COMP XM QUESTIONS AND ANSWERS GRADED A

COMP XM QUESTIONS AND ANSWERS GRADED A Segment/Perf/Size Thrift +-0.5 -0.5 Core +0.8 -0.8 Nano +0.8 -1.1 Elite +1.1 -0.8 THE ONLY PRODUCT THAT DOES NOT MOVE, IT'S THE PRODUCT IN LOW END SEGMENT. LEAVE THIS PRODUCT AT 3.0 AND 17.0 You want to increase performance and reduce size as much as you can without the revision date reaching July. Prices between each round Don't change the price! Price for each product Nano - max Elite - max Core - a few bucks below Thrift - a few bucks below Automation increase automation by 1 point each round in each product get low end up as high as you can What is your target leverage and how do you get there? borrow money until you hit 2.2 and get 60 days of working capital (will have to pay dividends) To calculate leverage, divide total assets by total equity. This number will represent the number of dollars of assets owned per dollar invested by equity holders. If a company has leverage of four, that means they have $4 in debt for every $1 in equity. sales and promo budgets (all four rounds) For all products Round 1: 2,000 Round 2: 1,500 Round 3: 1,400 Round 4: 1,400 Recruiting hours and spend $5,000 80 hours TQM $1,500 first round $1,500 second round $1,000 third round $0 fourth round adding capacity a couple hundred each round best date for new products to come out June 26-28th forecasting shift capacity forecast next year's demand directly This year's potential market share * next year's demand is a good starting point, but then make judgment adjustments as necessary (e.g. is my product improving, are my competitors improving, etc.) use 200% of plant utilization you must calculate capacity _____ rounds ahead 2 rounds MTBF Set to maximum amount Steps for getting a good finance position Goals is to get a cash position of $5,000 in Decembers Step 1: get as much issue stock as possible Step 2: get as much issue long-term debt Step 3: get whatever you need left from borrow when to retire stock when you have a good cash position and you have some money left over to purchase stock back from the market when to give out dividends it's for when you have cash leftover in capital investment to give to your shareholder. when to retire long-term debt it's for when you want to pay your debt early (This usually decreases your interests expense) Buy/Sell Capacity Strategy You want to keep 2 nd Shift Production % between 20% and 50% If you have less than 20%; you have to sell capacity If you more than 50% you have to buy capacity After you make you decisions on production, check how much capital investment you have; If you have capital investment leftover, try to spend it in Automation or Capacity If you are spending more than you should, try to sell capacity or not invest as much. production schedule formula ((Units Sales Forecasted) * (1.2) ) - Inventory on Hand) forecasting strategy From the Market Share page in the Capstone Courier, take your last year's market share and multiple it by the next year demand of each segment. To calculate Next Year Demand, you take current demand and multiple it by the growth rate Multiple your Market Share by Next Year's Demand Finding the profit margin Look at "ROS" under the Selected Financial Statistics A +/- ROS is directly correlated to a +/- ROA ex) negative ROS means you will have a negative ROA more on ROA Return on assets is an efficiency ratio. The ratio answers the question, "How good is the company at producing wealth with our assets?" It compares the profits generated by the company with the asset base. To calculate ROA, divide profit by assets. ROA is also the product of multiplying the ROS by the AT (asset turnover). Which three segments are the new products most likely compete in the following year year? high end performance size The industry best practice is for leverage to be in the range of 1.8 to 2.8. 1.8 breakdown: 56% equity, 44% debt 2.8 breakdown: 36% equity, 64% debt what's included in the contribution margin (4) sales - labor exp - material exp - inv carry costs = contribution margin Name the four ways you can increase your contribution margin Reduce cost of materials Lower MTBF Increase the product price Increase automation A profitable product should not have more than about X% of their sales consumed by inventory carrying costs (about X months of inventory). 3% 3 months the higher the number for asset turnover the more efficiently the company is using its assets should be greater than 1 if a company has high leverage, what does it negatively affect? interest If a company has too much capacity, which expense category on the income statement does this directly affect? depreciation current ratio def The current ratio is used to give an idea of the company's ability to pay back its current liabilities (current debt and accounts payable) with short-term assets (cash, accounts receivable and inventory). The higher the current ratio, the more capable the company is of paying its short term obligations. current ratio formula current assets / current liabilities a current ratio under one suggests that the company would be unable to pay off its short term obligations if they came due at that point. how to calculate contribution margin %: (price - cost) / price $ amount: calculated by subtracting variable costs from the sales