Once again if the president’s bonus is based off of net income, this situation is the most favorable for a high paying bonus and encourages stockpiling inventory to inflate net income. b. If the sales outlook for the coming three years were to increase to 30,000,000, the newly implemented system would prove valuable to B.E. Company. If production is kept the same, the company is predicted to sell every unit produced which would avoid a stockpile of inventory and also safeguarding an extra 5,000,000 units in ending inventory in case sales go above 30,000,000.
2. Why does a business that has a profit of $30,000 per year need a bank loan? They have a shortage of cash since they are usually taking advantage of the trade discounts. They also have a lot of money tied up in inventory and they are collecting their accounts receivable much later (about 43 days) then they are paying their accounts payable (about 10 days). – ratios in excel spreadsheet 3.
Calaveras Vineyards PROBLEM STATEMENT Senior Vice President, Anne Clemens of Golden-gate Capital, is contemplating an investment proposal for lending a $4.5 million dollar line of credit to Calaveras. The continuous growth in the wine market makes the loan approval more appealing however challenging to pursue. In order to decide whether to agree to the proposal or not, Clemens needs to determine the estimated worth of Calaveras Vineyards. ANALYSIS Calaveras Vineyards is located in Alameda Valley, California and was established in 1883. Despite the many changes in ownership Calaveras continues to grow in sales.
Case Clarkson Lumber Company Corporate Finance Summer 2015 Note: This handout is for your own use only and should not be distributed to others! 1 Introduction Clarkson Lumber Company is a rapidly expanding, profitable company with large external financing needs that cannot be satisfied under the current relationship with the Suburban National Bank The company must decide whether to continue expanding, and if so, how to raise the necessary funds As part of this decision Clarkson Lumber considers starting a new bank relationship with the Northrup National Bank in order to obtain a secured line of credit with a maximum amount of $750,000 at terms to be specified Analysis from the perspective of Clarkson Lumber Company and the bank 2 Main Issues • Why does Clarkson Lumber need to borrow increasing amounts despite its consistent profitability? • How has Clarkson met the financing needs of the company during the period 1993-1995? Has the financial strength of the company improved or deteriorated? • Will a credit line of $750,000 be sufficient to meet the company's financing needs in 1996?
He also implied that the stock in the corporation has become available because the financial problem of a current stockholder, who is in need have cash. Although the company presents an attractive number in the growth rate, Bob Adkins still needs to take a look at all ratios to analyze the overall condition of the firm. There are three purposes of this paper which is comparison the results from the ratios in the firm for each year with the industry, determine the overall condition of the firm, and give recommendations to Mr. Adkins. Analyzing the financial Statements and financial ratios. Meaning of the signs: ↑ = Good ↓ = Not Good ↔ = Normal | | 200X | 200Y | 200Z | | Growth in sales | Company | - | 25% | 25% | ↑ | | Industry | - | 10% | 12% | | Profit margin | Company | 7.35% | 6.12% | 6.38% | ↓ | | Industry | 7.71% | 7.82% | 7.96% | | Return on assets | Company | 8.02% | 6.80% | 5.70% | ↓ | | Industry | 7.94% | 8.68% | 8.95% | | Return on equity | Company | 15.90% | 14.20% | 13.98% | ↓ | | Industry | 14.31% | 15.26% | 16.01% | | Receivable turn over | Company | 7.06x | 5.79x | 5.21x | ↓ | | Industry | 9.02x | 8.86x | 9.31x | | Average collection period | Company | 51.7days | 63.0days | 70.1day | ↓ | | Industry | 39.9days | 40.6days | 38.7days | | Inventory turnover | Company | 3.48x | 3.98x | 4.52x
With Starfire already operating at (or near) full capacity, James is uncertain that his company can handle the additional routes. James feels that accepting the offer might require adding more trucks and possibly incurring additional debt. The issue is whether the rates offered by FHP are high enough to offset the associated risks of growing the fleet. Although James has grown his business organically through the years by reinvesting profits, the company has incurred debt from time to time to replace older equipment (usually in blocks of five trucks). He knows that the slim profit margins associated with trucking, coupled with a downturn in the economy, could spell disaster if Starfire were saddled with too much debt.
Even though federal budget constraints was a relevant factor over the past five years, the industry has experienced revenue growth due to strong demand. Growth is anticipated to accelerate in the coming years as freight lines develop larger cargo vessels, which will create the need for investments in dredging services to boost the capacity of ports. A political push to make more funds available for port improvements is also expected to benefit the dredging industry. This would allow investment in better equipment and innovative technology to improve efficiency to meet growing demand. Dredging is the removal of debris and sediment from water bodies, Dredging companies usually charge for this service on the basis of cubic yards of material removed.
Question 1) • Fortis has been facing strong competition: Since 2002, Fortis has been losing nearly 2% per year of the steel strapping market (in 2002 50% and 2008 40%). • Furthermore Fortis is confronted with significant erosion of prices: Other competitors initiated price war and Fortis refused to continuously cut its price. This also led to the fact that Fortis loosed market share to its competitors. • These effects are coupled with the overall declining health of the industrial economy and the fact that Fortis as well as its competitors are closely tied to this. (Overall decline of market / demand) and the increasing price sensitive of customers.
You see, with the continual growth and sales within his foreign market John not had the man power, time, or financial means to satisfy his smaller local businesses. He has gotten several complaints about late deliveries and no longer accepts returns at the end of the season or to allow mark down allowances. However, because of the financial growth with the foreign market John has not seen it fit to improve his quality of business within the smaller business. John’s big dilemma is that his major domestic mail-order chain in the United States is threatening to pull out of business with Hudson Shoe Company, however the international business is offering a possible increase in business if John will allow an additional $2 per pair towards the defense ministers, who approved major business among the navy and army and also an additional $2 per pair towards the minister of revenue to continue granting import licenses. But it is not this cut and dry.
So far, Jones Electrical’s financial needs have been met by Metropolitan Bank; however, this growing company is considering shifting to Southern Bank and Trust in order to gain access to a larger line of credit. While Metropolitan Bank offers a $250,000 line of credit, Southern Bank and Trust may be willing to extend a $350,000 line of credit. There are several recommendations that Jones Electrical should take action on in order to remain solvent and continue their company growth. Jones Electrical will need to increase its line of credit. Therefore, we would first have Jones Electrical move forward with acquiring the new line of credit from Southern Bank and Trust.