Math128 Lec2 Essay

Submitted By xqzhou
Words: 3662
Pages: 15

les estimated in the previous year was more accurately estimated for the 2016 year as the production was maintained to acquire an accuracy rate of 77% from the previous year’s 65%. The production costs were left the same due to an unexpectedly lower sales percentage than accounted for. The use of the same production figures helped increase the accuracy by 13%. The distribution and advertising expenses were also maintained at the same figures as in the prior year due to the favourably increasing results. Using this strategy, the distribution rating increased from 0.45 to 0.51 therefore acquiring the number two spot for distribution rating amongst our competitors. The sales price, was maintained and resulted in the continuation of successful sales. We believed that the constant sales price yields the best profitability of both lines of bikes and helps develop brand loyalty. Nuclear Bikes’ retail margins remained consistent with the prior year because this was increasing our distribution level for both the Road Runnr and the mountain bike line (Appendix I).
Operations Financial Decisions The operations financial decisions also remained constant with last year’s rollover due to a combination of successful results and incorrect sales estimations. We decided to maintain the capacity at $25000 and cap production at 20700 units. Due to this decision our idle time should decrease from 14% and in turn decreased carrying costs. Maintaining the same numbers as last time allowed for accuracy results to increase, because of overestimating sales in the prior year. Due to the same decisions implemented for this rollover we should yield a greater number of sales because of the increase in demand for the products. This will be supported by the expected idle percentage decreasing. To decrease the wastage, we must also increase the efficiency so that maximum profit can be obtained. The reduction in idle time, decreases carrying costs because the production demand will be greater than product manufacturing. Along with the increase in efficiency we will increase the quality so the efficiency quality ratio can be maintained. Also, because our SCU opening and ending are working at maximum capacity we should consider expanding productions to a larger facility. This will be a future endeavour because although we were working at maximum capacity we still had an idle time that could be reduced.
Financial Decisions The decisions made for the 2016 rollover remained constant from the previous year in that the decision to finance from equity is administered. The cost of our divided stayed consistent at 260 cents a share. This, combined with our attractive debt to equity ratio will be an incentive to future shareholders as well as maintaining our current bondholders. For the upcoming year the proforma results suggest that our cash flow from operations will decrease. However our cash flow from financing budget will remain the same. Since our current financial situation is adequate we have decided to remain with the same strategy of equity financing. The surplus of cash for this year will be added to the current sum of cash and will be used in the future cases of necessary spending. This money will go toward our adopted, equity financing strategy. Cash flow for the prior year generated $1 million dollars which we don’t expect to occur for the year 2016. Overall, the financial decisions within our control will be kept constant as this has worked for Nuclear Bikes in the previous rollover.
Expected Results & Conclusion
As formerly mentioned, the goal for this year was to allow our operations decisions for the previous year to not only catch up but to excel with the previous inputs. Expected for this year was the increase in sales due to the more accurate production estimate. The results for this year will give us a new base to estimate productions for the upcoming year. With the continuation of our decisions the results are likely to