Thomas Food: Case Study: Thomas Foods

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I selected Case 1 Thomas Food and I have been employed by Thomas Foods to plan and execute a supporting methodology that will insulate the organization from the dangers that are related with obtaining harvested crops from neighborhood crops. The main key terms I should use to help encourage my assessment procedure are in climate weather or potentially disastrous events, operating income, and free market activity. Clearly, with regards to working with farmers and their products, the climate as well as catastrophic events can majorly affect the prices of the harvests, which can essentially help or mischief Thomas Foods' association with their suppliers. Another key term to remember all through my study is "operating income," in which…show more content…
Since the company goal is to create a way to prevent a financial loss in the company's operating income. The major concern is increasing in prices, in which cause maybe due to the in climate weather on the farmers crops and produces that Thomas buy and sell to their customers. I will create a hedging strategy that will benefit both Thomas and the farmer by decreasing the middle man and buy directly from local farmers and suppliers to help cut the cost of some products with in…show more content…
What could cause the large increases in pricing is the uncertainty of future weather conditions and how the weather conditions will affect the suppliers’ produce, which will in turn affect the price of the produce sold to Thomas Foods. Thomas Foods believes that applying a hedge strategy towards their accounting practices would be the best answer to preserve the company’s operating income. With the implementation of a possible hedge accounting program at the company, the controller must be informed of both the cash flow and fair value hedge accounting strategies and how accounting will happen with the implementation process. Issues: 1. By implementing a hedging strategy at Thomas Foods, will the implementation of a strategy mitigate the risks of price increases from local suppliers and vendors and benefit Thomas Foods financially? 2. Between cash flow and fair value hedging strategies, which strategy would benefit Thomas Foods the most in ensuring minimal losses in operating income? 3. Due to the inexperience of the controller in hedging strategies, what would be the best way to explain how the strategies work and how to implement the new strategy so the controller can understand it?
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