the process of crafting a strategy in a new company

required :

An overview of the new tax plan.

What are the new directions in strategic thinking?

MINI CASE: Jen and Larrys Frozen Yogurt Company (Revisited) In…

MINI CASE: Jen and Larry’s Frozen Yogurt Company (Revisited)

In 2010, Jennifer (Jen) Liu and Larry Mestas founded Jen and Larry’s Frozen Yogurt Company, which was based on the idea of applying the microbrew or microbatch strategy to the production and sale of frozen yogurt. Jen and Larry began producing small quantities of unique flavors and blends in limited editions. Revenues were $600,000 in 2010 and were estimated at $1.2 million in 2011.

Because Jen and Larry were selling premium frozen yogurt containing premium ingredients, each small cup of yogurt sold for $3, and the cost of producing the frozen yogurt averaged $1.50 per cup. Administrative expenses, including Jen and Larry’s salaries and expenses for an accountant and two other administrative staff, were estimated at $180,000 in 2011. Marketing expenses, largely in the form of behind-the-counter workers, in-store posters, and advertising in local newspapers, were projected to be $200,000 in 2011.

An investment in bricks and mortar was necessary to make and sell the yogurt. Initial specialty equipment and the renovation of an old warehouse building in lower downtown (known as LoDo) of $450,000 occurred at the beginning of 2010 along with $50,000 being invested in inventories. An additional equipment investment of $100,000 was estimated to be needed at the beginning of 2011 to make the amount of yogurt forecasted to be sold in 2011. Depreciation expenses were expected to be $50,000 in 2011, and interest expenses were estimated at $15,000. The tax rate was expected to be 25 percent of taxable income.

A. How much net profit, before any financing costs, is the venture expected to earn in 2011? What would be the net profit if sales reach $1.5 million? What would be the net profit if sales are only $800,000?

B. If inventories are expected to turn over ten times a year (based on cost of goods sold), what will be the venture’s average inventories balance next year if sales are $1.2 million? How much might the venture be able to borrow if a lender typically lends an amount equal to 50 percent of the average inventories balance? If the borrowing rate is 12 percent, how much dollar amount of interest would have to be paid on the loan?

C. How might the venture acquire and finance the new equipment that is needed?

D. Identify potential government credit resources for the venture.

E. Prepare a summary of the benefits and risks of Jen and Larry’s continued use of credit card financing.

F. Prepare a summary of how the venture might benefit from receivables financing if commercial customers are extended credit for thirty days on their purchases.

G. Discuss the impact of potential loan restrictions should the venture seek commercial loan financing.

H. Comment on how the venture might be evaluated in terms of the five Cs of credit analysis.

You work for a small accounting firm in Halifax and are filling in as a temp during the winter
semester. It is February 5th 2020 and you are working on the January month-end accounting
file for a local mobile tire installation and repair business called The Good Rubber Company
(GRC) which has just opened. The following events happened during its first month of
operations.
1) On January 10th, GRC purchased $7,500 worth of inventory (new tires) from suppliers, on
account.
2) GRC also began its tire rotation and changeover service, collecting $110 from each of the 45
customers serviced that month.
3) At the beginning of the month GRC purchased a van and equipment for $30,000. GRC paid
$3,000 cash, and financed the rest from the supplier.
a) The interest rate on the outstanding balance is 5%, due annually (first payment of interest
and principle is PAYABLE NEXT January).
b) The estimated useful life of both the van and equipment is 10 years with no residual value
4) GRC was founded on January 1st with a cash investment from the one owner of $30,000 in
exchange for 3,000 shares.
5) Additionally, it sold eight (8) gift cards for $110 each, that can be redeemed for 1 service
each, at any point in the future. At the end of the month two (2) gift cards had been
redeemed / used.
6) GRC made a payment of $2,500 to its suppliers on January 15th, the remainder is due on
February 15th
.
7) The GRC paid $2,400 for a 1-year insurance policy to cover the Van used in operations as
well as general liability.
8) The owner of the company is also the operator (employee) and has elected to take a
monthly salary of $2,000. At the end of the month none of it had been paid.
General Journal entries for 1-3 have been completed (but not adjusting entries), please record
all the remaining necessary journal entries for the month of January. If no entry is required for
an event, please note it.
After this is complete please record all adjusting entries, update the general ledger (T-accounts)
and prepare an adjusted trial balance, income statement, and statement of financial position
for January 31st (please use the template provided, it is already formatted and some formulas
are already included) the company uses straight line depreciation. Do not worry about current
or non-current assets and liabilities for this month.
I will prepare a statement of cash flows, so you do not need to worry about that, however I am
concerned that our client will not understand the statement of cash flows, as this is the first
time they have received formal financial statements. Could you please prepare a professional
memo that explains the purpose of the cash flow statement, and the main business activities
that are included. It would be helpful to include examples for each business activity.
Bonus: Calculate the Return on Assets (ROA) for the month

California Coast General Stores

In December 2018, Steve Baily, the owner of California Coast General Stores announced the highest sales, $50, and profitability of $10 to its employees.

Founded in 1980, California Coast General Stores (CCGS), a regional west coast chain, owns several gas stations, mini-marts, and Auto rentals.

Explaining the original long-term success of the company, a financial analyst commented that the success of the company is due to its sustained growth rate, efficiency and cost savings. As a result, the company is cash rich and is looking to expand its operation.

One of the options that the company considered is to acquire a complementary company. John Marks, the company’s CFO and treasurer was asked to find the suitable acquisition. John identified Prestige Auto Shops, a chain which operates in several adjacent States. Prestige is a privately held company managed by three Johnson’s brothers. They own 10 million shares of the company and they have priced the stock price of the company internally at $20 per share.

Table-1 indicates John’s estimates of Prestige’s earnings potential if it came under CCGS’s management (in millions of dollars). The interest expense is based on Prestige’s existing debt, which is $20 million at a rate of 8 percent. It is expected new debt at rate of 8% to be issued over time to help finance investment in operating capital.

Security analysts based on comparable companies estimate the Prestige’s beta to be 1.28. The acquisition would not change Prestige capital structure, which is 25 percent debt-to value. John realizes that Prestige business plan requires investment in operating capital (net working capital and capital expenditures). The growth rate for operating capital is listed in table (1).

John estimates the risk-free rate to be 3 percent and the market risk premium to be 6 percent. He also estimates that free cash flows after 2023 will grow at a constant rate of 5 percent. Following are projections for sales and other items.

In theory, there are several valuation models. These models are Discounted Cash Flow based on WACC, Cash Flow to Equity (CFE), and AdjustedPresent Value (APV)which could be used to estimate the value of a firm.

Questions:

1.    What is the best model to value Prestige Company?

2.    Given the valuation model in part (1), what is the appropriate discount rate?

One Question = Please analyze this case, using International Trade methodology (not a short answer please) The Schwinn Bicycle Company illustrates the notion of globalization and how producers react to foreign competitive pressure. Founded in Chicago in 1895, Schwinn grew to produce bicycles that became the standard of the industry. Although the Great Depression drove most bicycle companies out of business, Schwinn survived by producing durable and stylish bikes sold by dealerships that were run by people who understood bicycles and were anxious to promote the brand. Schwinn emphasized continuous innovation that resulted in features such as built-in kickstands, balloon tires, chrome fenders, head and tail lights, and more. By the 1960s, the Schwinn Sting Ray became the bicycle that virtually every child wanted. Celebrities such as Captain Kangaroo and Ronald Reagan pitched ads claiming that “Schwinn bikes are the best.” Although Schwinn dominated the U.S. bicycle industry; the nature of the bicycle market was changing. Cyclists wanted features other than heavy, durable bicycles that had been the mainstay of Schwinn for decades. Competitors emerged, such as Trek, which built mountain bikes, and Mongoose, which produced bikes for BMX racing. Falling tariffs on imported bicycles encouraged Americans to import from companies in Japan, South Korea, Taiwan, and eventually China. These companies supplied Americans with everything ranging from parts to entire bicycles under U.S. brand names, or their own brands. Using production techniques initially developed by Schwinn, foreign companies hired low-wage workers to manufacture competitive bicycles at a fraction of Schwinn’s cost. As foreign competition intensified, Schwinn moved production to a plant in Greenville, Mississippi in 1981. The location was strategic. Like other U.S. manufacturers, Schwinn relocated production to the South in order to hire nonunion workers at lower wages. Schwinn also obtained parts produced by low-wage workers in foreign countries. The Greenville plant suffered from uneven quality and low efficiency, and it produced bicycles no better than the ones imported from Asia. As losses mounted for Schwinn, the firm declared bankruptcy in 1993. Eventually Schwinn was purchased by the Pacific Cycle Company that farmed the production of Schwinn bicycles out to low-wage workers in China. Most Schwinn bicycles today are built in Chinese factories and are sold by Walmart and other discount merchants. Cyclists do pay less for a new Schwinn under Pacific’s ownership. It may not be the industry standard that was the old Schwinn, but it sells at Walmart for approximately $180, about a third of the original price in today’s dollars. Although cyclists may lament that a Schwinn is no longer the bike it used to be, Pacific Cycle officials note that it is not as expensive as in the past either. One Question = Please analyze this case, using International Trade methodology (not a short answer please)

Please read case and answer the questions thank you.

As B2B e-commerce continues to grow, companies are placing more emphasis on upgrading their e-commerce infrastructure, taking many cues from B2C companies in the process. Streamlining their online stores and ensuring that potential customers can make purchases across a variety of channels has become just as important for B2B companies as it is for B2C companies. B2B e-commerce accounted for $6.7 trillion of the total $14.6 trillion in B2B trade in 2016, and that B2B e-commerce is expected to increase to around $9 trillion by 2020. For B2B e-commerce companies, there’s a lot at stake.Sana Commerce is a B2B e-commerce software company founded in 2008 and headquartered in the Netherlands. Sana provides B2B enterprise multichannel e-commerce, which is integrated with ERP systems. This means that Sana allows its clients to initiate transactions from physical stores, online stores, mobile app stores, telephone sales, or any other method. A number of companies offer these types of services, but Sana is unique in that it integrates within already installed enterprise resource planning (ERP) systems. Sana Commerce allows businesses to achieve better customer service, higher sales efficiency, and increased revenue. It’s compatible with many major ERP systems, including most versions of Microsoft Dynamics and SAP systems, and its Webshop is installed within that system, as opposed to functioning separately and interfacing with that system externally. This ensures that companies using Sana don’t have to make large investments in new ERP systems. Sana uses the pre-existing ERP’s business logic and information rather than forcing a complicated integration.This feature of Sana Commerce appeals to many companies, including Mechan Groep, distributor of agricultural machinery, wholesale goods, and aftersales supplies. Mechan Groep is based in Achterveld, Netherlands, employs 180 people, with clients in both the Netherlands and Belgium. The company earns 180 million euro per year, according to Mechan Groep CFO Rene Schwiete, who is featured in the video.Mechan Groep’s aftersales department uses Sana to better serve the needs of its dealers. Mechan Groep implemented Sana because of its preexisting use of SAP ERP software, and Sana’s Webshop worked within its larger SAP systems flawlessly. There are 105 dealers in Mechan Groep’s network. These dealers use Sana’s Webshop to access Mechan Groep supplies. Dealers can view inventory on a daily basis and select the urgency with which they need supplies. Mechan Groep’s custom Webshop offers over 700,000 items to Mechan Groep’s dealers.

1.How does Mechan Groep staff fulfill each order as it comes in on Sana Webshop?

2.What type of clients does Mechan Groep serve? Why is the speed of Sana Webshop important?

3.What types of B2B e-commerce companies is Sana best suited for?