Lecture Notes Week 7 (Class 13+14)
Lecture Notes Week 7 (Class 13+14) BA 101
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This 4 page Class Notes was uploaded by howellkaila on Friday February 20, 2015. The Class Notes belongs to BA 101 at University of Oregon taught by Tom Durant in Winter2015. Since its upload, it has received 169 views. For similar materials see Intro to Business in Business at University of Oregon.
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Date Created: 02/20/15
Week 7 Class 1 Tom started off Class with some tips on Foundation today as always Some of the things you should double check BEFORE vou submit vour decisions on Foundation are Is there a red number being saved Change it so it is not red Make sure your price on your unit is more than your variable costs labor material costs Are you making enough product to cover your fixed costs Are your sales going to outweigh your expenses How to make sure you are meeting all of the criteria for a round in Foundation Conduct your sales forecast to find inventory Make sure you calculate this correctly because if you don39t it could screw you over Towards the beginning of your FastTrack report there is a thing called the quotStock Market Summary Find the Close value listed for the Andrews Company or whichever one you may be Now go to the Proforma Ratios Here is where you find your Projected Stock Market Price Make sure this number is larger than the Close value listed on the FastTrack report If it is not larger you don39t get a star for Stock Increase Next go to the Proforma Income Statement This is where you find your contribution margin and Net Income Make sure your Contribution margin is above 30 and you are making a Net Income Make more than 0 If you are having trouble with contribution marain make you Material Costs lower and your price as high as it can go At this point 35 or 45 depending on the segment you are selling to You can also invest in TQM Continuous Process Improvement CPI to lower material costs For net income you need to make sure your sales outweigh your expenses Finally emergency loans On the Decisions Finance page at the very bottom of the chart is shows Starting and Closing Cash Position MAKE SURE these is no red number in closing Cash Position This will result in an Emergency Loan Another Foundation Struggle Other Companies are coming out with Products that will compete with meI what should I M 0 Odds are if you are putting in the RampD choices the market wants you will continue to be as successful as you already are But you will also have new competition What I did was I took away 200 units of product AFTER I added on the extra month of units I EXAMPLE My sales forecast was 1812 I added on the extra month of intentory and my new forecast was 1963 I subtracted 1763 from this because of the new competition If you were wondering I did receive my inventory star so this is a method that works I Something to think about How many new products are coming out to compete with you 1 2 4 These can effect how much you should take away Less new competition take away around 100 or less from your forecast More new competition Take away 200 It is a safe bet If you have a new product coming out in December wait until next year to start selling inventory It is not worth it to forecast for one month New Products can be difficult And if you forgot to buy capacity when making your new productI DO NOT WORRY The product is still there and it is ready to produce for the next year and you get a full year to produce it as well It can be risky making a new product so be cautious and make sure to look how many months you will actually be able to sell your product for in its first year If your awareness or accessibilitv is at 100 invest no more than 1400 per year in these categories for that product If you have more than one product each one has different accessibility and awareness Be aware of this Short Review on Finance Concepts Need to Borrow Cash Issue Bonds Take on Owners Issue Stock What happens of you reinvest profits Increase in Retained Earnings Have extra Cash 0 Retire bonds interest rate goes down 0 Retire Stock This will most likely increase your stock price so if you are struggling with this it is worth a shot 0 Pay Dividend You give money to your stock holders and it increases stock price It39s a win win for everyone Working Capital The extent to which a company can pay off its current liabilities using its current assets Formula WC Current Assets Current Liabilities You can find these numbers on the Balance Sheet The hiaher this ratio the better 0 Having a low WC Ratio means the company is struggling NOT GOOD 0 Having a high WC Ratio means you have a healthy company congrats When you look at your Proforma Ratio however you can a lower amount of days in which you can convert WC into Revenue Foundation Went over the basics of making a sales forecast Important If you have more than 12 million dollars in your closing cash position and do not plan on making any other extreme investments Retire bonds stock and give our a dividend I would personally retire stock before bonds to help raise your stock prIce Qsh Flow Statement Shows cash moving in and out of the companyorganization over a given period Shows how much cash is available during a given period Reconcile net profit back to cash By looking at the Income Statement we can figure out the Cash Flow with this equation Net Profit Depreciation Cash Flow from Income Statement On the ba nce sheet we can see how cash has chzmged from one vear to another Example 0 If cash goes down you lost money 0 If your accounts receivable increased you lost money 0 If your inventory increased you lost money 0 If you invest more in plant and equipment if plant and equipment increases you lost money 0 If your accounts payable increased you gained money 0 If your current debt increased you gained money BUT if you gained a lot of money this means you have to take out an emergency loan 0 If your Long Term Debt increases then you gained money 0 If your common stock increases then you gained money 0 If your retained earnings increases then you gained money On the Cash Flow Statement you can see important things like Inventory Costs Debt and Stock Values and most importantly Closina Cash Position Important things we went over in class vou won39t find on Blackboard Tom said this about 10 times toward the end of class so it must be important quotIncrease in asset use of cash Decrease in asset source of cash Increase in Liabilities Owner39s Equity source of cash Decrease in LiabilitiesOwner39s Equity use of cash Retired Stock means you purchased Common Stock If you issue a bond you are getting cash from issuing long term debt If you take out an emergency loan from inventory you will have a negative amount in red in inventory and a closing cash position of So If you take out an emergency loan for not financing equipment correctly you will have a negative amount in red in the plant improvements category and have a closing cash position of 0
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