This may have been for any number of reasons, however if this was cut simply to conserve cash it could result in slower growth in the long term. The cash and cash equivalents have grown by 348.2% which is alarming. This is an indication that the company is not investing their cash appropriately. This cash could have been invested in the aforementioned research and development to keep the business competitive in the long term. A few smaller points that are still worth mentioning are that the receivables have dropped 15%.
This would also help improve the company’s inventory turnover ratio from 4.7 to the industry average of 6.1. The firm’s debt ratio anticipation of 44.17% is better than the market average and will allow the company to pay down its debt quicker than competitors and have more cash on hand. The extra cash on hand provides more liquidity and is attractive to potential investors. However, these numbers are based on high projections. If such numbers are not reached the company is considered underperforming and makes an unattractive appeal to investors.
• Would need to reduce working capital by $260M • Would need to increase gross margins by 328bps • If growth is so important, then a price raise would likely slow that. The DPO change needed to self-finance is likely too aggressive. I would try to get half through DPO improvements and the other half through debt. This roughly doubles their debt. (But
1) Based on our model, the market believe the announcement of the merger will not create value to both firms due to the decline of share prices as well as total equity value of firms. We assume that the change of total value of the firm equals to the amount of changes in the equity since debt value is not subjected to the announcement of the merger. Therefore, the market considers that after the merger, both companies will together lose $836 million worthy equity. 2) The fair value of synergies, according to our calculations, is $3,702 million in with the expectation that after the merger, the new company would grow at approximately 15% in the 4-year duration and remain 3% long-term growth in the future. Sensitivity Analysis: Duration | 1 year | 4 years | 8 years | 12 years | 16 years | PV (In million dollars) | 1684 | 3702 | 10623 | 12015 | 17561 | Referring to the sensitivity of PV relative to the duration, we observe that if we expect the longer synergy involvement, the higher value we should evaluate it today.
Factor number two is the company offering free shipping to orders over $100. Not only did this cause the company to lose the income that it brings in for shipping and add shipping costs to it’s expenses, it also added to marketing by $13,000 plus an additional $32,000 for magazine marketing when ‘Marketing and administration’ it was only budgeted at $90,000. The shift in the economy during this time frame affected the budgeted ‘labor’ expense due to the increase in pay for it’s hourly employees. All of these factors combined worked against the company to cause a negative in operating profit. Although AGM fell short in meeting it’s master budget for this quarter, these unexpected occurrences can help them to better budget for the future of agm.com.
Under the high competitive and fast-evolving electronic industry, no change means fall behind. The Financial Report from 1991 to 2000 indicated the sales increased, while the gross profit decreased. It means cost of good sold increased year by year. According to the case, Best Buy offering a self-serve mode rather than pay commissions to sales in order to reduce their SG&A, but Circuit City still kept the same one in its sales model, which resulting in increase the sales cost and declines in operating profit. Also, the worst part of this sales model is to ignore the customer’s needs.
2010) is provided below. 1167872 4 Despite the leading position and the good business results, SWOT shows several sources of potential risks for UST. The company is losing market share against new price-value competitors because of slow innovation and late product introduction and extensions. Historically, UST relied on his leading market position boosting earnings with annual prices increases. But in the meanwhile smaller competitors started to quickly erode market share with prices cut.
After discussing the pricing problem, Magers want to keep the 100 series price for $2.45, which is right. Even though the sales volume would increase to 1,000,000 from 750,000 by reducing the selling price from $2.45 to $2.25 per 100 pieces, the company would not make profit. Since the cost per 100 pieces for 100 series is $2.29, which bigger than $2.25. If the company sold at $2.25, the company lost money. Also, in the short run,
Audi's global sales rose 8.3% to 1.58 million vehicles in 2013 however despite the increase in revenue, the net profit fell 7.7% ($5.57billion) and the operating profit margin fell to 10.1% from 11% the previous year. Based on this one could assume Audi is experiencing diseconomy of scale. But when you dig deeper into their situation the reasons for a lower net profit is not because of a “per-unit” cost of production which would truly mean they are operating as a diseconomies of scale. The true reasons appear to be because of their expansion investments. As per the article Audi “warned that profit would be hit by investment in new models and tougher climate regulation”.