Business Administration 2257 - Final Exam Cheat Sheet.docx

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Western University
Business Administration
Business Administration 2257
Ian Dunn

FUTURE LOOKING ANALYSIS Qualitative Assess new products or services pros/cons Implications Quantitative 1. Differential Analysis Differential Inflows Sales Total Inflows Differential Outflows Diff. Cogs Diff. Expenses Total Outflows Net Cash Flows -------------------------------------- Differential Investment Equipment or any Investments Diff. Working capital accts (AP, AR, INV) Total Investments ROI (total NCF/total investments) 2. Analysis of Differential Implications! (payback, ROI, cash flow) Payback (total investments/total NCF) CONTRIBUTION ANALYSIS 3. Breakeven Analysis B/E units= Fixed Costs/unit Unit contribution=selling price- contribution variable cost per unit Diff. AR B/E=Fixed Costs/contribution AR= (Diff. Sales/360) X Age of AR margin rate *increasing=investment (add it) Diff. AP Contribution margin rate= AP= (Diff. COGS/360) X Age of AP (SP-VC per unit) / SP *increasing=disinvestment (subtract) Diff. Inventory Inventory= (Diff. COGS/360) X Age of Inv. DECISION!!!!! *increasing=investment - “I recommend that...” -Address qualitative and quantitative *NOTE: IF WE ARE NOT GIVEN DIFF analysis COGS LOOK AT EXPENSES PERTAINING TO -how it will meet company goals LINK BACK -how do goals and constraints influence decision FINANCING DECISION -state whether financing with debt or equity (debt is always more favourable) -compare debt versus equity PROMOTION DECISION -compare both options (push versus pull) *pull requires $ EVALUATE EFFECTIVENESS OF DECISION 1. PROJECTED STATEMENTS Projected Income Statement Projected Balance Sheet 1) Estimate sales forecast (using sales growth ratiAs at 20— 2) Estimate expenses using vertical analysis, case Current Assets I/S Cash 3) Apply tax rate AR [(proj. Credit sales/360)X days of AR] + Diff. AR *MAKE SURE YOU INCORPORATE NEW PRODUCTS AS WELL AS PREVIOUS PRODUCTS Inv. [(proj. COGS/360) X days of Inv.)] + Diff. Inv. Prepaid expenses Total current assets Projected Balance Sheet Long Term Assets 1) Enter items not expected to change from last balFixed Assets (this yr purch.+ last yr. Purch) 2) Retained Earnings: Last years R/E+ projected net income (Less= A/A -net loss) + planned additional invstment- any Net Fixed Assets dividend/drawings 3) Projected A/R= (Projected credit sales/360) x days of A/Rets Projected A/P= (Projected purcheases/360) x days ofLiabilities Projected Inv= (Projected COGS/360) x days of Inv Current liabilities 4) Include planned fixed assets + amortization (froAP [(proj. COGS/360)X days of AP] + Diff. AP 5) Include planned debt financing Payables Total current liabilities Project Income Statement Shareholders Equity Revenue Common Stock (same as befo
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