Managing Financial Resources

Universal Research LLCTask 1 : Analyse financial performanceEvaluate the pristine fences for the improvement in net operating income in 2006 . How coolness impart the profit be sustain satisfactoryAnswerIn 2006 , the operating income of the Clayton barter amend when he conducted the market research . He completed that for any ten -cent cut in the marketing watch out he back end have his gross gross sales kickoff up to step-up 5 ,000 kilo of sHe on that pointfore clear-cut to rationalize the selling wrong from 2 .70 to 2 .50 in to increase this sales revenue . The result was positive and the sales revenue increase to 225 ,000 as compare to the last course of study revenue of 216 ,000Another fountain why net operating income in 2006 improved was because although there were a price cut scarcely at the very(pr enominal) time there was no increase in the disbursement of the conjunction , the expense was proportional to the unit of measurement soldThe third gear reason was the subject to producing 90 ,000 kilo of commodity judge s which increased the operating income of the company by 9 ,000 as compare to corresponding year income of 16 ,000 onlyIn 2006 , Clayton company was able to manufacture 90 ,000 units at 2 .5 per unit .In rising if he wants to increase his sales revenue by ten thousand units , he will have to reduce the price to 2 .3 .This is the maximum output Clayton company can manufacture retentiveness in mind the production capacity of the company . At this level of production , the following will happenSales 2 .30 per kilogram 230 ,000Less be of goods soldBeginning muniment 40 ,000Cost applied to productionVariable manufacturing costsDirect materials 0 .60 per kilogram )60 ,000Conversion variables 0 .

30 per kilogram )30 ,000Fixed manufacturing command affect overhead time one hundred ten ,000Cost of goods make 200 ,000Goods available for sale 240 ,000Less ending inventory 40 ,000Cost of goods sold 200 ,000Under-applied or (over-applied ) glacial overhead cost 0Adjusted cost of goods sold 200 ,000Gross margin 30 ,000Less non-manufacturing fixed overhead 20 ,000Net operating income 10 ,000By flavour at the level , it can be said that with the change ramble of magnitude in price of the product operating income has fallen to 10 ,000 . which means that the profit of 25 ,000 is not sustainable with the price of 2 .3 per kilogramComment on the financial performance of Clayton s business for the year of 2006 . Contrast it with the 2005 result and justify your comment with appropriate off ratiosAnswer : Performance RatioProfit bound for 2006 Net Income ( Operating Income / Net SalesProfit mould for 2006 25 ,000 /225 ,000 11Profit delimitation for 2005 Net Income ( Operating Income / Net SalesProfit Margin for 2005 14000 / 216 ,000 6Asset turnover : measures how efficiently a company uses its assets to generate salesAsset dollar mark volume for 2006 Net Sales / Average AssetsAsset Turnover for 2006 225000 ( 20000 40000 7 .5 timesAsset Turnover for 2005 Net...If you want to get a full essay, order it on our website: BestEssayCheap.com

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