Please help. Case Study Assignments Requires written and oral presentation as fo
ID: 2331450 • Letter: P
Question
Please help.
Case Study Assignments Requires written and oral presentation as follows: All assignments require use of the following attributes and delineate/present format as follows: Identify a minimum of two significant issues within each Case Study. Next explain why these issues defeat the well being of firm. You MUST use the following attributes. 1. Problem causing condition: What two analyjical tools did you use to identify relevant issues/ findings? Ddlanle S incomeS 2. Criteria/measures used in Benchmarks: What action should be taken to improve operating performance? 3. Effect influencer of outcome: What is it about the two analytical tools that influence stated operating outcome? 4. Recommendation: If corrective action is required? Remember all findings must be traced to relevant analytical measure(s) Correctness and relevance of analytical measures. Criteria, effect and recommendatio Format/Presentation 20 point penalty for submission beyond syllabus " due date" Copyright 2016 Pearson Education, Inc.Explanation / Answer
The two Analytical tool that we use here is Ratio analysis and Cash Flow statement
The Operating Profit difference between Gross Profit and Fixed Expenses.
that is Operating profit = Gross Profit - Fixed Expenses
In other words Fixed Expenses = Gross Profit - Operating Profit
In present case the gross profit for year 2012 is 5249 and operating profit is (12225)
So Fixed expenses will be = 5249- (-) 12225 ie 5249+12225 = 17474
Simirarly for year 2013 Gross profit is $ 12061 and Operating profit is $ (6783)
so fixed expenses will be $ 12061- $ (-) 6783 = $ 18844
Inspite being decrease in rent income which is fixed expenses from $ 906 to $ 845 from 2012 to 2013 there is rise in other fixed expenses. This may be due to increase in capacity as we see there is rise in gross profit or due to inefficiencies. The company needs to address this rising fixed expenses issue. As we observe the accumulated depreciation is almost near the original cost value of assets it depicts that assets are old and may be not working at efficiency levels and also there may be increase in maintainence cost of these assets
Second aspect is increase in non operating losses. The non operating losses for the year 2012 was $ 572 (Difference between operating income and net profit) but the same for 2013 is $ 2125.
On persuing cash flow statement the cash flow from investing activity for 2012 is $ (400) and that for 2013 is $ (971) . Negative Cash flow from investing activity represents outflow for investment in fixed assets and long term investment. In current example new investment in assets represents ($ 11888- $ 10769) ie $ 1119 and outflow for long term investment is $ 227 ($5248-$5021) summing to $ 1346 however in cash flow statement net outflow from investing activity is $ 971. The difference between income from investing activity which will be $ 375.
The loss from non operating activity is $2125 inspite of income of $ 375 hence the non operating expenses will be $ 2500 which are causing major losses to the company. The investment policy of the company is not proper. The company should resturcture its investment policy. The company has sourced $ 8669 from financing activity by raising capital and borrowing more, however this funds are utlised for coping up with losses thereby increasing financial cost which in turn will increase losses for future.