Rolls royce case study

Topics: Boeing 787, Generally Accepted Accounting Principles, Balance sheet, Inventory, Future, Asset / Pages: 4 (1557 words) / Published: Feb 10th, 2015
Preliminary questions
1. The amount of Non-current assets has increased due to; an increase in stock, increase in receivables and decrease in cash. The amount of stock has been increase because the company believe that they are going to be able to sell more cars and therefore they need more materials to make them. Due to this strategy they have had to take on more debtors to be able to meet the increase in demand for the materials and in order to stay competitive they have offered more of their customers credit periods so that they will be encouraged to buy from Rolls Royce. Due to the fact that they are offering their customers credit this has led to a decrease in the amount of cash that the business has had and looks as if it could be the start of a cash flow problem which is why Working Capital has been decreased. The amount of current liabilities has been increase because Rolls Royce are paying for more materials to build more cars to meet an increase in demand.
a) The procuring of equipment in order to increase the companies output.
b) They are offering more credit because they want a competitive edge.
c) Due to have more receivables this has led to a decreased amount of cash in hand.
d) Buying more raw materials to increase the amount they make.
e) The company has been successful and is therefore valued at a higher price per share.

Case study Questions
1. There has been an increase in non-current assets which is extremely positive for the company for it shows that it is not selling its assets to raise capital. By increasing the amount of non-currents assets it has it shows that Rolls Royce is really thinking ahead for the future and is therefore looking at an expansion strategy. Due to this expansion strategy there has been a decrease of cash in hand which could in the short run destabilise the finances of the company and therefore they will have to monitor the amount they spend so they do not run into short term financial difficulties and have to procure

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