’s financial performance
WFC faces multiple significant internal risks that may affect the company’s financial performance. One of the significant internal risks to the company’s financial performance is acquisitions which form a significant part of WFC’s expansion strategy. WFC regularly explores opportunities to expand its products, services and assets through acquisitions. Acquiring a business in the financial services industry often requires federal regulatory approval and since WFC is effectively a multinational the level of regulatory scrutiny when it comes to acquiring businesses in other countries is even higher. Additionally, regulatory approval has become more complex...
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