Test Bank For Canadian Entrepreneurship and Small Business Management 11th Edition By Wesley Balderson, Peter Mombourquette
Solution Manual For Canadian Entrepreneurship and Small Business Management 11th Edition By Wesley Balderson, Peter Mombourquette
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Instructor Manuals For Canadian Entrepreneurship And
Small Business Management 11th Edition By Wesley
Balderson A+
Thompson Greenhouse
Case overview
Thompson Greenhouse is family business owned by Earl and Lisa Thompson. The business has
enabled them to supplement their income and provide work for their children. With increased
competition from major retailers the Thompsons are unsure how they should compete in the
year’s ahead and if they should invest further into their business.
Discussion questions
1. Discuss the implications of the Thomsons’ attempt to obtain additional commercial
contracts (the department stores) for their products.
2. Evaluate the decision to construct another greenhouse from a financial and an
organizational point of view. (Use rate of return, payback, and break-even analysis in your
evaluation.)
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3. Comment on the financial health of Thomson Greenhouse through a review of the
financial statements.
4. Discuss the implications for succession of the business if the decision were to pass the
business to one of the sons sell the business to someone outside the family.
Instructors may opt to use these questions or ask the students to complete a simple case analysis
including a problem statement, SWOT, alternatives and recommendation.
Solutions to discussion questions
1. Discuss the implications of the Thomsons’ attempt to obtain additional commercial
contracts (the department stores) for their products.
Student answers will vary. Students will likely point out that this is becoming an increasing
popular choice amongst consumers. Students should also note that the business will come with
much lower margins than they have now. Some students may question if the Thompson’s should
pursue this type of business.
2. Evaluate the decision to construct another greenhouse from a financial and an
organizational point of view. (Use rate of return, payback, and break-even analysis in your
evaluation.)
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The case does not provide all the financial information needed to complete the tasks at hand, so
some estimates are needed.
To keep things simple:
Margin: 20.53% (using revenue and all expenses) New Greenhouse - $75,000
Variable Cost of the Greenhouse - $60,0000 @ 8 percent interest over ten years = $26,861.45 in
interest costs. Total repayment including interest would be $86,861.45. Variable cost per year
using interest only would be 26,861.45/12 = 2,238.45
Extra Income - $60,000 a year
If you read through their financials, most of their costs are fixed and would likely not increase as
a result of the added greenhouse.
The two extra expenses would be Power and Heat@ $6,450. There is no discussion of additional
labour required.
Hence the income before income, taxes and depreciation would be: 60,000 – 6450 – 2,223.45
(interest)
= $53, 326.55
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3. Comment on the financial health of Thomson Greenhouse through a review of the
financial statements.
Student answers will vary.
4. Discuss the implications for succession of the business if the decision were to pass the
business to one of the sons sell the business to someone outside the family.
If the business is sold, the owner would most likely maximize the value of the company. The sale
may be slightly hindered as the marketplace is changing. Leaving the business in the family
would ensure the long-term continuation of the company but the owner’s may not be able to
maximize the sales price. Anytime there is an internal succession there is potential for stress
among family members.
Case Method:
Problem Statement: Long term succession/planning
Strengths:
• Family owned and operated
• Due income
• Partnership agreement – tax benefits
• Income from renting land
• Loyal customers
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