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PROJECT 10Intermediate

Balance Sheet and Working Capital Analysis

Business scenario

A lender is reviewing Orion's credit line and asks for an analysis of liquidity and working capital trends.

Problem statement

Analyse the month-end balance sheet 2023–2025: structure, liquidity, working capital and its relationship to sales.

Learning objectives

  • Read and validate a balance sheet
  • Compute working capital and liquidity ratios
  • Link working capital to operating activity

Instructions

Validate Assets = Liabilities + Equity each month. Working capital = current assets − current liabilities. Compute current ratio, quick ratio (excluding inventory), and days metrics (DSO, DIO, DPO) using monthly revenue and cost of sales from pnl_monthly.

Tasks

  1. Balance check per month.
  2. Working capital and ratios by quarter-end.
  3. Cash conversion cycle = DSO + DIO − DPO.
  4. Commentary on trend and seasonality (December).
  5. Two questions you would ask management.

Deliverables

  • Excel analysis
  • Lender note

Evaluation rubric

CriterionWeightExcellentProficientDevelopingInsufficient
Validation15%Balance verified for all months.Correct and complete with minor gaps in rigour or presentation.Partly correct; important steps missing, unvalidated or unclear.Missing, incorrect, or not supported by the data.
Ratios & working capital30%All ratios correct with formulas shown.Correct and complete with minor gaps in rigour or presentation.Partly correct; important steps missing, unvalidated or unclear.Missing, incorrect, or not supported by the data.
Interpretation30%Trend and seasonality interpreted correctly.Correct and complete with minor gaps in rigour or presentation.Partly correct; important steps missing, unvalidated or unclear.Missing, incorrect, or not supported by the data.
Presentation15%Concise, well-labelled outputs a manager can act on without explanation.Correct and complete with minor gaps in rigour or presentation.Partly correct; important steps missing, unvalidated or unclear.Missing, incorrect, or not supported by the data.
Questions to management10%Insightful, specific.Correct and complete with minor gaps in rigour or presentation.Partly correct; important steps missing, unvalidated or unclear.Missing, incorrect, or not supported by the data.