Download Week 4 DQs DQ 1 1. What are the most important financial

Week 4 DQs
DQ 1
1.
What are the most important financial components to track to determine the
success of a small business? Explain why.
2.
Provide an example of a company with a high volume of sales and a low
profit margin, and provide an example of a company with a lower volume of sales,
with a higher profit margin? Which company is more financially successful and
why?
1.
What are the most important financial components to track to determine the
success of a small business? Explain why.
The most crucial fiscal elements to trace are the cash-flow report, income report, as well
as the balance sheet. The cash-flow report demonstrates shareholders the amount of
money a company will require to meet their expenditures. The income report
demonstrates the earlier makings of the company; it demonstrates how nicely the
company is doing in a period of time. The company can keep track of the growth or fall
of the organization on a monthly basis, quarterly, or annual basis. Final, the balance
sheet demonstrates just how much the company is investing in assets, debts, stock, or
other expenditures all through the month, quarter, or year. Tracking the balance sheet
may help find out when the company is spending excessively in a single area or that the
expenditures overwhelm the profit.
2.
Provide an example of a company with a high volume of sales and a low profit
margin, and provide an example of a company with a lower volume of sales, with a
higher profit margin? Which company is more financially successful and why?
Big Lots experienced a drop in profit in 2008, from $158.5 to $151.5, as per Watershed
Publishing (2012). The drop in income was attributed to the rises in gross margin and
operating profit. Essentially, expenditures surpassed profit and Big Lots over-purchased
and sales didn't increase as predicted. PetSmart, Inc. has enhanced sales from
$4,217,716 in 2007 to $4,538,563 in 2008 (Retail Sails, 2012). Their profit margin
dropped from 5.5% in 2007 to 3.8% in 2008. Big Lots appears to decrease in sales
during a year’s period however PetSmart continues to enhance sales with time.
PetSmart is much more fiscally successful in this case as this organization appears to
surge in profit every year whereas Big Lots appears to decrease in profit every year.
DQ 2
1.
What are some of the differences in problem-solving techniques as they
relate to increasing sales and controlling costs?
2.
How does a small business keep a balance of increasing sales while
controlling costs?
3.
Suppose you manage a small business and notice that sales are high, but
costs are higher. What areas would you look at changing to create a more
profitable business?
1.
What are some of the differences in problem-solving techniques as they relate to
increasing sales and controlling costs?
To start with, it is usually essential to keep track of your business’s income and balance
reports, which will specify the issues in sales and costs. For problem-solving methods,
administrators can narrow down which area has got the issue and change the
expenditures or increase their price for the product. One more problem-solving way is to
set concentration to collecting on accounts receivables quicker. Perhaps the company is
not collecting on bills quick enough. There are plenty of issues that can happen fiscally
with a business however by way of tracking and observation, administrators can tweak
at its expenditures and sales to earn a profit.
2.
How does a small business keep a balance of increasing sales while controlling
costs?
Consider stock for instance: when a company buys stock for its store, the company
must label the product for how much they paid for the product and 75% more. For
instance, when the product cost the company $4, I would label that product at $6-$7 to
earn a profit. A company must earn sufficient profit to pay for its suppliers, overhead,
workers, and liquidities. It demonstrates in the balance sheet just how much the
company spent that period and just how much that company earned, demonstrating a
profit or loss. When the firm is paying more than it is actually earning, the expenditures
must be modified to balance out the sales and expenses.
3.
Suppose you manage a small business and notice that sales are high, but costs are
higher. What areas would you look at changing to create a more profitable business?
I now run a small company and struggle with the expenses and sales continuously.
Initially, I would take a look at what expenditures may be decreased, if we are
overstocking on items which aren't selling as we expected. Secondly, I would take a
look at if what we pay money for our goods is not improving. If that's improving, I would
consider modifying our rates for all those items. I would then produce a budget for the
company, produce a weekly budget which could arrange the way the company pays its
expenditures every week. Among the issues I face at the office is material being
squandered, we spend a lot of money on materials and there's an excessive amount
waste remaining. You don’t realize how valuable inventory and products are before you
pay for them.
DQ 3
1.
What data might be used to distinguish short-term success or failure versus
long-term trends when measuring financial performance in a small business?
2.
Why is it important to look for long-term trends, even if things are looking
great for the short term? Provide an example of a situation where the short-term
success of a business is doing well, whereas the long-term trends are pointing
towards future decline.
3.
What would you do to change the long-term trends into something more
positive for that company?
1. What data might be used to distinguish short-term success or failure versus long-term
trends when measuring financial performance in a small business?
I would look into the fiscal papers and historical market information. The information is
in the cash flow reports as well as the company’s balance sheets; I would get this
information and compare with the historical data to find out if the temporary
achievement can go on for the long run.
2. Why is it important to look for long-term trends, even if things are looking great for the
short term? Provide an example of a situation where the short-term success of a
business is doing well, whereas the long-term trends are pointing towards future
decline.
Long run tendencies are essential since companies as well as the overall economy are
cyclical. I was employed by a smaller investment organization and we had a property
supported finance which contained more than 40 shareholders. When the real estate
market was flourishing we made a nice income with bridge and gap financing. We
worked with only a few custom home constructors and the end loans were already in
place therefore when the home was finished we were paid in full and the shareholders
got their payouts. In the short period we were doing excellent, 11% returns for around 3
years. After that the economy transformed, the housing industry modified, as well as the
growth was finished. We had one purchaser walk away from a house which she put 60k
up front into since the market price changed this much it was cheaper for her to accept
the 60k loss rather than attempt to purchase the house. Had we been more conscious
of the real estate industry as well as the long-term tendencies we might have better
placed ourselves moving forward.
3. What would you do to change the long-term trends into something more positive for
that company?
I would have been much more conscious of the real estate tendencies. I had lately
begun to be employed in the industry and had no knowledge. We were “living in the
moment” and didn't take a look far enough ahead; whenever we did it was far too late.
Had we looked into the market tendencies we might have observed the death of the
housing industry quicker which would have helped us to be ready and re-structure our
business design therefore we might still work with our constructors and make our
investors’ money.