As the Controller of ABC Company
ACC 206 Principles of Accounting II
January 21, 2013
Purpose of the Paper
This report’s purpose is to be of assistance to the CEO of ABC Company to determine if the new project should be put into action and the way that it can be within the means financially through presenting information regarding the projected costs and returns. This decision-making report is intended to aid the CEO’s in internal decisions that are made. It depicts the capability of the projects possibility of making money for the company and its intentional purpose.
An analysis of information such as a balance sheet, income statement, and financial statements must be done so that the security and financial ability of a company can be seen. Along with this presented method, this project is tact on and a complete analysis is performed to come to the conclusion in deciding what to do in regards to taking on a new project. The idea of the report is to supply logical and vital knowledge about the project.
Summary of Findings
ABC Company focuses on making cedar roofing and siding shingles. There are various factors that pose a threat to the ABC Company, and to add to that the state of the economy is not at its best. It appears that the key basis of cash flow for the company was operating activities, particularly within the net income. If the company was to invest in income earnings securities, this would certainly enhance cash flow. This project is going to need extra financing. With the NPV of the investment project being in the red, the obvious choice should be that the investment not be made by the CEO. However, it could decrease the costs of production, that would indicate that the ABC Company could take a chance on the investment and be able to still accomplish the intended growth rate. Part I
The Overall Perspective of Risks Profile
Current economic and industry issues: Risks are present everywhere. Various kinds of risks could stem from the economic and industry circumstances within an economy. For the ABC Company, which is considered a manufacturing company, numerous economic and industry risk issues can harm their business. Here are a few of such risk issues, but not limited to them: • Present or new competitors might take that same benefit by gaining knowledge and replicating the production procedures of ABC Company.
• Unfavorable economic development may possibly hinder the production process for the new product
• A rise in price of raw materials is considered necessary.
• A new product that has substantial time demanding characteristics could cause setbacks in the construction deadlines,
• Political risk that comes about from remarkable change within the political government.
• Threats can surface from one of the five forces of Porter’s five forces model. These forces include competition between existing companies, the threat of new competitors, dealing power of buyers, dealing power of suppliers and threat of alternate products or services (Walther, 2012).
• Possible loss of crucial workers, unpleasant relationship of the company with its labor Union.
Information that is currently available depicts that the economy is still in a recession, even though it has began to make progress. Making of new and existing maintainable products would still need to catch up its prior cycle. Our country is controlling a trade debt while embarks in selling assets and bearing substantial debts to maintain standard of living. Competitors internationally are to catch the market share caused by globalization. As an end result USA companies could possibly suffer the loss of domestic market share, self-reliance, and pull. The US manufacturers are allured to plan, engineer and...