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# Capstone research project

Document Type:Thesis

Subject Area:Accounting

Document 1

Here, it can be stated that there are five main sets of skills and knowledge which can sufficiently apply to the company. The first one entails an in-depth understanding of the principles of cash and accrual accounting. As a top manager, one should be able to appropriately apply the skills of cash accounting or accrual accounting as they suit the status of the company. In many large corporations and mid-level firms, it is advisable to integrate accrual accounting because the technique is very precise when evaluating expenses, balancing credit sales, and generating purchase orders. Secondly, it can be recommended that the CEO must demonstrate a good understanding of the basic financial statements. Such evaluations can also assist in understanding whether the variance is a one-time scenario or a recurrent problem.

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Lastly, it is worth noting that CEOs should demonstrate competent skills in financial analysis of investments and evaluation of new business strategies. These motives can be achieved through the analysis of concepts such as return on investment, net present value, and internal rate of return. Using Financial Statement Information to Make Decisions From a company’s financial statements, important ratios can be determined thereby helping stakeholders to make investment decisions. There are various categories of financial ratios which can be used by lenders, investors, and employees in the best way which suits their interest in the firm. While using the liquidity ratios to make informed decisions, a lender may have to compare different calculations. The first one is called current ratio.

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This is the ratio of current assets to current liabilities of a company. It is also known as the working capital ratio and helps in determining the value of a firm’s assets in relation to the liabilities which need to be serviced (Beck & Demirguc-Kunt, 2009). Another calculation might involve the determination of acid-test ratio, commonly referred to as quick ratio. Investors can also apply calculations such as dividend yield, PEG ratio, and cash flow ratio to confirm whether a company’ shares are actually profitable. For the employees in a company, their main concern is the efficient utilization of resources. As such, they can evaluate the efficiency ratios as a way of confirming the firm’s ability to compensate them accordingly. Here, the first calculation is called the average collection period which compares the account receivable with annual credits over a period of 365 days.

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Secondly, the efficiency ratios can be determined by the degree of operating leverage whereby the percentage changes in net operating income and sales are compared (Brigham & Houston, 2012). The IRR is considered as a superior measure of capital budgeting because it integrates the aspects of profitability, quality, and yield of investment while the net present value only measures the magnitude added by an investment (Rossi, 2014). Therefore, it is clear that Durango Manufacturing Company can realize an improvement in its revenue if the CEO adopts IRR technique. It is recognized that IRR can be implemented to analyze the yield to maturity of shares and also the buyback programs of stocks. Improving the Operational Efficiency of Departments The production department of an organization is usually tasked with the responsibility of creating new products or improving the value of the existing ones.

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As such, the department is segmented in a way that facilitates maximum achievement of production goals. This uncertainty is often caused by the fluctuations in economic security and dynamics in the labor market. In this case, it can be supported that the CEO of Durango Manufacturing Company has made the best decision by considering to outsource manufacturing operations. Firstly, it is known that the company will benefit from lower costs of operation. This is because the estimated cost of renting a factory and its employees will not require high amounts of capital than the costs of establishing a complete premise of operations (Jarratt & Stiles, 2010). In another perspective, it can be noted that Durango Manufacturing Company will incur fewer expenses in training its workforce because the contracted company will provide competent employees to conduct the manufacturing operations.

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In return, the demand for the product will gradually improve over the next few years hence helping the company to consolidate its brand in the market. Accordingly, the increased utility from the firm’s products may influence an increase in prices of such items thus boosting the volume of revenues. It is also known that if the CEO of Durango Manufacturing Company fully incorporates financial management skills, then the organization will definitely ascend to be a market leader. This is because, the CEO already has a background in manufacturing and supply chain management, and hence the acquisition of financial knowledge will result in all-round leader. The company’s production strategies, budgeting, and plans of operations will all be combined to achieve the set targets (Williams & Dobelman, 2017).

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For instance, the company will be building on its reputation by improving the quality of its products which are already circulating in the market. Secondly, the company will be consistently engaging in marketing research as a way of understanding the specific needs of consumers thereby manufacturing items which satisfy their exact descriptions (Jarratt & Stiles, 2010). Within a period of 5 years, Durango Manufacturing Company can surely achieve a growth revenue of 10% by embarking on product development. This strategy is useful in the sense that it can be adopted when differentiating a company’s products. It is also beneficial when expanding the line of products which a company is dealing in. These unethical practices are sometimes very hard to detect and may cause uncertainties to a company.

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