DURANGO MANUFACTURING COMPANY report
Knowledge and skills in the area of financial management are essential when it comes to implementing the company's five-year plan. Proper administration and compliance besides cash flow control form the basis of the company's success. Accounting and financial skills help the management to measure and track performance, minimize risks, identify problems and exploit new opportunities (Lee, 2016). Growing and successful businesses are always proactive in financial management and they always ensure they have the right capabilities since financial management has a continuous role it plays in the broader aspect of business and strategic planning. Durango Manufacturing Company is a medium sized organization that is poised to grow exponentially and enjoy a robust market share in the coming years. They will look at the ratio of the current assets and current liabilities to ascertain the company's ability to run its daily operations.
Investors will also look at acquisition costs, revenue streams and turnover rates all of which are available in the financial statements and ratio calculations of the company. On the other hand, lenders use the debt-to-equity to find out the portion of the stakeholder's equity as well as the debt that is used in financing the company's assets. From this ratio, lenders are able to understand how the company manages its debt and whether it has the ability to repay any additional debt. The lenders can also determine the wealth of the company with the help of the gearing ratio (Tay, 2016). Capital expenditures require the organization to carry out some visibility studies before choosing on the most appropriate method. These studies involve identifying and prioritizing requests, determine the project cash flows and performing the required financial analysis.
There are various expenditure ratios that the company can choose from. Durango is a growing organization and it has specialized in custom made cabinets. In order for the company to determine which expenditure method to adopt in order to grow within a short period then they need a technique that give answers in terms of value not periods and the Net Present Value is that method. The company can tap into the Net Present Value method in order to realize its set target within five years. Q4 For Durango to attain the much desired operational efficiency then the company ought to adopt various costing techniques in the departments. Costing is essential for any organization since it helps to determine accurately the expenses incurred for materials and labor as well as other overhead costs incurred during operations.
On its front, Durango is known a mid-sized company that has been in operation for a few years and it attracts clients for their custom made cabinets (Dhillon, 2013). For a company like Durango, department heads are more likely to adopt job order costing since it is more accurate with the company's line of business as compared to process costing. Also based on the way of activity based accounting management accountants can monitor the performance of all departments involved in the production process. Q5 The past few decades have seen companies adopt the trend of outsourcing their manufacturing operations. Statistics indicate that outsourcing has become an in-depth strategy for large companies to improve their competitiveness and effectiveness. However, this is no longer the case since the advancement of technology has made things similarly easier for small and mid-sized companies.
These relatively smaller companies embrace the idea of outsourcing the process of manufacturing since they are able to access skilled labor and there are chances of increased profit margins (Bengtsson, 2014). Businesses are moving away from products to services and soon enough they will be moving to experiences. In the next five years, it will be harder for businesses to make money through transactional business thus they have to figure out ways in which they will they get out of this setback. Small and medium-sized businesses are becoming more of a mutual-benefit partnering on the global market and the reciprocity advantage will be a worldwide phenomenon in the next five years. This will require such businesses to look for ways of innovating, looking for partners, experimenting with different ideas then scaling them.
Since the company has chosen to specialize in custom-made cabinets, then it can be said that the company is moving in the right direction in readiness of all the changes that will be felt the business world. Instead, the company can change on the methods they use to charge for their products. In the world of business, today giant companies rely on each other to satisfy customer needs. They do this by identifying which aspect of their businesses customers pay for and they can leave the other parts for partners for the sake of making better profits. If the customers, for example, pay for the products, then Durango can let other companies fix them as they focus on production of other better products.
The company can also prioritize on competing opportunities. The company can also introduce a two-level control system whereby employees who access books of accounting must be given permission by their superiors through a password protected scheme as well. Companies can create environments that focus on the well-being of employees as one way of eliminating fraud. Further, managers of companies ought to understand that companies work like a person, each part has a role to play and there is always a weakness in some part. Thus, managers need to cultivate a working culture that is based on good morals, values, common beliefs and a set target to be achieved. References Bengtsson, L. Corporate and Business Lending: Setting the Standards, Partridge Publishing Singapore.
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