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Essays on balance sheet analysis
Essays on balance sheet analysis
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Executive summary.
In this business case, a shift from seasonal to level monthly production of toys will change the seasonal cycle of Toys World's working capital needs and necessitate new bank credit arrangements.
It has to be analyzed the company's performance, forecast fund needs and make a recommendation. The case introduces the pattern of current assets and cash flows in a seasonal company and provide and elementary exercise in the construction of the pro forma financial statements and estimation of fund needs.
Toy World has been facing two basic issues, as follows:
- The first one is if it has to change to a level monthly production.
- The second area of concern is the financial arrangement with the bank.
These two points are analyzed in detail here in this paper.
Finally, I have suggested some recommendations for the issues that I have mentioned above. In reference to the first issue, it will be profitable for the company to change to level monthly production.
In reference to the second issue, Toy World has to get a bigger loan.
If the company follow this recommendations, it will obtain a profit of $ 531,000 that represents $180,000 more than with seasonal production
Background
Toy World, Inc is a manufacturer of plastic toys for children, founded in 1973 by David Dunton. In the past, the company's production schedules had always been highly seasonal, reflecting the seasonality of sales. Jack McClintock, president and part owner of this company, is considering a proposal to adopt level monthly production for the coming year.
Main Issues:
The two principal issues that has to be analyzed are:
.
1.Should Toy World change from seasonal production to level monthly production?
The first problem that has to be analyzed is if they have to adopt a policy of level monthly production, or if they have to continue with seasonal production. It has to be studied what are the opportunities and the risks for the company if they adopt the change.
2. Financial arrangement with the bank
If a level production is adopted, fund needs will change, and the company will have to renegotiate the agreements with its primary bank, City Trust Company.
Insights about the Main Issues
1. Should Toy World change from seasonal production to level monthly production?
With seasonal production there are many problems. Overtime premiums reduced profits, seasonal expansion and contraction of the work force resulted in recruiting difficulties and high training and quality control cost, etc.
2. Operations are heavily dependent on Western Canada which is going through economic downturn(oil situation)
There are two solutions that provide the optimal profit given the current constraints under which JP Molasses operates. Under these conditions, the optimal profit is $63,571. This profit margin is achieved in both cases with revenue of $942,354 and cost of $412,333 for material purchased and $466,450 for fixed and variable costs in processing, for total cost of $878,783.
An important indicator is that the company broke the budget for each department on monthly bases, since they had a variation of products and quality products. The reason why they did this stands to the point that the company produced products in two seasons, fall and spring. The fall products had a cost of $100 dollar per unit because of the more delicate product that required higher material cost, whereas the spring products had a cost of $60 dollars per unit as they needed less costly material. All in, these clarify the fact that they used monthly bases budget.
In order for a company to push its improvement and create a balanced plant, it is necessary to increase the throughput, while reducing inventory an operating expense. But, what is most important is to identify the bottlenecks to be able to focus on them. After focusing and solving the constraints, everything else is going to be less powerful but important at the same time.
The tradition of toys shows a high growth rate in China and hence provides a positive outlook and hence a room for expansion and new business venture for new toy companies. The production of traditional toys is cost competitive and transportation cost within China is considerably low. The management can stay in control by keeping the production as close to the main market as possible and taking charge of the division of labor to avoid unplanned decisions. The use of highly automated factories can increase price competitiveness and local sourcing of products (Yew Wong, Stentoft Arlbjørn, & Johansen,
he Lego Company was first started in 1916 in Denmark concentrating on building houses and furniture for all farmers. Lego company found its niche in the year 1932 when the first wooden type building blocks were created by that moment lego company had found the purpose in creating toys for small children. Thelego toy product was developed further more and eventually the wooden blocks were developed out for plastic kind of pieces. Lego comany effectively grew its brand by evolving several more product lines for different kind of age groups and specializing its development and production process. However, Lego company, as well as the rest of the toy industry had to experience very slow growth in the period of 1993 to 1998. The declining growth was initially attributed to a declining youth aggresive population in key
1. Context: In early September’08 Giant Consumer Products, Inc. (GCP) realized that Frozen food division, which had been growing at 2.8% (compounded annual growth) rate since 2003 to 2007 and accounted for almost 33% of GCP’s overall business volume, is not doing well now. The sales as well revenue volume is around 3.9% behind the target. Most specifically marketing margin (key parameter for GCP business) was also under plan by 4.1%. GCP had been doing well in wall-street but performance of past couple of quarters has increased the worries of GCP i.e. whether GCP will able to maintain its profitable growth.
Since more than 40 years, Toyota Company was thinking how to develop the traditional process costing system and the production system. Some of the companies believe that the increasing of the production is a big profit, while Toyota proved the opposite. The more you increase the products out of the need of the market, the more losses you are going to gain. This kin...
While analyzing the data for The Body Shop International case, I noticed some trends and have compiled my assumptions for the next three years. I have compiled pro-forma statements for the fiscal years 2002, 2003 & 2004. These figures are based on the percentage of sales method for pro-forma financial modeling. Simply put, I used the sales figures from the past three years 1999, 2000 & 2001 and applied a growth rate of 13% increase to sales. Below are some additional assumptions that I have created to illustrate how the firm can become profitable while increasing market share and maintaining stockholder interest within the firm over the next three years.
Galaxy Toys was founded in 1956 by George Jepson and his wife Nan. Over the span of the business’s 60 year history, it has seen many social, economic, political, and cultural changes. To survive the company has had to change with the times. Its
Every company has some kind of Revenue and they all have costs that are associated with running the company. It is also true that if a company wants to increase their Revenue, their costs will increase too. It is every company’s goal to maximize revenue and either through Production or Services, and minimize cost. These things are easy to figure out, but actually identifying the production and figuring out how it will increase or decrease with change is very difficult.
The successful operations of the company revolve around the undertaking of strategic responses to market dynamics and performance of their brands. The company consistently applies changes to the various systems in its production line to address not only i...
also be fixed with effort from the management, with potential to turn undercapitalized resources and
Maintaining a company’s financial assets is a daunting task. Cash management techniques and short-term financing provide accounting executives with the tools needed to survive the constant changes within the economy. The combination of these tools and the knowledge of the world economy will assist companies in maintaining current assets and facilitates growth.
Here are some recommendations for him to make changes. First, there are some strategies can be used in inventory control. The main problem of the inventory control is unable to respond with the changing demand. It is suggested the shops in Hogsmeadow Garden Centre to place more orders with smaller order batches each time. It is not necessary for the shops to place order in a fixed period of time, at the beginning of the season for Hogsmeadow Garden Centre. It is possible to place orders when the stocks reach minimal stock level, which means the minimal amount of safety inventory that are willing to keep on hand before replenishing the suppliers. (Colleen Rodericks, n.d.) This strategy is particularly beneficial for selling perishable goods, as it can reduce the inventory level of the shops. It enables the shops to lessen the problem of losing money by discounting and throwing away for the perished stocks. At the same time, it is important for the shops to use First-in-first-out (FIFO) method for perishable products. FIFO method means selling the oldest products first, and the selling the new purchased products later. (Colleen Rodericks, n.d.) It is crucial for products with limited-life, like plants. As the oldest products are supposed to perish earlier, it is better to sell them earlier so as to reduce throwing away the perished products. Reducing the order batches and using FIFO method can reduce the products to be thrown, the costs of inventory can be reduced and the profitability of Hogsmeadow Garden Centre can be