Power of Suppliers – Low There is low supplier concentration relative to the industry they sell to and a single supplier does not account for a large part of a retailer’s business. This weakens the overall power of the supplier because there are more supply options available for discount retailers. The emergence of private labels has also reduced supplier leverage. Supplier power is further weakened by low switching costs and non-differentiated products. As the retailers incur virtually no costs by changing suppliers it is easy for them to play them against each other to get better terms.
It helps for forecasting on making certain financial decisions. The three groups that use these ratios are managers, potential investors or lenders, and stockholders. The reason the managers use these ratios, is to have a closer look and be able to identify situations that need their instant attention with in the firm. Potential investors are lenders used a ratio to determine if they should invest in the company or not. As for stockholders they mainly use this information for forecasting dividends, earnings on the free cash flow.
The turnaround time for Reed is shorter because the store has everything on hand as opposed to other stores which may take orders on “specialty” items. Having discounted sales will help Reed move older inventory and inventory not as in demand anymore. For example, larger
WACC is the minimum return required by the investors * As I said in the last bullet there are many different to interpret the numbers in WACC and the way Cohen did it is one way but there is different ways to interpret the data given. One of the things I see that I would do different is how she calculated the weight of the equity. I would do it by multiplying the number of shares outstanding by the price of the stock. I also found the cost of debt a little differently by using the present and future values to find i for the cost of debt. 2.
By doing so, a corporation may reduce commodity price affecting its share price. J&L Railroad had most of its revenue fixed for a long term, because it was industry practice for railroads to enter into long-term fixed-price contracts with their freight customers. On the other hand, fuel cost was a large cost item for J&L, and fuel prices have high volatility. Price competition in the railroad industry was fierce that railroads could not increase freight prices based on fuel price increase. Thus, J&L’s operating margin was exposed to the volatility of fuel prices.
What are the core competencies and end products of IKEA? How are they linked with each other? IKEA is capable to design its products in-house; therefore they can reduce their costs because outsourcing their product designing is much cheaper. Despite that they’re designing its product itself, people find it still attractive enough to buy IKEA’s products. Also their furniture and packaging is designed in such a way that it’s easily transportable (‘flat packaging’1) for both customer and IKEA.
The bid-ask spread is also a cost to the dealer. Reducing the bid-ask spread would make prices more competitive and also lower costs. Section 2 Strategy # Description 15 Better .02 Match Depth All Full No Inv MgmtBid price is 0.02 more than the other dealers bid price. Ask price is 0.02 less than the other dealers ask price. 16 Inventory Management in Depth Cutoffs = 30 When the cum.
For instances, company can choose cost model or revaluation model for property, plant, and equipment. The inventory must be measured at the lower of cost or net realizable value. In addition, according to Mautz (1973), it stated that if who rely on the financial report that measured on historical cost to make decision, found that the information is not useful, then the accounting method will change since it have been made. However, during the times of rising prices, the historical cost accounting has limitations. This is because according to Elliot (1986), it stated that historical cost assumes money holds a constant purchasing power.
There is $2.5 million sinking fund required which leaves $12.5 million outstanding at maturity. The issues with this method are as follows: Long-term-debt can be burdensome and can stunt or slow growth of the company. The company has to payback what was borrowed plus the interest on the debt. It also puts stockholders and management who are primary holders of stock at risk, because if the company earnings are substantially lower than what was forecasted then the bondholders can virtually gain control of company. The second alternative would be the possibility of issuing new common stock of 3 million shares offered at $17.75 per share.
It might have been wise to wait before going ahead with the price cut from $39.95 to $29.95 because of the following reasons 1. Reduction of commission may start the price war by offering even less than $8 by some of its competitors, as the analyst believe that the marginal cost of completing a trade was between $3 to $5 2. New offering i.e. $ 29.95 may not be able to retain and attract the very price sensitive customer segment because they are trading on self directed basis. They may not be willing to pay for advice/ additional services in new offering 3.