An Efficient Balance Between Advertising And Advertising

4) Based on your positioning strategy, what brand name and marketing budget allocations would you advise?

The company started off producing 20,000 units of mountain bikes. We did not change the production quantity. Last year our forecast sales were 24,000 when we only sold 19,866; therefore we thought it would be best to leave production at 20,000 bikes. Having excess inventory, we concluded that 20,000 units should be enough considering our quality has not changed and our advertising will not increase the sales dramatically. Although we had the choice to produce as much as 30,000 units, we felt as though we did not have sufficient money to increase production. We were interested in allocating the money towards marketing as opposed to production. We realized that without awareness, no matter how many units we make, sales would be inefficient.

The company is looking to increase profitability and find a long-term solution to the inventory problem.

4. What is the “Goal”? Why does Alex need two sets of measurement: (1) Net profit, ROI, and Cash flow; and (2) Throughput, Inventory, OE?

After identifying the product(s) with the high sales, we will expand the capacity of that product(s). For the second round, we will analyze and adjust the automation levels to improve margins.

* We want to maintain a safe cash balance in order to meet short term obligations.

7. Debt to capitalization = Long-term Debt in Balance Sheet / Long term debt + Net Assets in

Require officers who have borrowed money from the company to repay the amounts owed at December 31. This would convert into cash the “notes receivable from officers,” which now appear in the balance sheet as noncurrent assets. The loans could be renewed immediately after year-end.

Further, we would pay off the debt using our excess free cash flow to pay off the debt. By the end of the 5th year, we would sell the firm and gain from any excess value found within the firm.

We assume that the debt of these companies is risk free, because debt represents only a small fraction of the firm’s value.

Long-term solvency for Ford Motor Company also appears to be strong. The company’s times interest earned ratio of 1.96 means that it can cover its interest charges on current debt issues almost two times over. This is a good sign that bankruptcy is not eminent and the company is solvent in the long-run. A higher debt to equity ratio means a company gets a larger portion of its financing from creditors than shareholders, though higher is a subjective measure and depends on the industry. (Wahlen et al, 2008) Automotive manufacturers tend to have debt to equity ratios above 2 because the industry is capital intensive. (Debt/equity ratio, 2014) Ford’s debt to equity ratio in 2011 was 10.89, far higher than the industry standard, potentially due to the circumstances of the time. The financial crisis of 2008 resulted in major financial bailouts across the automotive industry. These large levels of debt to the government would increase the debt to equity ratios of all companies that accepted the money.

Under this category there are three firms which have zero debt ratios because the nature of these firms show that all the financing is done by equity.

To be able to understand the goal of your company you have to be able to understand the overall goal in relation to the measurements, meaning that the rate at which the system generates sales increases while at the same time decreasing the money that the company has used to purchase things and also decreasing the amount of money that is spent moving “inventory” into the throughput. The interesting part of these measurements is that they all have to do with the goal of the company, meaning that they all involve money, which is the overall goal of the company, to make money.

The management of cash is essential to the survival of any organization. Managing an organization’s financial operation requires knowledge of the economy and ways to maximize revenue. For any organization to operate on a daily basis adequate cash flow is required. Without cash management the organization will be unable to function because there is no cash readily available in case of inconsistencies in the market. Cash is also needed to keep the cycle of the company’s operations going.

E. Continued focus on improving efficiency and effectiveness in the organisation, from procurement, to supply chain to customer service delivery.