...Managing Growth Simulation FIN/571 Managing Growth Simulation Introduction The complete course has reveled us the great idea to influence our trends and intelligence while analyzing the entire details of Sunflower Nutraceuticals (SNC) company followed with all the decisions of the company which tends to increase their working capital and maximizing the overall organizational growth potentially with respect to time, as we have figured out the data and change in numbers below which reflects the growth annually. Moreover in addition to various details of the SNC firm we have also examined various decisions which took place in each of the phase of SNC’s simulation which has an estimated values to figure out the results, secondly the paper also describes how SNC’s decisions are influenced with respect to their working capital followed with the final step of evaluating the general affects associated with the limited access of financial mix. Sunflower Nutraceuticals (SNC) Background No wonder SNC is a privately owned Nutraceuticals company , more over one can say it is a wide distributor which provides all the vital dietary supplements such as herbs for women’s, vitamins, and minerals for all the consumers (mainly women’s), distributors and retailers. (Harvard Business School Publishing, 2012). Once the business was initiated after 2006, SNC expanded their operations and came up with various retail outlets in the nutraceutical...
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...Assignment 1.53 The proposal that the chairman suggested to perform is not infeasible. First of all, we can peruse some information on our textbook, “the SEC places constraints on the common practice of auditors’ joining public clients that they have previously audited”. It means if the corporation hires an auditor and gives he or she a work like investigations of accounting and operating data as necessary, the company will break the rules on the auditing. The big companies must be conducted by the outside independent auditor teams for auditing their financial statements. In view of the fact that avoid any appearance of impropriety or inside bias. When the companies are permitted to audit their own books or statements by their internal auditors, it will lead to serious problem, like breaking the accounting rule, being in prison. For example, some employees avoid being laid off, they will help their companies hiding the real information or situations, so that affect the healthy development of the world economy. Independent auditors are held to their own standards and have their own independent boards of review that they answer to, so companies that hire them can be assured of the highest standards of quality and integrity. Secondly, professional skepticism is a key characteristic for auditors. Professional skepticism requires every auditor to have a questioning mind and a critical assessment of evidence. We can find this requirement on page 17 of our textbook. So auditors must...
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...and preparation for multiple users may lead to increased neutrality | VERIFIABLE | Information may not have been checked for verifiability or accuracy | Controls may increase verifiability of this information | Controls may increase verifiability of this information | COMPLETENESS | Least complete | Average completeness | Most completeness | ACCESSABLE | Most accessible | Average | Average | What is an accounts receivable aging report? How long debts have been outstanding with debtors, management need to know for cash flow issues, customers’ accounts balance. Why is accounts receivable aging report needed for an audit? To see if accounts receivable is accurate in looking at provisions for bad debts What is an accounts receivable aging report used for normal company operations? Determining credit policies, if credit collections need to be chased up, appropriate credit limits, allow the follow-up of outstanding amounts Where will you collect the data you need to prepare the report? Cash collections, Accounts receivable lecture What will it look like? Customer number (invoice number) | Customer name | 0-30 days outstanding | 31-60 days outstanding | 61-90 days outstanding | XXX | XXX | XXX | XXX | XXX | Who should receive the...
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...the Cash Conversion Cycle. 3.) Selected option should free up locked capital in receivables and inventories. 4.) Selected option should lead to a zero working capital policy in the long run. SELECTED OPTIONS: We decided to tighten accounts receivable and drop poorly selling products because they yielded a percentage decrease in working capital requirement larger than their percentage drop in sales. Also these 2 options fit all the selection criteria we stated above. The initial selection criteria for the first phase was to manage the thin margins of SNC that seemed like the biggest limitation towards growth. The selected option, therefore, should lead to an overall reduction in the working capital requirement while reducing the short term debt in the process. Additionally, the cash conversion cycle had to be reduced in order to better manage cash that gets tied up in inventories. Freeing up locked capital in receivables and inventories became a big priority for my strategy moving ahead. Given the four options, the best ones suited to my initial goals for the company were options 2, 3, & 4. Tightening accounts receivable would lead to a decrease in sales but improve the DSO (days sales outstanding) significantly. This was congruous with the goal of improving the accounts receivable position of the company to free up cash. Secondly, dropping poorly performing products was another method of managing SNC’s working capital and freeing up cash tied in inventory. While sales and EBIT...
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...Current assets and current liabilities include three accounts which are of special importance. These accounts represent the areas of the business where managers have the most direct impact: accounts receivable (current asset) inventory (current assets), and accounts payable (current liability) The current portion of debt (payable within 12 months) is critical, because it represents a short-term claim to current assets and is often secured by long term assets. Common types of short-term debt are bank loans and lines of credit. An increase in working capital indicates that the business has either increased current assets (that it has increased its receivables, or other current assets) or has decreased current liabilities—for example has paid off some short-term creditors. Implications on M&A: The common commercial definition of working capital for the purpose of a working capital adjustment in an M&A transaction (i.e. for a working capital adjustment mechanism in a sale and purchase agreement) is equal to: Current Assets – Current Liabilities excluding deferred tax assets/liabilities, excess cash, surplus assets and/or deposit balances. Cash balance items often attract a one-for-one, purchase-price adjustment. Working capital management Corporate finance Looking north from the Empire State Building, New York City, 2005 Working capital Cash conversion cycle Return on capital Economic Value Added Just-in-time Economic...
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...profitably, then it should, in theory, generate cash surpluses. If it doesn't generate surpluses, the business will eventually run out of cash and expire. limit, you effectively create free finance to help fund future sales. Each component of working capital (namely inventory, receivables and payables) has two dimensions. TIME and MONEY. When it comes to managing working capital - TIME IS MONEY. If you can get money to move faster around the cycle (e.g. collect monies due from debtors more quickly) or reduce the amount of money tied up (e.g. reduce inventory levels relative to sales), the business will generate more cash or it will need to borrow less money to fund working capital. As a consequence, you could reduce the cost of bank interest or you'll have additional free money available to support additional sales growth or investment. Similarly, if you can negotiate improved terms with suppliers e.g. get longer credit or an increased credit 2. Describe the two components of a working capital management strategy. Current Assets Current assets are items that can be turned into cash quickly. Examples of current assets are cash on hand, short-term investments, inventory and accounts receivable. Accounts receivable must be collected in a timely manner the sooner you receive money owed, the sooner it can be reinvested to earn a profit. Effective inventory management is also essential. The goal is to have enough inventory to complete orders but not an excess. Excess inventory creates...
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...18, 2011 Kudler Accounting System Kudler wants to incorporate an SQL database that contains the fields found in the company's Chart of Accounts. Add a balance field and create a query that will display all of the fields of the database and run a report totaling the balance field using test data added to the database. Kudler's Chart of Accounts is currently a Microsoft Excel spreadsheet and they want the Chart of Accounts upgraded to the SQL database. The new database will be used to facilitate decision making at the store and department levels. The processes of Kudler Fine Foods include inventory, payroll, accounts payable and accounts receivable. Using a new accounting information systems, will improve these processes from the old system. Key features Intergrading the new accounting system at Kudler Fine Foods has made the company gain new key features along with adding the old key features, such as; It allows the company to keep track of customer purchases. Each time a customer creates a purchase it will register to the new accounting system main computer, and shows what items were purchased along with the price paid. This new system shows the accounts receivables, this show the money being received, and the money going out. The current system at Kudler could be improved through the automation. The objective of accounts payable processing is to pay vendors at the optimum time, taking advantage of cash discounts offered and avoiding late fees. When money gets...
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...question, ignore the forecasted receivables collection pattern in Exhibit 27.4. Using paper and pencil (do NOT use the template), calculate the projected ACP and average daily sales (ADS) under the following conditions: 30% of customers pay on the 10th day 50% of customers pay on the 30th day 20% of customers pay on the 60th day 800,000 units sold per year @ $5 per unit = $4,000,000/360 Remember, since there are no balance sheets or operating statements, you will have to MANUALLY calculate the ACP. Just look at the numbers: 30% pay after 10 days + 50% pay after 30 days + 20% pay after 60 days. What’s the average? Voila! Also, for consistency, use 360 days = one year Answer: ADS= $11,111 ACP= 33 days 2. Given your answers to #1, what is the projected average receivables level on any given day? (HINT: Formula is ACP x ADS) Answer: $366,663 3. Given your answer to #2, and assuming a contribution margin of 20% and short term bank loans of 10% cited in the case study, what would the firm’s balance sheet look like for accounts receivable and notes payable accounts at the end of the year if notes payable are used to finance the investment in receivables? (HINT: A/R on the assets side; notes payable and ? on the other side of the ledger. ANOTHER HINT: What is another name for contribution margin on the balance sheet [i.e., where do the profits show up on a balance sheet]? This is a short answer, not complicated. Only three accounts involved.) Answer ...
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...Managers take time to understand and apply the concepts of internal controls because it organizes the business’s work flow and responsibilities. Internal controls are often referred to as “red tape,” because it a process which ensures the reliability and efficiency of the financial reporting that is recorded. The internal controls process include the following components; monitoring, risk assessment, control environment, control activities, and communication and information. In order to effectively apply internal control concepts within an organization, ethical and moral values that must be followed. This paper will analyze and evaluate the areas of risk in the system. These risk are payroll, accounts receivable, accounts payable, and inventory. Risks in the System There will always be a numerable amount of risks associated with all aspects of accounting. For example, common risks displayed in a system would be security breaches, errors in manual input, and cases of fraud. These risks put leaders and managers in pressure to keep the operation organized and ethical. It also increases the risk of inappropriate accounting and unethical decisions regarding disclosure methods. Other risks that are associated with the system are the establishment of illegal programs that have the capability to breach security walls. Some programs are capable of corrupting files with viruses, deleting important files, and intentionally causing programs and applications to malfunction...
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...CASE1: DELIMA Mustapha Kamal Mohd Razali Aini Aman Azbir Abu Bakar Yazmiza Long Case Synopsis The case is about an enterprise founded by family members and later was incorporated as Sdn Bhd. The shareholders were mainly the directors of husband and wife who were involved in the management of the company. The company involved in trading and engineering service3s. The company has limited financial resources. Based on the audit finding the records were not properly kept and no procedures and financial system were in place and lacked internal control. The auditors were not able to express a true & fair view on the accounts and recommended to qualify the audited accounts. Introduction It was July, 2006 when En Zayed engaged the external auditor Aziz & Co ( a Chartered Accountant), introduced by his friend to perform the statutory audit for the period of 2003 to 2006. This was the first audit experience for En. Zayed and Puan Hashimah and was a difficult learning experience faced by both. The Auditors expressed their intention to qualify the financial statements of the business due to several unresolved issues. However, En. Zayed and Puan Hashimah negotiated with the Auditor to not doing so. Failing to this negotiation, En Zayed and Puan Hashimah planned to terminate Aziz & Co appointment and to replace (appoint) with their new “friendly party” auditor. Interestingly, En Zayed and Puan Hashimah were not familiar with the Accounting Standards, provisions of the Companies...
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...SFM400 Strategic Financial Management M.G.W. Kachanje Senior Lecturer in Finance and Accounting Definition of 'Strategic Financial Management ' Managing an organization's financial resources so as to achieve its business objectives and maximize its value. Strategic financial management involves a defined sequence of steps that encompasses the full range of a company's finances, from setting out objectives and identifying resources, analyzing data and making financial decisions, to tracking the variance between actual and budgeted results and identifying the reasons for this variance. The term "strategic" means that this approach to financial management has a long-term horizon At the most fundamental level, financial management is concerned with managing an organization's assets, liabilities, revenues, profitability and cash flow. Strategic financial management goes a step further in ensuring that the organization remains on track to attain its short-term and long-term goals, while maximizing value for its shareholders. Strategic financial management also means that short-term goals may occasionally need to be sacrificed to meet longer-term objectives. A typical example is when a loss-making company trims its asset base through factory closures or headcount reduction in order to reduce operating expenses. While such actions have a detrimental effect on near-term results because of restructuring costs and other one-time items, it positions the company to achieve...
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...covers the following areas: * To Study the working capital policies of the sample company. * To study the structure of working capital. * To measure the utilization of working capital of the sample company. * To examine the impact of working capital on profitability. * To identity the problems facing the sample company. * To suggest the recommendation of measuring working capital Management efficiency. Scope of the Study: In my term paper the sample size was one and M.M. ISPAHANI Ltd. was selected as a sample and my topic was working capital management. For gathering more about my requirements I have scheduled my time in various departments, such as Department | Days | Executive Officer | 07 | Finance & Accounts | 15 | Marketing & Sales | 05 | Purchase | 05 | Import & Export | 05 | Administration | 03 | Methodology of the Study: In order to accomplish the term paper report in the...
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...Subject: Butler Lumber Company Problem: Butler Lumber Company has been experiencing in the past few years a rapid growth of its sales. However, in order to sustain this growth the company also experienced an increase of its inventory and of its accounts receivables leading to a shortage of cash to finance day to day activities. The company therefore needs to find a way to improve its financial flexibility without extending even more its trade credit. Options: 1. Remain with its current bank, the Suburban National Bank, with a credit limit of $250,000. 2. Take the 90-day note ($465k) from Northrop National Bank and deteriorate relations with Suburban National Bank. a. Benefit from the early payment discount b. Do not benefit from the early payment discount 3. Take a line of credit from Suburban National Bank but for a different amount. Recommendation: Ratio Analysis (compare A/R, A/P turnover rate) Our group recommends that Mr Butler puts an end to his relationship with the Suburban National Bank. Butler Lumber Company needs more financial flexibility in order to sustain its growth and the bank is limiting the maximum loan to $250,000. Therefore, we recommend Mr Butler to start working with Northrop National Bank. Based on our EFN calculations we believe that $465,000 is too much for Butler Lumber Company. Indeed, we have found in our 6 scenarios that the maximum amount that Mr Butler could need would be $392,000. Therefore, we recommend Butler...
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... II. General Framework for Financial Analyses There are different financial ratios and questions they answer: • Liquidity ratio – current ratio: Will Butler Lumber be able to pay off his debts as they come due? Satisfactory liquidity ratio is necessary if Butler Lumber is to continue its operations. • Asset management ratio: Does Butler Lumber have the appropriate amount of assets versus sales? How effectively is Butler Lumber managing its assets? • Debt management ration: Does Butler Lumber have the right mix of debt and equity? • Profitability Ratios: Are sales high enough? Do sales exceed the unit cost? It is necessary to calculate different types of financial ratios to examine different aspects of Butler Lumber’s operations. Key accounts for sources of funds for Butler Lumber Company are: retained earnings from previous years, cash accounts, accounts receivables and borrowing funds from bank Uses of funds are: accounts payables, inventory, fixed asset accounts, buyout of Mr. Stark, long term and short term debt. III. Applying of the financial framework Before identifying the reasons in increasing/decreasing in sources/funds of cash, I...
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...working capital policy that will address their cash management needs for the long-term. Situation Analysis Issue and Opportunity Identification Lawrence Sports’ principle customer, Mayo Stores, is having a difficult time paying for the products on time. The current payment arrangement is that Mayo will pay 20% on purchases and 80% the following week. Mayo depends principally on this revenue from Mayo and it finds itself not being able to live up to the agreements made to their agreements to both creditors and suppliers. The only viable option detailed in the scenario is borrowing from Central Bank. Their plan is to borrow a daily loan for any amount to keep the account minimum of $50,000. Lawrence has reached the maximum amount that can be borrowed, which is $1.2 million. Lawrence cannot afford to keep using the bank to bail them out during the low peak times of cash conversion usually occurring in the last few weeks of March. Using Central Bank to finance their operations has negative consequences. First, Lawrence has to come up with $1.2 million at 16% interest to bring the total to $1,392,000...
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