For the following types of companies, discuss whether you think their cash flows from operations, investing, and financing will be positive (the activity provides cash) or negative (the activity uses cash). Provide support for your answer. 1 . Tech
Corporation is a developer of computer software for the gaming industry. The company recently launched its first software title. The company is expanding its operations by hiring additional developers and administrative staff. The company is not yet profitable, but expects to break even within two years. Investors view it as having a first mover advantage and have been happy to invest in the company. 2 . Midwest Corporation is a supplier to the agricultural industry. The company is experiencing its 25th year of profitability, but is concerned that sales have contracted for the fifth year in a row. Midwest prides itself in paying dividends and having no debt on its balance sheet. 3 . Semi Inc manufactures semiconductors. The company has just introduced its ninth new product and is the leader in market share for the industry. The company continues to invest in research and development and expand by purchasing competitors. The company has yet to pay dividends, but is considering it in the future. The company's largest current asset is cash, due to its high profit margin.
1 . This company is in the introduction phase. CFO--negative, CFI--negative, CFF--positive
2 . This company is in the late mature to early decline phase. CFO--positive and declining, CFI--positive and declining, CFF--negative due to dividends.
3 . This company is in the growth phase. CFO--positive, CFI--negative, CFF--positive maybe starting to turn negative.
You might also like to view...
Pro forma financial statements are financial statements that are prepared based on budgeted future amounts.
Answer the following statement true (T) or false (F)
An external search for product information is likely to occur when
A. the risk of making a wrong purchase decision is low. B. review of past experience provides adequate information. C. the cost of gathering information is low. D. the item is for personal use rather than for professional use. E. the item is frequently purchased.
The following data is given for the Taylor Company: Budgeted production 1,000 units Actual production 980 units Materials: Standard price per lb $2.00 Standard pounds per completed unit 12 Actual pounds purchased and used in production 11,800 Actual price paid for materials $23,000 Labor: Standard hourly labor rate $14 per hour Standard hours allowed per completed unit 4.5 Actual labor hours
worked 4,560 Actual total labor costs $62,928 Overhead: Actual and budgeted fixed overhead $27,000 Standard variable overhead rate $3.50 per standard labor hour Actual variable overhead costs $15,500 Overhead is applied on standard labor hours. The direct material price variance is: A) 600F B) 600U C) 80F D) 80U
Moreland Manufacturing Inc Moreland Manufacturing Inc produces and sells stainless steel faucets. In the current year, the company had budgeted for the production and sale of 6,000 faucets but, due to unexpected demand, 7,000 faucets were actually produced and sold. Each faucet has a standard requiring 15 ounces of direct material at a cost of $.40 per ounce and 15 minutes of assembly time at a
cost of $.20 per minute. Actual costs for the production of 7,000 faucets were $41,359.50 for materials (106,050 ounces purchased and used @ $.39 per ounce) and $21,560 for labor (98,000 minutes @ $.22 per minute). Refer to the Moreland Manufacturing Inc information above. Moreland's direct labor efficiency variance is: A) $1,600 U. B) $1,400 F. C) $2,100 U. D) $2,100 F.