This document is a case study analyzing the financial reporting options for Merrimack Tractors and Mowers Inc. The company is facing rising costs and needs to determine whether to continue using LIFO (Last In First Out) or switch to FIFO (First In First Out) for inventory accounting. Continuing with LIFO would lead to declining profits over time. Switching to FIFO would boost short-term profits but could hurt the company in the long run as prices continue increasing. The conclusion is that the company should switch to FIFO for 2008 to remain viable but must take additional steps to reduce costs.
Clique Pens - Case Study Solution by Kamal Allazov (Essay type)Kamal Allazov (MSc.)
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Clique Pens - Case Study Solution by Kamal Allazov (Essay type)Kamal Allazov (MSc.)
Clique Pens Case Study by Harward Mba Center. This paper introduces possible solutions and recommendations by MSc. Marketing student - Allazov Kamal. (https://allazov.org/)
Faced with increased competition at home, Sainsbury's decided to expand its international operations by entering Egypt.But in Egypt, there is an odd victim on the boycott list, Supermarket group Sainsbury's pulls out of Egypt after just two years - at a cost of more than £100m. I and my team have studied on it. Hope you like it and suggestions are most welcome.
Toko Bunga Surabaya, Jual Karangan Bunga Surabaya, Jual Bunga Papan Surabaya, Jual Bunga Ucapan Surabaya, Jual Rangkaian Bunga Surabaya, Jual Buket Bunga Surabaya, Bunga Ucapan Selamat, Bunga Ucapan Duka Cita, Bunga Papan Selamat, Bunga Papan Duka Cita
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A marketing Case Study of Natureview Farm, an organic yogurt manufacturer. This analysis was performed by E. Santhosh Kumar, IIT Madras, during an internship with Prof. Sameer Mathur, IIM Lucknow.
Case Analysis |Altius Golf and the Fighter Brand|Anahit Babayan
Questions covered.
1. If Altius implements the Elevate strategy what are the risks to the brand and how can they be managed?
2. What sales result would you expect for each item in the line if Elevate is introduced?
This is the case study of the subject Managerial Accounting. It deals with the Break Even point. The analysis is basically on the break -even analysis for the multiple products. We have done the full analysis and the solution is in the presentation.
Reliance Baking Soda is Stewart Corporation's oldest and most established product. The new Domestic Brand Director needs to create a 2008 marketing budget that delivers a profit increase of 10% over 2007 levels. She must first evaluate the effectiveness of past consumer and trade promotions and determine if a price increase will have net bottom line benefits. Then she must decide on the optimal allocation of her marketing budget, taking into account the brand's apparent "cash cow" role in the Household Division of Stewart Corporation. Students are expected to complete a quantitative assignment: create and defend a budget.
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Mini Case112018Chapter 2 Mini CaseSituationJenny Cochran, a grad.docxpauline234567
Mini Case11/20/18Chapter 2 Mini CaseSituationJenny Cochran, a graduate of The University of Tennessee with 4 years of experience as an equities analyst, was recently brought in as assistant to the chairman of the board of Computron Industries, a manufacturer of computer components.
During the previous year, Computron had doubled its plant capacity, opened new sales offices outside its home territory, and launched an expensive advertising campaign. Cochran was assigned to evaluate the impact of the changes. She began by gathering financial statements and other data.Computron's Balance Sheets (Millions of Dollars)20182019AssetsCash and equivalents$ 60$ 50Short-term investments10010Accounts receivable400520Inventories620820Total current assets$ 1,180$ 1,400Gross fixed assets$ 3,900$ 4,820Less: Accumulated depreciation1,0001,320Net fixed assets$ 2,900$ 3,500Total assets$ 4,080$ 4,900Liabilities and equityAccounts payable$ 300$ 400Notes payable50250Accruals200240Total current liabilities$ 550$ 890Long-term bonds8001,100Total liabilities$ 1,350$ 1,990Common stock1,0001,000Retained earnings1,7301,910Total equity$ 2,730$ 2,910Total liabilities and equity$ 4,080$ 4,900Computron's Income Statement (Millions of Dollars)20182019Net sales$ 5,500$ 6,000Cost of goods sold (Excluding depr. & amort.)4,3004,800Depreciation and amortizationa290320Other operating expenses350420Total operating costs$ 4,940$ 5,540Earnings before interest and taxes (EBIT)$ 560$ 460Less interest 68108Pre-tax earnings$ 492$ 352Taxes (25%)12388Net Income $ 369$ 264Notes:a Computron has no amortization charges.Other Data20182019Stock price$50.00$30.00Shares outstanding (millions)100100Common dividends (millions)$90$84Tax rate25%25%Weighted average cost of capital (WACC)10.00%10.00%Computron's Statement of Cash Flows (Millions of Dollars)
Bart Kreps: The statement of cash flows provides information about cash inflows and outflows during an accounting period.
2019Operating Activities Net Income before preferred dividends$ 264Noncash adjustments Depreciation and amortization320Due to changes in working capital Change in accounts receivable(120) Change in inventories(200) Change in accounts payable100 Change in accruals40Net cash provided by operating activities$ 404Investing activities Cash used to acquire fixed assets$ (920)
Bart Kreps: Make sure to add back annual Depreciation to Net PP&E.
Bart Kreps: The statement of cash flows provides information about cash inflows and outflows during an accounting period.
Change in short-term investments90Net cash provided by investing activities$ (830)Financing Activities Change in notes payable$ 200 Change in long-term debt300 Payment of cash dividends(84)Net cash provided by financing activities$ 416Net change in cash.
Faced with increased competition at home, Sainsbury's decided to expand its international operations by entering Egypt.But in Egypt, there is an odd victim on the boycott list, Supermarket group Sainsbury's pulls out of Egypt after just two years - at a cost of more than £100m. I and my team have studied on it. Hope you like it and suggestions are most welcome.
Toko Bunga Surabaya, Jual Karangan Bunga Surabaya, Jual Bunga Papan Surabaya, Jual Bunga Ucapan Surabaya, Jual Rangkaian Bunga Surabaya, Jual Buket Bunga Surabaya, Bunga Ucapan Selamat, Bunga Ucapan Duka Cita, Bunga Papan Selamat, Bunga Papan Duka Cita
Aqualisa Quartz - Simply A Better Shower (HBR Case Study)Arjun Parekh
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A marketing Case Study of Natureview Farm, an organic yogurt manufacturer. This analysis was performed by E. Santhosh Kumar, IIT Madras, during an internship with Prof. Sameer Mathur, IIM Lucknow.
Case Analysis |Altius Golf and the Fighter Brand|Anahit Babayan
Questions covered.
1. If Altius implements the Elevate strategy what are the risks to the brand and how can they be managed?
2. What sales result would you expect for each item in the line if Elevate is introduced?
This is the case study of the subject Managerial Accounting. It deals with the Break Even point. The analysis is basically on the break -even analysis for the multiple products. We have done the full analysis and the solution is in the presentation.
Reliance Baking Soda is Stewart Corporation's oldest and most established product. The new Domestic Brand Director needs to create a 2008 marketing budget that delivers a profit increase of 10% over 2007 levels. She must first evaluate the effectiveness of past consumer and trade promotions and determine if a price increase will have net bottom line benefits. Then she must decide on the optimal allocation of her marketing budget, taking into account the brand's apparent "cash cow" role in the Household Division of Stewart Corporation. Students are expected to complete a quantitative assignment: create and defend a budget.
Monte Carl Simulation is a powerful and effective tool when used properly helps to navigate the expected Net Present Value NPV. This presentation helps to improve the pattern to ackowlege onthe Odessa Investment by Decision Dres.
Mini Case112018Chapter 2 Mini CaseSituationJenny Cochran, a grad.docxpauline234567
Mini Case11/20/18Chapter 2 Mini CaseSituationJenny Cochran, a graduate of The University of Tennessee with 4 years of experience as an equities analyst, was recently brought in as assistant to the chairman of the board of Computron Industries, a manufacturer of computer components.
During the previous year, Computron had doubled its plant capacity, opened new sales offices outside its home territory, and launched an expensive advertising campaign. Cochran was assigned to evaluate the impact of the changes. She began by gathering financial statements and other data.Computron's Balance Sheets (Millions of Dollars)20182019AssetsCash and equivalents$ 60$ 50Short-term investments10010Accounts receivable400520Inventories620820Total current assets$ 1,180$ 1,400Gross fixed assets$ 3,900$ 4,820Less: Accumulated depreciation1,0001,320Net fixed assets$ 2,900$ 3,500Total assets$ 4,080$ 4,900Liabilities and equityAccounts payable$ 300$ 400Notes payable50250Accruals200240Total current liabilities$ 550$ 890Long-term bonds8001,100Total liabilities$ 1,350$ 1,990Common stock1,0001,000Retained earnings1,7301,910Total equity$ 2,730$ 2,910Total liabilities and equity$ 4,080$ 4,900Computron's Income Statement (Millions of Dollars)20182019Net sales$ 5,500$ 6,000Cost of goods sold (Excluding depr. & amort.)4,3004,800Depreciation and amortizationa290320Other operating expenses350420Total operating costs$ 4,940$ 5,540Earnings before interest and taxes (EBIT)$ 560$ 460Less interest 68108Pre-tax earnings$ 492$ 352Taxes (25%)12388Net Income $ 369$ 264Notes:a Computron has no amortization charges.Other Data20182019Stock price$50.00$30.00Shares outstanding (millions)100100Common dividends (millions)$90$84Tax rate25%25%Weighted average cost of capital (WACC)10.00%10.00%Computron's Statement of Cash Flows (Millions of Dollars)
Bart Kreps: The statement of cash flows provides information about cash inflows and outflows during an accounting period.
2019Operating Activities Net Income before preferred dividends$ 264Noncash adjustments Depreciation and amortization320Due to changes in working capital Change in accounts receivable(120) Change in inventories(200) Change in accounts payable100 Change in accruals40Net cash provided by operating activities$ 404Investing activities Cash used to acquire fixed assets$ (920)
Bart Kreps: Make sure to add back annual Depreciation to Net PP&E.
Bart Kreps: The statement of cash flows provides information about cash inflows and outflows during an accounting period.
Change in short-term investments90Net cash provided by investing activities$ (830)Financing Activities Change in notes payable$ 200 Change in long-term debt300 Payment of cash dividends(84)Net cash provided by financing activities$ 416Net change in cash.
Dear connections,
this is a very interesting report of Marks and Spencer financial progress during 2013-15, elaborated by myself and two more peers (Alhassane Diallo and Zahoro Msallam) and I have taken the freedom (with their permission) to share it with you all.
I invite everyone (regardless of your background) to give a read, leave comments, questions and messages.
Omnicom Should Be On Value Investor & Activist Investors' Radar ScreenJeff Lawrence
Like many value stocks, Omnicom is materially undervalued relative to its intrinsic value. However, it is also unique because its stable ROIC / EVA has not, historically, been reflected in its relative stock price nor its equity beta.
Resolving these inconsistencies may require a material reduction in its excess cash holdings and/or additional corporate governance reform. It is not inconceivable that an activist investor will be drawn to the company, despite its status as a large cap stock.
Ratios Analysis, Pro Forma Statements, Projected Cash flows of Proposed Project, Net Present Value, Internal Rate of Return, Payback Period, Discounted Payback Period, Break Even Analysis, Scenario Analysis, As-if Analysis
Ch. 16 Assignment ALLAnalysis of Oil and Gas Companies Financial .docxsleeperharwell
Ch. 16 Assignment ALLAnalysis of Oil and Gas Companies' Financial Statements- Homework#17What is the reserve replacement ratio? What is the reserve replacement ratio attempting to measure? How would you interpret it?The reserve replacement ratio measures a company's success in replacing production and accordingly measures a company's ability to continue to operate in the future. It is used to measure the performance of a company. The most basic form formula:Reserve replacement ratio=Extensions and discoveries + Improved recoveryRevisions in previous estimates + Purchases of reserves in placeProduction#13The following reserve table appeared in the financial statements of Lomax Company.Estimated Quantities of Net Proved Crude Oil and Natural Gas(Worldwide Totals only)in Thousands of Barrels and Millions of Cubic FeetYear ended Dec. 31201520162017OilGasOilGasOil GasBeginning of year171779234783335724Revisions of prevision estimates10121531(11)22Improved recovery213025231550Purchases of reserves in place001212024Sales of reserves in place(12)(12)(20)(99)(70)(24)Extension & discoveries697890426150Production(25)(104)(21)(68)(24)(76)End of year totals234783335724251870YearNet WellsGross Wells201575020102016840191020179002050i.Reserve replacement ratio=Extensions and discoveries + Improved recoveryProductionExtensions and discoveries + Improved recovery+ Revisions in previous estimatesii.Reserve replacement ratio=ProductionExtensions and discoveries + Improved recovery + Revisions in previous estimates + Purchase of reserves in placeiii.Reserve replacement ratio=Production + Sales of reserves in placeREQUIRED: Compute the following ratios for all three years:a.The reserves replacement ratio computed for all three methods and for oil and gas separately2015OilGasi.=3.6001.038ii.=4.0001.154iii.=2.7031.0342016OilGasi.=5.4760.956ii.=6.1901.412iii.=3.4630.6472017OilGasi.=0.8752.632ii.=0.4172.921iii.=0.1062.460b.The reserve life ratio computed for oil and gas separatelyReserve life ratio =Total proved reserves at beg. of year2015OilGasProduction6.847.4902016OilGas11.14311.5152017OilGas13.9589.526c.The net wells to gross wells ratioNet to gross wells =Net wells2015Gross wells0.373134328420160.44020170.439d.The average reserves per well ratio computed using BOE, i.e., combining reserves based on relative energy contentAverage reserves per well ratio=Total proved reseves @ beg2015Net wells0.401BOE/well20160.434BOE/well20170.506BOE/welle.The average daily production per well computed using BOEAverage daily production per well=Annual production/3652015Net wells0.155bbl/day/well20160.105bbl/day/well20170.112bbl/day/well#15Lomax Company reported the following expenses in its financial statements (in thousands):YearLifting CostsDD&A2015$211$50020162264502017183525REQUIRED: Using the reserve disclosure for Lomax Company given in problem 13 and the data presented in this problem:a.Compute lifting costs per BOELifting cost/BOE=Total annual lifting costs2015$ 4.984/B.
Similar to Da = merrimack tractors -_analysis (18)
1. Case Study – Merrimack Tractors and Mowers Inc.
Case Study Merrimack Tractors and Mowers Inc.
Submission Date 13-Sep-2009
Class EPGP– 09-10
Subject Financial Reporting and Analysis
Submitted by
Abhishek Pangaria
Mandeepak Singh
Rajendra Inani
Saravanan Logu
Tarandeep Singh
Vivek Edlabadkar
Table of contents
Objectives............................................................................................................................2
Case Background.................................................................................................................2
About the Company.........................................................................................................2
Company’s need...............................................................................................................2
Analysis of current Business Scenario.................................................................................4
Conclusion...........................................................................................................................6
Take the FIFO way..........................................................................................................6
Page 1 of 6
2. Case Study – Merrimack Tractors and Mowers Inc.
Objectives
To suggest suitable revenue recognition methods to Trans-share Inc for its fractional interest programs and
other offered services. The recommendation should be an appropriate revenue recognition practices to
EITF, based on the model suggested to Trans-share Inc.
Case Background
About the Company
Name of the company Trans-Share Inc.
Line of Business Buy-Sale of aircrafts, maintenance and operational support
Products Offered: Partial / full ownership of aircrafts
Services Offered: Maintenance of aircrafts
Aircraft operations support
- Pilot & Crew
- Flight planning
Purchasing & selling aircrafts in secondary market
Brokerage & Marketing of aircrafts to 3rd party buyers
Company’ s need
Trans-share is preparing for IPO and wanted to ensure that its prospectus reflects the real picture of the
company by implementing the right revenue recognition methods.
In addition, Trans-share wants to be proactive by planning for the impending revenue recognition
guidelines from Financial EITF (Emerging Issues Task Force), to be followed in its financial accounting.
About EITF
A professional financial reporting control group of 13 members, associated with SEC, Financial
Accounting Standards Board and the American institute of Certified Public Accountants. This group is
focused on early identification of emerging issues affecting the financial reporting and problems in
implementing the corrective measures.
Page 2 of 6
3. Case Study – Merrimack Tractors and Mowers Inc.
Page 3 of 6
4. Case Study – Merrimack Tractors and Mowers Inc.
Analysis of current Business Scenario
Until 2007, Merrimack has accumulated a LIFO reserve of $5.5 million. Considering
the current trend of rising prices, LIFO is a suitable method for computation but as
evident from the discussions between the board members, Merrimack is facing huge
challenges in meeting up with the cost and keeping the margins intact. This is
primarily because of the rising cost of imports.
Possible Solutions
1. Continuing with LIFO
2. Moving to FIFO from 2008
As evidenced by Colburn, moving to FIFO will cost the company $2 million on
account of additional taxes. But this tax is unavoidable if the company were ever to
liquidate.
Moving into FIFO in 2008 will plug in additional $3.5 million into the financial system
and hence bloat the profit margin for the year.
However, moving to FIFO in times of rising costs is going to be counterproductive in
following years. This is because the company would be incurring higher taxes as the
cost of goods in transaction would be lower than what would have been in LIFO.
Assumptions in analysis
1. Sales remain consistent at 40,000 units each year
2. Selling and administrative expenses remain constant
3. Sales Price increases YoY at a rate of 5%
LIFO Analysis
Figure 1
Page 4 of 6
5. Case Study – Merrimack Tractors and Mowers Inc.
Income Statement 2007 - LIFO 2008 - LIFO 2009 - LIFO
Sales $67,000,000 $70,350,000 $73,867,500
Cost of Goods Sold $46,000,000 $62,000,000 $78,000,000
Gross Margin $21,000,000 $8,350,000 -$4,132,500
Selling and admin exp. $10,000,000 $10,000,000 $10,000,000
Income before taxes $11,000,000 -$1,650,000 -$14,132,500
Income Tax (35%) $3,850,000 $0 $0
Net Income $7,150,000 -$1,650,000 -$14,132,500
Profitability Margin 10.67 (2.35) (19.13)
Figure 2
From Figure 1 and 2, we may conclude the following
1. Despite the rise in costs, the inventory holding remains unchanged.
2. YoY, the net income is depleting at a rapid rate. The main contributor for this
change is the increasing COGS.
FIFO Conversion
Figure 3
Income Statement 2007 - LIFO 2008 - FIFO 2009 - FIFO 2009 - FIFO**
Sales $67,000,000 $70,350,000 $73,867,500 $73,867,500
Cost of Goods Sold $46,000,000 $50,500,000 $72,000,000 $63,750,000
Gross Margin $21,000,000 $19,850,000 $1,867,500 $10,117,500
Selling and admin exp. $10,000,000 $10,000,000 $10,000,000 $10,000,000
Income before taxes $11,000,000 $9,850,000 -$8,132,500 $117,500
Income Tax (35%) $3,850,000 $3,447,500 $0 $41,125
Net Income $7,150,000 $6,402,500 -$8,132,500 $76,375
Profitability Margin 10.67 9.10 (11.01) 0.10
** - Indicates the values with curtailed COGS
Figure 4
Page 5 of 6
6. Case Study – Merrimack Tractors and Mowers Inc.
From figure 3 and 4 above, we can conclude the following:
1. As we move from LIFO to FIFO in 2008, the COGS does not increase
substantially despite the rise in costs. This is primarily due to the use of
inventory with cost of $900.
2. We are able to maintain profitability which is comparable to figures from
2007.
3. As the prices keep increasing from 2007 to 2009, the effect of move from
LIFO to FIFO (i.e. LIFO reserve liquidation) is seen in 2008. However, the
effect is counterproductive in 2009 as FIFO is not a good practice when prices
are rising.
Conclusion
Take the FIFO way
Considering available options it is evident that the business will run unviable in 2008 if
the company does not move to FIFO method of accounting for inventory.
This however is not the gospel to move company from RED to green. The move will
prove to be extremely wrong if the company does not plan to reduce cost of
production/purchase.
Hence this move is to be seen only as a measure to keep the business running under
“viable” status for another year.
Page 6 of 6