Case Study (Accounting) - BUSINESS FINANCEIntroductionThere' are different phases in the economy such as boom, depression, recession, etc. The performance of the economy here is not cyclical as in the case ofdeveloped countries exhibiting business cycles, as the economy dependsbasically on growth rate of agriculture. Thus one important factor is die fiscal policywhich incorporates government expenditure and taxation, borrowing, deficit financing etc. which influences both the public and private sectors in the economy. The industrial growth in general norm Particular influence he corporate performance. Corporate performance depends on a number of variables, both internal andexternal to the company.
The major internal factors are: (i) efficiency of capital use productivity of total capital employed Growth of Gross Block and itscapacity utilization (ii) Sales turnover and operational efficiency (iii) Profitability ofthe operations (iv) return on capital employed (v) expansion plans and internalreserves built tip and (vi) Tax planning and accounting practices etc. Let’s analyze the cases. Case 1Introduction The long-term goals prefer mostly companies with a solid past performance and continued good performance in future. Such companies are calledgrowth companies, or Blue Chip Companies as Burganz. Of the factors which influence the share prices, the most important one is corporate fundamentals, namely, company'sintrinsic worth, net asset value or book value.
The corporate performance is thus thesingle largest force, influencing share price. This is studied by the ratio analysisreferred to below, funds flow analysis — namely sources and use of funds — andtrend analysis of growth rates of important parameters like sales, gross block etc. All the proposals are important and require considerable attention since they relate to the future development of the company. The reliable proposal up for consideration is: The proposal 3 i. e.
to relocate to a new factory on a site the company already owns in Melbourne. Features of BurganzThe factory Burganz is currently operating in Adelaide was established 5 years ago at a cost of $10 million. This cost is being depreciated over its expected economic life of 10 years. The factory has been well maintained by Burganz and the company estimates this plant will remain capable of full-scale production for another 10 years. The company expects that this plant in Adelaide would have a current salvage value of $4 million and a value of $100,000 in 10 year’s time.
The upgrade of the factory in Adelaide under proposal 2 or the relocation to Melbourne under proposal 3 both involve considerable expenditure. Both of these proposals require new production equipment that will have a 10-year economic life. These proposals require the scraping of the existing factory in Adelaide. The major difference between the new installations of proposals 2 and 3, is the Melbourne factory would make greater use of automation and modern surf board making equipment. GENERAL PREPARATION The objective of new product marketing may be an investigation of buyer characteristics, trial and usage rates, purchase frequencies, product applications, results of altering marketing inputs, response from the trade, etc.
But, the major purposes of it are: I. To obtain reliable forecasts of sales volume. 2. To obtain information that can help correct any problems with the new productor its marketing plan.