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ACC 206 FINAL PAPER(8 pages word paper)
ACC 206 FINAL PAPER(8 pages word paper)
The intention of this report is to help the ABC Company arrive at a decision on whether
adding cedar dollhouses to their manufacturing schedule will be profitable or a costly venture. It
will look at possible risks factors associated when adding something new to a production line.
The paper will talk about cash flow and how that might affect business. It will even talk about
potential depreciation that could change over time. A recommendation will be giving to the CEO
that will help him arrive at a sound decision for the ABC Company.
The overall risk profile of ABC Company based on current economic and industry issues
that it may face are described as followed. First, the economic condition can affect the overall
production condition of ABC Company. Then there could be a rise in the price of raw materials
and factors of production could be affected by the expansion of new products. The product that
would be developed would be new and other companies might take the benefit from the result
experience. Then there would be a learning curve for development of the new product.There is
alsoa risk of loss of key personnel at any time or political change. The potential for a natural
disaster could harm the company’s production at any time adversely.
The company could never rule out the five porter forces that would likelyrival among
existing firms and the threat of new entrants that could make a harmful effect any time on ABC
Company. There are other factors of the five forces such as bargaining power of buyers and
sellers as well as the threat of substitute products that could create a threat for ABC Company.
Economic factors like inflation, reduction in per capital income, and the condition of GDP. The
condition of the company such as employee condition, quality and efficiency of workers, and
internal economic policy of the company all these can create risk to the company as well as to
the new project viability of the company. The overall economic condition of the United States is
not well either.
Although it was the largest manufacturer in the world but at present it is in fifth place.
Currently importing is much higher in this country than export. The country is selling asset as
well as taking debts to maintain current living standard. The international competitors are
planning to make the country completely dependent on foreign productions. As a result the
United States firms are going to lose domestic self-sufficiency, national security, and leverage
over time. This overall condition can be a risky thing for the ABC Company.
The calculation of ABC Company’s cash flow statement involves cash receipts and cash
payments in three categories; operating, investing, and financing activities. This calculation tells
that the ABC Company enjoyed a cash flow provided from operations of about $3,500 in year
20X2. The statement also shows that ABC Company used more cash in investing activities than
was provided from different sources. The net cash flows from ABC company’s business were
positive ($3,000). For ABC Company cash generated from operations is the primary source of
cash flow. The company used the cash flow from operating and investing activities to make
payment of dividends (see table).
To improve the cash flow further, ABC Company could invest more in other firms’
securities like common stocks or debts to earn more cash proceeds in return. More common
stocks may also be issued to collect funds to invest on more profitable sectors or to involve more
production activities by expanding its manufacturing activities. However, full financing of this
project cannot be done with the current level of cash flows generated from the company as the
new project will need additional financing for raw materials to manufacture with more time. So
more funds will be needed in the new project to be invested in and more labor force to produce
effectively to supply in time delivery will also be needed.
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