Dinner Bell Case Study and The Koala Fun Cases Questions

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Dinner Bell Case QUESTIONS 1. Prepare a cash budget for the period February through August. See Exhibit C1.1 for necessary data. 2. Is there any advantage to extending the forecast through September, October, and November? Explain. 3. Let's assume the hotel's cash flow would not be sufficient to cover any shortfall occurring during the cash budget period. What proportion of payables must be deferred to get the resort through this period? 4. Sarah, in essence, may be asking the firm's vendors for a loan if she re- quests a deferral on payables. From the hotel's point of view, the size of the loan is your answer to question 3. From the suppliers' point of view, however, the size of their investment in the loan is actually less than that amount. Explain why. 5. Do the suppliers have an incentive to cooperate? Explain. 6. The suppliers may be unable to cooperate. Why? 7. As a follow-up to question 6. if the suppliers are unable (or unwilling) to cooperate, how do you think Sarah should proceed? 8. Do you think that a cash budget is a more important financial tool for a small operation such as Dinner Bell Hotel or a large firm such as Exxon? Explain. Koala Fun Case QUESTIONS 1. Using the data in Exhibits C2.1 and C2.2. calculate and analyze the firm's 2012 and 2013 ratios. 2. Part of Owen's evaluation will consist of comparing the firm's ratios to the industry as shown in Exhibit C3.3. Discuss the limitations of such a comparative financial analysis. In view of these limitations, why are such industry comparisons so frequently made? (Note: Sales are forecast to be $8.25 million in 2014.) 3. Owen thinks that the profitability of the firm has been hurt by Tessa's reluc- tance to use much interest-bearing debt. Is this a reasonable position? Explain. 4. The case mentions that Tessa rarely takes trade discounts, which are typi- cally 1%/10, net 30. Does this seem like a wise financial move? Explain. 5. Is the estimate of $35 to $40 for Owen's shares a fair evaluation? 6. What do you recommend that Owen and Tessa do to improve their company?
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Running head: DINNER BELL CASE STUDY

Dinner Bell Case Study
Details
Name
Institutional Affiliation
Date

1

DINNER BELL CASE STUDY

2

1. Budget for February to August

Jan
Feb
Openin cash
0
sales
157500
Sales collection
182350
Total cash
182350
Cash expenses
Mortgage
3000
Utilities
2500
Rental
22500
Property taxes
0
Income tax
0
Renovation
0
Supplier expense
45000
supplier expenses payment 71666.6667
Payroll expense
65000
Total cash expense
164666.667
Cash surplus/defit
Cash borrowedfrom/to bank
Cash in hand

400,000
180000
172125
172125
3000
2500
22500
75000
0
300000
50,000
45000
65000
513000
67,000
17,000
84,000

Cash Budget
March
April
May
June
July
August
84,000
50000 143333.3 216000 269,583 425416.7
255000 275000 275000 380000 550000 650000
228750 268000 275000 343250 490500 615000
228750 268000 275000 343250 490500 615000
3000
3000
3000
3000
3000
2500
2500
2500
2500
2500
22500
22500
22500
22500
22500
0
0
0
0
0
0
0
1000
0
0
0
0
0
0
0
70000
80,000 100,000 120000 135000
46666.6666...


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