Study Guides (370,000)
CA (150,000)
Western (10,000)
2257 (100)
Prof (9)

Business Administration 2257 Study Guide - Final Guide: Sunk Costs, Internal Financing, Contribution Margin

Business Administration
Course Code
Business Administration 2257
Study Guide

This preview shows half of the first page. to view the full 2 pages of the document.
1. Read the case (30 min)
Role, goals, constraints (qualitative and quantitative, potential obstacles)
Outline necessary decision and recommendations (wondered, wanted to)
2. Understand the organization (1.5 hours)
Business size-up (45 min): industry/environment analysis, consumer, competitor, corporate capabilities
Financial size-up (45 min): past long analysis: statement of cash flows, ratio analysis, contribution analysis
3. Access future opportunities/decision (1 hour)
Qualitative: pros, cons
Quantitative: differential, contribution, breakeven, cash budgeting, sensitivity analysis
How does sensitivity analysis affect the results?
Make a decision (launch? Financing? Promotions?)
How do goals and constraints influence your decisions?
Marketing (push vs. pull strategy) depend on environment, company, customers, competitors
New product launch, pricing (cost behavior analysis): do contribution, breakeven, sub-unit, cost-price analysis
New product, expansion, fit within industry, new plan or revise promotion plan: do marking analysis
Experiencing cash flow problems: do cash budget analysis
Cash management issues, new financing required, current financial position: do statement of cash flow analysis
Do Ratio Analysis after SCF is analyzed, understand the past, access profitability
Access future opportunity: differential analysis
4. Evaluate effectiveness of decision/overall strategy (1 hour)
Projected income statement (changes in profitability) and balance sheet (expose financing requirements)
Action plan (Specific, long-term and short-term. Additional funding?)
Contingency plan
Access future opportunity, overall strategy effectiveness, determine financing needed: projected statement analysis
Consistency, Implications, be specific
Statement of Cash Flow
1. Operations: (operating activities, net income, adjustment to cash basis)
Record Net Income Add back non-cash expense (amortization)Add back losses, subtract gains
Add sources, subtract uses Net Cash Flow from Operations
2. Financing Activities
or in loans, stock, personal investment, Reconstruct the R/E (or Equity) to determine dividends (or drawings) subtract dividends/drawings Net
Cash Flow from Financing
3. Investing Activities:
Non-current Assets (excluding trading investments), consider depreciation and losses or gains
Increase Decrease
Asset Use Source
Source Use
Equity Source Use
Analysis of SCF:
Operations: Cash flow, positive or negative? Driven by Net Income? Working capital accounts?(AP, AR, Inventory) Sustainable?
Sources/Uses: Major sources/uses? Meet expectations? Sustainable? Concerns?
AR Use + Inventory Source < AP Source: adequately managed. Can AP be extended?
AR : Large sales increases, Longer collection period
Ratios: Age of AR, AP, Inventory
Matching: Appropriately?
Large source from capital investment used to finance purchase of building (Long-term to Long-term). Effective matching. Additional
financing? Repayment of long-term debt?
Large use of cash for purchases of buildings. Expected? Expanding operations? Required?
Ratio Analysis
Profitability Investment Utilization Liquidity Stability Growth
Vertical Analysis
COGS to sales=
Gross Profit to Sales
Operating Ex. to Sales
Net income to Sales
Measures efficiency
Inventory Turnover=
Fixed Asset Turnover=
Total Asset Turnover=
Current Ratio= (2:1)
Acid Test= (1:1)
Working Capital=
Current Assets-Cur. Li
Age of AR=
Age of AP=
Net worth to total
Tot.Debt to Tot. Asset
Debt to Equity=
Long-term Debt Interest
Sales Growth=
Profit Growth
Asset Growth
Return on Investm’t
Return on assets=
find more resources at
find more resources at
You're Reading a Preview

Unlock to view full version