Strategic planning and management Assignment Writing Online Essay Help Analysis:
Part A: NGF Limited
NGF Limited is a boutique producer of hand crafted sound systems operating in Monaco. While their products are certainly more expensive to produce, no competitor has come close to its unique acoustics. Unfortunately, with the financial troubles in Europe, it’s selling fewer sound systems than ever before.
The owner and CEO, Nigel G. Forde examined its financial statements, and decided that three things needed to be done to keep the business afloat during these difficult times:
- Slash the marketing budget by half.
- Scrap research and development entirely (at least until things look better)
- Sell off half the machines, and work the remaining ones slightly harder.
- Fire one third of the staff.
Below is its most current balance sheet and profit and loss statement (2011). Also provided are the budgeted (or estimated) statements taking the above into consideration.
Balance Sheet, 2010, 2011 and 2012 (Budgeted)
|
2010 |
2011 |
2012 (Budgeted) |
|
| Assets | |||
| Cash |
$50,000 |
$50,000 |
$250,000 |
| Inventory |
$300,000 |
$400,000 |
$250,000 |
| Accounts Receivables |
$400,000 |
$350,000 |
$300,000 |
| Plant, Property and Equipment |
$2,000,000 |
$2,000,000 |
$1,000,000 |
| Less Accumulated Depreciation |
$1,000,000 |
$1,200,000 |
$700,000 |
| Intellectual Property |
$500,000 |
$500,000 |
$500,000 |
| Total Assets |
$2,250,000 |
$2,100,000 |
$1,600,000 |
| Liabilities | |||
| Accounts Payables |
$150,000 |
$200,000 |
$100,000 |
| Bank Loan |
$1,000,000 |
$1,000,000 |
$500,000 |
| Total Liabilities |
$1,150,000 |
$1,200,000 |
$600,000 |
| Owners’ Equity | |||
| Contributed Capital |
$800,000 |
$800,000 |
$800,000 |
| Retained Profit |
$300,000 |
$100,000 |
$200,000 |
| Total Equity |
$1,100,000 |
$900,000 |
$1,000,000 |
| L + OE |
$2,250,000 |
$2,100,000 |
$1,600,000 |
Profit and Loss Statement, 2010, 2011 and 2012 (Budgeted)
|
2010 |
2011 |
2012 (Budgeted) |
|
| Sales |
$2,000,000 |
$1,200,000 |
$1,200,000 |
| COGS |
$1,000,000 |
$600,000 |
$600,000 |
| Gross Profit |
$1,000,000 |
$600,000 |
$600,000 |
| Other Selling Expenses |
$200,000 |
$150,000 |
$150,000 |
| Wages |
$150,000 |
$150,000 |
$100,000 |
| Admin Expenses |
$50,000 |
$50,000 |
$50,000 |
| Marketing Expenses |
$100,000 |
$100,000 |
$50,000 |
| R&D Expenses |
$50,000 |
$50,000 |
$0 |
| Depreciation |
$200,000 |
$200,000 |
$100,000 |
| Interest |
$100,000 |
$100,000 |
$50,000 |
| Net Profit |
$150,000 |
-$200,000 |
$100,000 |
Required:
- Comment on the strategies that Nigel is planning to take. What are your views on them (positive or negative). Given your personal views, re-state the budgeted 2012 Balance Sheet and Profit and Loss Statements. (Make sure that your views are well-justified.)
[10 marks] - Construct a (budgeted) statement of cash flows for 2012. Comment briefly on the source of its budgeted cash surplus. How will the sell-off in machinery affect future cash flows?
[10 marks] - Discuss NGF Limited’s working capital management for 2011. What strategies will you take to improve this for 2012? Make sure you document any associated risks. Do you think the budgeted (2012) statements show a sensible use of working capital?
Strategic planning and management Assignment Writing Online Essay Help Analysis:
Ans 1 )The strategies undertaken by Nigel can be discussed as below:
Slashing the marketing budget by half:It is a very wise decision looking into the financial turmoil across the demand for costly hand crafted systems is fact very poor and there is hardly any chance to improve as it is evident from the sales figure of the projected balance sheet as well. Thus looking at the present context I would rather agree with the steps taken by Nigel.
Scrapping the Research and Development budget would also be in line to bring financial prudence in a time when the entire has been to keep the company afloat looks logical.He could have tried to amortise the R&D expenses
Selling Of Machines: Once again an important move taken to ensure that it saves expenses out of the depreciation block
Fire one third of the staff: This again is in response to the current financial condition where keeping the company afloat is of prime importance
Accounting practices are in fact a measure of the use of the accounting principles involved.In the present era .Some of the common practices like depreciation ,amortisation and principles involved with COGS sold can be easily doctored to window dress a balance sheet. Thus the integrity of the corporate citizenship involved and thus the true value that the balance sheet reflects for the share holders is thus a reflection of the accounting practices .In order to represent a better reflect shareholders value some companies have also moved an extra mile to present the shareholders with EVA ( Economic Value Added) numbers with is a trademark ratio developed by the famous accounting company Stern and Stewart and is very widely noted in the industry as a true representation of value. The degree with which organisations have an emphasis on sound and just accounting practices also reflects their commitment towards corporate citizenship. One of the examples in this case can be seen by the actions taken by the Hastie Group(NZ Herald) in the month of May in the year 2012.On realising accounting malpractices by one of its employee’s in quickly swung into action by suspending the employee and ordering further probe to investigate the matter.This was also followed by reporting the entire event of actions to ASIC(Australian Securities and Investment Commission).Thus we see here the company being committed to the cause of corporate citizenship and the value it offers to shareholders by being very transparent about its accounting practices. This scandal also made Hastie Group investigates some of the directors involved .This eventually lead to the complete collapse of the group. However ,here we see an example in which deliberate erroneous application of accounting practices can severely lead to erosion of shareholder value. Thus ,it is the prime responsibility of organisations to involve the best possible accounting practices to ensure that the cause of corporate citizenship is upheld.
Good corporate makes sure that companies consistently perform better and have a sound relationship with it stakeholders Thus proper accounting standards are very significant, as it leads to the effective disclosure and consequently good corporate governance programmes. Thus,in the present era proper accounting practices are of importance as they help to shape sound corporate citizenship values. Thus setting the context for corporate citizenship makes sure that personal discretion and confusions have no room to play while presenting resuls.Thus we can safely say that strict and uniform standards , widespread interpretation, harmonization of related laws for ensuring the true and fair view of business ,are in fact some of the important tenets of corporate citizenship
MD68
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