Jet2 Task 3

The firm has decided to increase the debt finance component portion from 20% to 30% which is a good decision since the interest payments are 100% tax deductible. The appropriate capital structure would be to

MCI would be better to keep its capital structure of 55% debt. The cost of equity is high because raising more equity will dilute the value for existing shareholders. Due to the fact that MCI has a high leverage, it is not feasible to issue debt. Additionally, MCI has exhausted the line of credit from the banks and used convertible debentures frequently. MCI belongs to a competitive and regulatory industry. The high leverage will limit its potential to grow. In exhibit 8, MCI does not have a bond rating. The convertible bond allowed the company to raise capital and convert to equity later. The interest coverage ratio of AT&T is 3.6X whereas that of MCI is 4.2X. After increasing the market share, the company can obtain a bond rating by decreasing its financial leverage.

A1. Budget Concerns Competition Bikes budget has several areas of concern that need to be address. 1. Units expected to be sold for year nine is 3510. Competition Bikes is predicting that they will sell 3510 Bikes but they only sold 3400 Bikes in year eight down 15% from year seven 4000 units sold. Competitions Bikes has budget to high because the current economic down turn is showing no signs of relief for the next three years. Many of Competition Bikes customers are sponsored riders and many sponsors have pulled their funding to their rides. Competition Bikes has not presents a plan that would support their projections. Competition Bikes should lower there should lower the expected units sold so not to over order raw materials that will

Snowboards had a cash and cash equivalent of 83.8% during year 12 and year 13, but that

There are many concerns with the budget planning for Competition Bike. From year 2006 to 2008, Competition Bike experienced a 13.3% increase in sales. In year 9, sales are projected to increase to 3510 units to give sales revenue of $5,247,450. This is a bold increase after 3400 units sold in 2008 and 4000 sold in 2007. I do not think the sales will be as robust with the economy rebounding. Sales projections should be 3425 with net sales at $5,120,375.

Investopedia defines Budget as an "estimation of the expenses and revenues over a specific future period of time. Budgets can be made for a group of people, family, person, country, business, government, organization or anything else that makes or spend money. The budget is a micro economic concept that shows the trade-offs made when one good is exchange for another." When looking at the year 9 budget for CB first thing that jumped out at me was the sales goal of 3510 is a 5247450. This is my first immediate concern considering that the storyline has clearly stated it is a down market due to the

Upon reviewing the Competition Bikes Inc. (CBI) Budget Schedules and ProFormas for Year 9, there are a few concerns that should be analyzed. The first is the forecasted sales in units. The forecast for year 9 is 3,510 units, which is a 3.2% increase over the 3,400 units sold in year 8. The storyline mentions the economic downturn, which has led to a decrease in bike sales. It can take some time to recover sales lost during an economic downturn, and given that sales were down 15% between year 7 and year 8, to go from a 15% decrease in sales to a 3.2% increase in sales in the span of only two years may be an unrealistic goal. I would want to see a specific plan in place for

As shown in the financial income statement (Exhibit3), Intel Corp. (INTC) has a capital structure consisting most of equity. Intel has very little debt in its capital structure and the cost of debt would have only a marginal effect on the overall cost of capital. The current capital structure of Intel is not optimal yet since optimal capital structure is making minimum weighted-average cost of capital.

Glaser Health Products manufactures medical items for the health care industry. Production involves machining, assembly and painting. Finished units are then packed and shipped. The financial controller is interested to introduce an activity-based costing (ABC) system to allocate (or distribute) indirect costs to products. Indirect costs, as distinct from direct costs, cannot be unambiguously linked to specific products. The controller would like to calculate product costs based on ABC for planning and control, not inventory valuation.

This paper provides a brief presentation of Activity-Based Costing methodology, how is used as well as its short comings.

Generally, firms can choose among various capital structures in order to maximize overall market value of the company. It is proposed however, that

The above graph suggests that volume based computation of overhead costs does not reflect the real overhead costs based on actual production per product line (computed maximum in excess over actual). On the other hand, if we follow the allocation of overhead costs based on prime costs as illustrated in Exhibit 2 of the case, we need to consider other quantitative factors: 1. No data is available to determine the amount of raw materials used in producing each of the products. While we can assume that the production of small, colored glass ornaments uses fewer raw materials (e.g. glass) than large, colored glass ornaments, the amount of glass used to produce specialty ornaments cannot be derived from the facts of the case. 2. There is also no data available to determine the number of direct labor hours consumed for producing each product type, although evidently, specialty ornaments use more direct labor hours. Based on the above considerations, we deem it inaccurate to base overhead on prime costs, a common practice in traditional costing. In addition,

The course project involved developing a great depth of knowledge in analyzing capital structure, theories behind it, and its risks and issues. Before I began this assignment, I knew nothing but a few things about capital structure from previous unit weeks; however, it was not until this course’s final project that came along with opening

Costing systems are the programs that supply information about the value of direct labor hours and numbers of units produced. With the help of data such as product cost, the managers can generate estimation of cost associated with different activity carried in the organization. The costs systems operate by taking total cost as basic for calculation. Costing is essential for every organization, as every manufacturing and other department has to be assigned accurate budget for proper operation (Hansen, Mowen and Guan, 2006).

Companies apply different costing techniques to keep track of the production of goods and services. Both absorption and costing techniques allow companies to obtain a complete picture of their financial standing. The application of these two methods allows the company to see everything from taxes and sales to inventories in manufactured goods to the cost of all expenses within the organization. In other words, both absorption and variable costing techniques give companies a more accurate picture of how the company has performed financially.