Lebo & Company_Presentation

Lebo & Company_Presentation - 6.356 Debt to Equity...

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Budget Project for AEM 323
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•Due to the extent of cash flow problems leading to shortages for Lebo & Co., we have prepared a detailed budget for their second quarter. •This budget will highlight some of the problem areas associated with this bracelet manufacturer.
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Sales peek during the second quarter, however, negative profits are seen in the first and third. Return on Sales: $1,700,000/(-$31,868) = -53.345 Return on Equity: (-$31,868)/$133,132 = -.024
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Contribution Margin Ratio: $850,000/$1,700,000 = .5 Contribution margin<Fixed Cost in some periods. BEP= Fixed Expenses/CM Ratio=$876,000/5=1,752,000 sales revenue Net income is negative for the  period. (31,868) The method of receiving cash increases accounts receivable taking away from the bottom line.
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Working Capital: $413,132 - $65,000 = $348,132 Current Ratio: $413,132/$65,000 =
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Unformatted text preview: 6.356 Debt to Equity Ratio: $65,000/$1333,132 = . 05 A/R Turnover: $1,700,000/$326,000= 5.21 Inventory Turnover Ratio: COGS/Avg.inventory= $680,000/($60,000+40,000/2) = 15.8 Average Sale Period: 365 days. Inventory Turnover = 365/15.08 = 24.2days Liquidity The quick and current ratio appear to offer the company the ability to acquire short term credit. Profitability ROS &ROE are extremely low and show a net loss for the company. Activity Inventory Turnover not very high turnover According to our budget the company does not appear to be functioning with a goal of making a profit. By cutting expenses or raising the price of the bracelets they may be able to Lebo & Co may be able to offset their losses. Overall the company is not very healthy with is current budget....
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This note was uploaded on 02/24/2009 for the course AEM 323 taught by Professor As during the Spring '09 term at Cornell University (Engineering School).

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Lebo &amp; Company_Presentation - 6.356 Debt to Equity...

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