William George Is the Marketing Manager at the Crunchy Cookie Company
Each quarter, he is responsible for submitting a sales forecast to be used in the formulation of the company’s master budget. George consistently understates the sales forecast because, as he puts it, “I am reprimanded if actual sales are less than I’ve projected, and I look like a hero if actual sales exceed my projections.” What would you do if you were the marketing manager at the Crunchy Cookie Company? Would you also understate sales projections? Defend your answer.
As a sales manager at the Crunchy Cookie Company, I would not understate the sales projections. I believe that it is not beneficial to the company or the employees in the long-run. By not understating the sales projection it allows the company to come up with new creative ideas to exceed realistic sales projections. b. What measures might be taken by the company to discourage the manipulation of sales forecasts?
One measure the company can take to discourage the manipulation of sales forcast would be for management to stop reprimanding the marketing manager if sales are not met. The company could also set polices stating that
management is not allow to understate sales projections just so that they could look like a hero. What are the components of the capital structure?
There are two components of capital structure. The two components are equity and debt. What are the differences of these components?
“Debt is provided by lenders, whether an individual, group or bank. It is a legal obligation of the company to repay the debt. The lenders do not own any of the company. Equity is money invested in a company, but it does not have to be paid back. The money is provided in exchange for ownership shares in the company. Equity is provided by individuals, groups of individuals or corporations such as venture capital companies. Lenders do not own any of the company. Investors providing equity do own part of the company. Shares are issued for the investment” (RoseHill, 1999-2013). How do you determine the optimal mix of the components of the capital structure? To determine the optimal mix of the components of the capital structure an individual would have to look at the debt to equity ratio.
What are some of the various lease options?
- Current lease accounting standards divides leases into two headings: Capital lease treatment needs recognition of an asset and a liability on lease books.
- Operating lease need periodic recognition of rent expense without requiring recognition of the company’s future obligation to the lessor. When would you use one option over the others?
A company would use capital lease when they plan to keep an item or property for a long period of time. If the company chooses to use the item or property for a time and has no need to own the item/property. What could be the financial influence of this decision?
The financial of this decision could include: advantages in financial reporting, tax benefits, and advantages of leasing in regards to the balance sheet.
Reference:
Rosehill, Katie (1999-2013). Differences Between Debt & Equity. Retrieved from: http://www.ehow.com/list_7178066_differences-between-debt-equity.html#ixzz2itQPMVGN
