High operating expenses and ineffective management of A/R have led the company to insolvency by demonstrating a quick ratio of 0.38. DECISION CRITERIA * Reduce operating expenses by 6% or more within next year Option 1: Reduce Salaries By 8% Reducing the salaries by 8% might affect the motivation and productivity. But how much of productivity and motivation is linked to financial rewards? Several psychological and economic studies suggest that money does motivate people to work but they also want to “feel autonomous, competent, and related to others.” (Piekema, 2012)Since many of the supervisors have been with the company since it started, it is unlikely they would be willing to leave the company. By the end of 2006, this option will reduce the selling and admin expense from $160m to $148m.
They also faced increased operational expenses of selling, general, and administrative costs by 0.49%. Perhaps the biggest impact on their profit margin is the cost of revenues that were associated with their sales, an increase of 0.92% which affected their EBITDA (Earnings before Interest Tax Depreciation and Amortization). Overall, these show operating expenses as a key issue for the company as the operating income shrank by 2.72% in just a two year period. When analyzing the whole foods balance sheet in common size it shows they have been reducing their short term debt. In 2007, they reduced their current installments of long-term debt by 0.76%, accounts payable by 1.61%, and other current liabilities by 1.35% in just a year as portion of their Liabilities and Shareholders’ Equity.
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.
I calculated an “inventory turnover ratio” which measures the number of times a company sells its inventory during a year. A high rate of turnover indicates easiness in selling inventory; a low rate indicates difficulty. In 2011, the inventory turnover was 6.1. By 2012 the ratio decreased to 5.2. The decrease may be due to a slow ability to turn around merchandise in sales and potentially due to paying a higher cost for goods.
Such a decline (and such a low percentage) indicates that management is not efficient in employing the company’s assets to make a profit. Also, the Return on Capital Employed had an even more significant decline – from 15.6% in Year 12 to (29.9%) in Year 14. This indicates very poor performance for FBN. In order for FBN to become profitable (efficiently, that is) ROCE should be higher than the rate at which the company borrows. In FBN’s case, their long-term debt ratios alone are 55.7% and 81.5% in years 12 and 13, respectively (and they’ve incurred interest rate increases); and ROCE in the same two years is 15.6% and 6.4%.
It is also important to evaluate managerial challenges that Grinna will face if his team becomes spread across two countries at such an early stage. And there is an opportunity to discuss various online outsourcing models, which represent a major trend in global labor markets. • Assess the technology development options available for EverTrue. What criteria should Brent use to evaluate them? Should Brent outsource technology development abroad so early?
Problem Statement The vice-president and general manager of Brannigan Food Soup’s Division, Bert Clark, must choose an alternative that will reverse the division’s sales, market share and profitability decrease over the last three years, along with industry’s steady decline. In order to do so, he has asked four of his team members for an alternative that would move the division’s growth back to 3% next year. Situation Analysis – 5C’s Customers: As the case points out, baby boomers are the larger and most loyal segment. However, they are getting older and their preferences are changing, as soups are concerned, into healthier, lower-sodium products. Furthermore, the younger generations don’t perceive the same value for canned soups, as they look for other types of meals (simple, fast and microwaveable).
This is harmful for our economy. Our economy is based on competition. Any monopoly is not good. Their low prices affect neighboring stores that cannot maintain the “Wal-Mart” prices. This is also an example of how Wal-Mart is getting rid of jobs.
The decrease in expenses observed in 2009 was primarily due to cost-containment measures implemented at the Company’s global and regional offices beginning in the fourth quarter of fiscal year 2008 (10-K, p. 20). Pre-opening Expenses, Relocation, Store Closure and Lease Termination Costs These expenses have been falling over the last few years. This decrease is due to the company’s consistently having relocated or closed fewer stores annually from 2008 to 2010. Interest Expense Interest expense, net of amounts capitalized, has decreased by a small amount in the last few years. Interest expense for these years consists principally of interest expense on the term loan entered into on August 28, 2007 to finance the acquisition of Wild Oats Markets.
PART A Company Q is missing an opportunity to be a leader in the area of social responsibility within the community they serve and to their employees. Its current attitude towards social responsibility could impact their business for the long-term. They may continue to lose customers if it continues on this current self-destructive business path. They appear to be of the opinion that the high crimes rates are leading to losses. Perhaps they believe that the employees are contributing to the revenue losses and are stealing merchandise.