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Analysis of the finance case study - Outdoor jackets

Number of Words : 3337

Contents

 This paper is based on the following case study -
 Case study: Outdoor jackets.
 Mahmud has just finished studying in a college and has just returned to work in his father’s factory, making outdoor clothes for mountaineering. The company has developed and patented a highly effective waterproof material with an attractive design. As a result the factory’s products are well sought after and the outdoor jackets sell at a premium price of £140.00 to outdoor shops and hiking organisations. Annual sales for the jackets are 18,000. Variable manufacturing costs are £60.00 per jacket and the present fixed costs is £840,000 per annum.
 The factory sells most of its products in the EU with growing interest in the US. Last year, export sales to the US accounted for 10% of total sales.
 Despite its success, the business currently has a bank overdraft of £500,000 and the bank charges interest at 1% per month on the overdraft. According to the accountant, the factory has been making a profit during the last year and should continue to make a profit over the next 6 months. The bank overdraft, however, would still not be paid off in 6 months’ time. Mahmud’s father is puzzled as to why a profitable business should still owe the bank money.
 Recently, the factory received an enquiry from a mountaineering organisation in India. The founder and director of the organisation, Kasikrisnan, tried out one of the jackets on a recent hiking trip on the Kangchenjunga Trek and is very impressed by the quality of the jacket. As result, he would like to start supplying the jacket in India. He is aware, however, that there would be very few buyers in India if the jackets are priced the same by the retailers in the EU. Kasi suggested that a reasonable price would be £90.00 and that the specification could be lowered slightly as the buyers in India would not be too fussy about the quality. By changing the design slightly, Mahmud estimates that the variable costs of the new design could be lowered to £50.00 per jacket.
 One evening, Mahmud was having dinner with a few friends. One of them suggested that Mahmud should prepare a budget for the business.

Description

This paper answers the following questions on the case study - <br />Questions we need from you to answer ALL questions<br /> • Calculate the contribution for the existing and proposed in india with comment and Calculate the BEP for the existing and proposed in india with comment? <br />Answer should be 100 words maximum<br /> • Calculate the ratios like: coverage internet and return on investment? for the existing and proposed in india with comment?<br />Answer should be 100 words maximum<br /> • Discuss the general proposal should be accepted or rejected?<br />Answer should be 100 words maximum<br /> • Discuss the general consideration that one should consider before making investment decisions? <br />Answer should be 100 words maximum<br /> • As consultant / manger could you be suggest the reasons for business not have cash despite of profits? <br />Answer should be 100 words maximum<br /> • Consider the relevant cost while taking accept or reject decision?<br /> • Look the non-financial factors such as inflation, population, culture, brand image etc and government rules and regulation such taxes, rates, etc and county risk analysis?<br />Answer should be 500 words maximum<br /> • The cost has not been reduced in proportion to selling price for the new proposal?<br /> • How much is cash sales and how much is credit sales?<br /> • If the not units to be sold in india is given, then what if analysis? <br /> • Identify the reasons a business being profitable but cash poor like tax payment, equipment heavy over draft etc.? <br /> • Provide solution to overcome liquidity problems in business such as cash management and debtor’s management and inventory management? <br /> • Identify the business risk and financial risk of doing it in another country? <br /> • General economic condition like inflation and demand and supply?<br /> • Virai and back end effect hat loss in one country could be made good by profit in another country?<br /> • Projected income statement including the interest payment on total basis?<br /> • Liquidity v/s profitability <br /> • Pricing in different countries <br /> • Preparation of cash budget on sale revenue and expenses ?<br /> • Can we explore more markets?<br /> • Taxes could be provided in question?<br />

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