Science Technology Company (1985)
What is the importance of financial planning? This serves as a guide to day-to-day decision making of the business. As periodically revenues vary, it is important to identify why there are times that a business has plenty of cash or sometimes, they have shortage. I appreciate that Harry Finson, the financial officer, prepared the 5-year financial planning for Science and Technology Company.
It was identified here that while the sales increased each year, profits were erratic. Opportunities were detected such as there was an increase of the number of employees and the amount of plant capacity in anticipation of a stronger sales growth than the 10% realized. Aside from that, it was identified that there are market opportunities and competitive pressures required that research and development spending be increased and also, company had significant problems with a new product at the largest division, thus there’s an expensive product recalls and repairs. Lastly, there was a major manufacturing problem with a line of very large and complex testers at its semiconductor test division, resulting a loss of 18million. By identifying the factors of the poor performance of STC, this is an advantage to convert these issues as opportunities to help the business achieve its goal, a bigger profit. Not only the issues were identified here, but also the strengths of the company when it reached sales increased from 359 million in 1978 to 1.6 billion in 1984. Factors identified of this positive increase in profit are steady increase in labor rates, the move by electronics manufacturers away from design and manufacture of their own test equipment and the dramatic improvement in testing technology and changes in devices to be tested. As in any business, owner makes so many decisions and it can be difficult to tell which decisions resulted in success and which are not. By preparing this financial plan, which involves in spotting trends...
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