Lebo &amp; Company_Presentation

# Lebo &amp; 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.
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.
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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