3) The sales budget is to estimate the profitability. As we know, sales budget is used to structure the company in a way to maximize profits. With an accurate projection of future sales, the company is actually can save the expenses and protects the company from failing. If the sales projection is overstated, the president has to decide whether to proceed or to have other alternative planning.
What is the project’s net present value? When attempting to finance a project, it is important to know the financial health of the company. The net present value aids with analyzing the profitability of a project. It demonstrates the difference between the present value of the cash inflows and the cash outflows (Titman, Keown, & Martin, 2011). When a negative net present value is obtained, it is a sure indicator that the firm should not continue to invest in a project.
What is the project’s NPV? Explain the economic rationale behind the NPV. Could the NPV of this particular project be different for GP Manufacturing than for one of Chino Material Systems Inc.’s other potential customers? Explain. NPV = $205,761 By using Net Present Value, investors can determine the expected profitability of a project.
Individual financial gain determines the price for oligopolies. These firms find non price competition to keep from having to change the price of their products. The output of each product must be maximized to see a true profit which is
For these reasons, it is necessary to analyze the competitive advantage of the different options presented. • Strengths and Opportunities: The project evaluation should consider a SWOT analysis of each potential application, which allows identifying the strengths, opportunities, threats and weaknesses. This way, it is possible to choose the best option, which maximized the firm’s strengths and opportunities, while mitigating its threats and weaknesses. • Barrier to Entry: Also it is necessary to analyze the cost of enter to the industry. • Economic Benefit: What will be the earnings associated to the project.. • Customer Preferences Bernstein should recommend to the board the
Profit maximisation is assumed to be the objective of a firm, however there are other objectives that firms have, these include: revenue maximisation and sales maximisation. A firm aiming to maximise profit will aim to operate at output level Q, where Marginal Revenue (MR) is equal to Marginal Cost (MC). A process that companies undergo to determine the best output and price levels in order to maximize its return. The company will usually adjust influential factors such as production costs, sale prices, and output levels as a way of reaching its profit goal. There are two main profit maximization methods used, and they are Marginal Cost-Marginal Revenue Method and Total Cost-Total Revenue Method.
So to be able to have a productive and successful business, business owners may want to look into maximizing their profits by way of the profit maximization concept. Profit maximization is when a company comes to a conclusion on the price and output level that will turn the maximum profit by using this particular process (Wikipedia). Granted there are many different approaches to this problem; however in this essay we will be considering the TR to TC method and the MR MC method. Tiffany C Wright expressed that the total revenue to total cost method is dependent on the fact that profit equals revenue minus cost. Total revenue equals price time’s quantity.
1. The focus of DuPont analysis is to provide management information as to how the firm is using its resources to maximize returns on owners’ investments. 2. The financial manager should examine available risk-return trade-offs and make his decision based upon the greatest expected return. 3.
Economic incentives are used by businesses and government agencies to influence the behavior of people. These incentives are designed for the overall profitability of the business or agency and can have either a negative or positive impact on the individual. Today economics is largely incentive based. There are work incentives, production incentives, investment incentives and even purchasing incen-tives. To accomplish goals you must provide incentives, without them people have no reason to com-plete tasks (Laffont & Martimort, 2001).
Abstract The paper is for the financial management and focus on two important costing methods, the absorption costing and marginal costing. Base on the example of Simpson Ltd, it will be given the profits calculated by each method, and show the process and also explain the reason of different result. Furthermore, these two methods will be compared in the other situation in order to indicate the natural theory of both of them. On the other hand, it also will try to discuss the advantage and disadvantage of each method in financial reporting and management decision-making, then conclusion will be given to present the final personal opinion. Introduction Cost accounting is one of the most important parts of accounting system, and it plays a significant role in so many areas of business like decision-making or financial report.