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Homework answers / question archive / 1)Zippo's Beta subdivision produces ottomans
1)Zippo's Beta subdivision produces ottomans. The company expects to sell 15,000 ottomans next year at an average sales price of $600 each. Each ottoman requires 8 square feet of leather, 2 cubic feet of padding, and 20 feet of lumber. Assume the following inventory at the beginning of the year and cost information: Ottomans Leather Padding Lumber Beginning inventory - 2,500 1,500 400 2,000 units $200 Unit cost $2/sq $17 $0.50 / ft cubic ft ft each Target ending 1,000 2,000 500 1,600 inventory level
1. What the number of ottomans budgeted for production? 2. How much padding (cubic feet and $) is required to be purchased during the coming year? 3. What is the impact on budgeted ottoman sales (in units and $) and production (in units) if the sales price decreased by $100 and sales are expected to increase by 20% as a result?
2)Explain how would you conduct a financial analysis of a corporate customer/business to understand its financial strengths and financial risks?
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2)
The examination of financial position of a corporate customer/business is done by studying its financial statements and calculating certain ratios. A company's worth is based on its market value.
In assessing the strength or risks of a bussiness's financial position, a financial analyst uses the information of quality of the assets, such as your car and your house, and places a conservative valuation. The analyst also ensures that all liabilities, such as mortgage and credit card debt, are appropriately disclosed and fully valued. The total value of all assets less the total value of all liabilities gives your net worth or equity which further explains company's financial status. If the assets are more than liabilities, then company's financial health is good but if liabilities are more than assets, then there is a risk.
The Significant Financial Statements/ calculations needed to assess the details of strength and risks associated with comapany's financial position:
1) Balance Sheet
Like financial position, a company's financial situation is defined by its assets and liabilities. A company's financial position also includes shareholder equity.
2) The Current Ratio
3) Financial Position: Book Value
If we subtract total liabilities from assets, we are left with shareholder equity. Essentially, this is the book value, or accounting value, of the shareholders' stake in the company. It is principally made up of the capital contributed by shareholders over time and profits earned and retained by the company, including that portion of any profit not paid to shareholders as a dividend.
