...Memorandum Date: 30th September, 2012 To: Board of Directors, Coast4Life From: Pat Brown CMA, Controller, Coast4Life Subject: Assessing the Proposed Options Introduction We at Coast4Life are small, but proud, player in a dynamic and unstable industry. The forecasted drop in customer bookings due to terrorism and the recent incident involving Coastal Native requires a necessary emphasis on both identifying and capitalizing on the core competencies of our growing young company. It is forecasted that the recent terrorist attacks will likely negatively impact the cruise bookings, as much as 50-55% over the next 6 months and up to 30-35% the following year. The damage sustained to the Coastal Native in an underwater collision. Estimated costs to repair the ship are $3.6 million, which is in addition to the $2.16 million already committed for the scheduled refurbishments. Coast4Life is committed to offering travellers safe, high quality cruises at an affordable price, while maintaining our commitment to being environmentally aware and conscious. By analysing the strategic alternatives proposed by the Board of Directors, I will seek to propose a recommend solution to the current financial crisis faced by Coast4Life. Strategic Alternative Analysis Option 1 – Selling the Fraser dry dock Divesting the Fraser dry dock will allow Coast4Life to focus solely on offering cruises in accordance to their vision. It also removes the uncertainty of obtaining repair bids to keep the...
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...Date: Jan 4, 2013 To: The Board of Directors of Coast4Life Cruises From: Pat Brown Subject: Analysis of key issues, alternatives, and recommendations Introduction The cruise industry is expected to face an imminent risk of heading into a downturn as a result of the September 30th terrorist attacks. As well, Coastal Native’s hull repair needs to be addressed for the 2013 season. This report will analyze and compare the four alternatives available and identify the recommendation that will not only allow Coast4Life to remain profitable in the short-term but strengthen the business in the long-term by focusing on its core capabilities. Financial assessment The financial performance of Coast4Life over the past three years has been impressive (See Appendix 1). The ability of the firm’s ability to meet current obligations (current ratio) and long-term obligations (Debt to equity) has steadily improved. Profitability (Return on sales, Return on assets, and Return on Equity) has also increased consistently while maintaining a steady gross margin as a percentage of sales. However, accounts receivable turnover has decreased over the past three years but is still at a healthy level. Also, the degree of operating leverage is 2.1 and degree of total leverage is 2.5 and both have improved over the last couple of years. This means that if sales decrease by 35% then operating income will decrease by 70% and earnings after taxes will decrease by 87.5%. Analysis of the issues and the related...
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...Coast4Life Cruises Memorandum To: Board of Directors From: Pat Brown, Controller Subject: Options for cost savings and revenue generation Date: November 30, 2012 Introduction Recent events in the cruise industry, specifically a terrorist attach on a cruise ship in the Caribbean, are expected to affect cruise travel negatively over the next year. Based on the effects of past terrorist attacks on the airline industry, overall bookings for cruises worldwide are expected to drop by 50%-55% over the next six months, and 30%-35% overall for the next year. If there are no further incidents, worldwide demand for cruises could be restored to 2012 levels by 2014. A projection for 2013 and 2014 is included in Appendix A. During this downturn period, the Board has mandated that Coast4Life remain profitable and explore methods to reduce costs and/or generate revenue. As directed, the following four options were analyzed: divest the Fraser dry dock, target a more profitable market segment, register Coast4Life’s ships in Liberia and hire crews and hospitality workers from underdeveloped countries for low wages, and implement a web-based booking system to take advantage of the increasing numbers of travellers who are making reservations via the Internet. Analysis Option One: divest the Fraser dry dock. An offer has been made for the dry dock land, facility and equipment for $4.3 million. The current book value of the dry dock is $2.6 million. While the sale will generate...
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...To :Coast4life Inc From: Pat Brown, CMA Subject: Coast4life Cruises Introduction: Coast4life Inc with the expected downturn situation due to recent terrorist attack on a cruise ship in 2012 and on airline industry would prepare to remain profitable by finding ways to cut cost or generate additional revenue. Target is to recommend the best among the four alternative suggested aiming at 16% after tax return and tax rate of 38%. Identification of Issues and related alternatives: • Debt to Equity Ratio of 1.23 more than 1 reveals that more than half of assets are financed by debt. • $3.6 million required for repairs of hull before 2013. • Gross profit of 60% has not increased much over past three years it will affect operating income if there is a decline in sales. • Operating profit of .23% in 2012 seems to decline from 2011 of .26% implies company earns less per dollar of sales. • Accounts Receivable of 2.6 days in 2012 increased as compared to 2.3 days in 2011 .Should re-assess credit policies to ensure timely collection. • Return on equity is not growing at an increasing rate as compared to growth of 2010 to 2011 company will grow less towards downturn. Alternative 1: Divesting the dry dock Pros • Savings on expenses amounting to $5,674,000 Cons: • Unavoidable maintenance cost of $2 million for each ship • Damage relationship with government, employees and city • Lost contribution to the overall profitability of the company. • Negative cash...
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...COAST4LIFE Prepared For: Coast4Life Board of Directors From: Pat Brown, Controller December 06, 2013 Introduction This report will analyze the current situation of Coast4Life and evaluate four strategic alternatives for the Board of Directors to effectively maintain an after-tax rate of return of sixteen percent. Upon evaluation of the four alternatives, conclusions will be drawn and recommendations will be made on the best alternative action to take to meet the overall goal of remaining profitable during an anticipated downturn forecasted for the 2013. Ratio Analysis * In 2010, the current ratio was 0.64. However, in 2011 and 2012, the current ratio increased from 1.21 to 1.75. Increased cash and marketable securities have resulted in Coast4Life becoming more liquid. * Asset Turnover ratio increased from 0.52 in 2010 to 0.74 in 2012. This shows effective use of the assets employed by Coast4Life. * The debt-to-equity ratio saw a decline from 1.89 in 2010 to 1.45 in 2012. Also, total debt-to-total assets decreased from 0.65 in 2010 to 0.59 in 2012. The debt-to-equity ratio of 1.45 in 2012 and the total debt-to-total assets ratio of 0.59 are a positive predictor in indicating the company’s ability to sustain losses and still meet obligations to creditors. * The profitability ratios increased from 2010 to 2012. A return on equity ratio of 27.4% in 2012, up from 15.1% in 2010, is due to the increased revenue from the Dry Dock. The return-on-assets saw a gradual climb...
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...Objet : Analyse des enjeux stratégiques et recommandations À : Conseil d’administration de Coast4Life De : Pat Brown, CMA Date : 1er novembre 2010 INTRODUCTION Ce rapport présente une analyse des options qui s’offrent à Coast4Life ainsi que des recommandations afin d’aider l’entreprise à faire face à ses enjeux stratégiques. Une approche stratégique et systématique sera utilisée pour examiner la situation. ENJEUX STRATÉGIQUES (voir Annexe 1) 1. Continuer d’accroître son rendement tout en maintenant son offre de croisières sécuritaires, agréables et abordables. 2. Exploiter la présente croissance de l’industrie touristique ainsi que du secteur des croisières à Vancouver. 3. La domination du marché par les gros croisiéristes et organisateurs de croisières présente un fort risque de concurrence qui pourrait rapidement mettre en péril les activités de l’entreprise. 4. Éliminer l’absence d’un système de réservations par Internet. DÉTERMINATION ET HIÉRARCHISATION DES OPTIONS STRATÉGIQUES Option #1 Se départir de la cale sèche Fraser Avantages : - Élimination de la division la moins rentable. - Économies réalisées dû aux coûts de main-d’œuvre et des impôts plus élevés que les concurrents. - L’entreprise peut se concentrer sur ses activités principales : la vente de croisières. Inconvénients : - Affaiblir la réputation de Coast4Life en matière de sécurité. - Les licenciements nuiraient à la relation entretenue par l’entreprise...
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...related alternatives, 6. Supported recommendations, 7. A conclusion, 8. Appendices, and 9. Any footnotes. Coast4Life Cruises Business Case Analysis Business Case Analysis Introduction Coast4Life Inc. was incorporated federally on June 3, 2000, and is in the business of offering ocean cruises along the Canadian west coast, with stops at interesting ports of call in British Columbia. The business has a September 30 year end. In 2007, the original owners sold all their Coast4Life shares to the senior management group. Between 2001 and 2010, the company grew steadily from 135 to 574 employees and from $9.4 million to more than $55.7 million in revenue. Vision Coast4Life will be the first choice for vacationers who are seeking a safe, enjoyable and unique cruise experience in the northeastern Pacific Ocean. Mission Coast4Life meets the needs of North American vacationers by offering safe, enjoyable and unique cruises along the coast of British Columbia at affordable prices and at a high-quality level of service. Coast4Life also strives to minimize the effects of cruising on the ecology along the BC coast and maximize the safety of customers, staff and marine life by ensuring that the ships used are well maintained and that environmental and safety regulations are not only met, but exceeded. Quantitative analysis The main revenues in the Coast4Life are generated for the most...
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...© 2013 The Society of Management Accountants of Canada. All rights reserved. ®/™ Registered Trade-Marks/Trade-Marks are owned by The Society of Management Accountants of Canada. No part of this document may be reproduced in any form without the permission of the copyright holder. MODULE 1, ASSIGNMENT 1 August 30, 2013 Topic: Performance Management Overview Welcome to Module 1. If you have not already done so, read the Program Manual located in the Reference Material section of the CMA Canada Professional Programs website. It provides you with important introductory information about the program. In Module 1 of the program, candidates are exposed to many functional competencies from the CMA Competency Map that involve decision making regarding performance management, performance measurement, risk management and governance, and financial reporting. For assistance when doing their assignments in these areas, candidates are expected to draw on many of their intermediate and advanced management and financial accounting concepts they learned in their university courses and/or in the Accelerated Program. For instance, in this assignment, one of the concepts involves Cost-Volume-Profit (CVP) analysis. In these types of analysis, candidates may be asked to look at how profits and costs change with a change in volume, or a change in such factors as variable costs, fixed costs, selling prices, and mix of products sold. By studying the relationships of costs, sales and...
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...MEMORANDUM Date: October 1, 2012 To: Coast4Life Board of Directors From: Pat Brown, Controller Subject: Recommendations of Coast4Life alternatives to retain profitability during the economic downturn. Please find the attached report I have prepared for Coast4Life to analyze its major strategic issues and alternatives. The purpose of this report is to recommend the most effective alternatives for Coast4LIfe to remain being profitable during downturn. Introduction Coast4Life (C4L) is a Canadian company offering ocean cruises along the Canadian west coast, which is facing a critical downturn as cruise bookings in 2013 began to drastically decline due to a recent terrorist attack. As a result there is a concern of retained profitability for C4L of minimum after-tax rate of return of 16%. This report will analyze all alternatives for C4L and will recommend the most effective ones to survive the downturn. Identification of the issues and related alternatives 1) After accident Coastal Native will require extended repairs of $3.6 million before 2013 season, though company’s actual financials for 2012 are fairly healthy to cover uninsured expenses (Appendix 1). 2) C4L should watch its future cash due to after terrorist attack it is expected that cruise bookings worldwide will drop by 50-55% in the next 6 month and 30-35% in 2013 (Appendix 6). 3) C4L would like to expend its market share targeting more profitable passenger groups: passengers between 40-60...
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...To: The Board of Directors of Coast4Life From: Pat Brown Re: Strategic issues and Recommendation Date: January 18, 2013 Please find the attached report addressing the key strategic issues, analysis and recommendation. Sincerely, Pat Brown Controller Introduction The purpose of this report is to address the key strategic issues facing Coast4Life with the expected downturn ahead. Included is a financial analysis, identification of major issues, analysis of alternatives and a recommendation. Financial Analysis for the Year Ended 2012 (Appendix 1) * Current ratio of 1.6 indicates that the company can meet its short term obligations. There is a 46% improvement versus last year’s current ratio of 1.1. Quick ratio of 1.8 shows a 50% improvement. * Total debt- to-equity of 1.5 shows a 12% improvement over prior year’s ratio of 1.7 indicating that the firm is relying less on debt. Times interest earned ratio of 6.4 improved by 30%. * Profitability ratios indicate overall earnings growth. Net margin of 15.2% grew by 18% compared to 12.9% in 2011 while Return-on-Equity (ROE) of 27.4% grew by 16%. Return on Investments (ROI) of 11.2% shows a significant 28% growth from 8.7% and posted a 14% favourable variance compared to target. Major Strategic Issues With the expected estimated 30%-35% decline in the overall booking, the expected impact is a decline in income by $7M (Appendix 2). The proposed alternatives to generate additional revenues...
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...Introduction Cruise industry is facing a downturn worldwide after Sep 30, 2010’s terrorist attack in Caribbean, experienced an immediate decline in bookings. A requested report to identify a strategy for Coast4Life (C4L hereafter) to remain profitable during the downturn is followed. Issue Identification The terrorist attack caused the decline in booking of cruise next year implies that the cruise revenue may shrink worldwide. C4L itself, although in the past three years has been growing fast with continuing improvement in liquidity and profitability, activity and long term debt (Appendix 1), but facing the industry downturn, If no any action on C4L in 2011, it may suffer a net loss if dry dock division is not able to obtain the external revenue from maintenance ships (Appendix 2). The following four alternative strategies are being considered in order for C4L to keep profitable in the downturn Analysis First option is to cut cost by selling dry dock that C4L used to do maintenance for the two cruises. Pros: • A relevant cost analysis has been conducted and it shows: by selling dry dock, C4L could save an average cost at $1.6million in 2011 and $1.3million in 2012(Appendix 3) based on how much dry dock can obtain from external revenue in three scenarios. • C4L can use its resources and investment concentrating on its core business after divesting its dock maintenance service • BC government may assist in building more docks for cruise ships is an opportunity that C4L...
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