In class test Flashcards
What happens when orders can’t be delivered (from stock) ?
sales are permanently lost. Theres no backlog. Customers may resent their inability to deliver and company will be affected negatively.
What are the impact of quality decisions ?
Facility usable capacity and
Product recalls for quality issues
How can quality be improved?
Investing in HR & Quality at corporate level
Designing the cars for quality
How can we adjust capacity?
Invest in buildings, machines and equipment.
How to maintain capacity?
Investment is needed, equivalent to depreciation to compensate for the deterioration .
Conditions for bank loans ?
Max loan amount is 5 times previous period/ $2000/period
Actual rate depends on the leverage ratio
Once contracted a loan remains on the BS
Novelty/new parts means
the percentage of new parts that will be found in the new generation of cars
Carryover means
the percentage of car parts that are reused from the previous generation of cars
What does carryover impact?
Carryover impacts cost, capex and field failure rate because the parts that are re-used have already been designed and tested
when customers like novelty they
are looking to buy a new model and not one similar to the previous one (carryover)
What volume can be manufactured in one period?
there is a max volume calculated by current capacity, capex per unit and HR&Quality level
what is capex per unit impacted by?
decisions made by engineering department
can you manufacture more than capacity?
no, but you can choose to manufacture less than capacity
How is the available for sale volume calculated?
previous period inventory PLUS the volume produced during the current period
What is the actual cost to invest in capacity?
It’s reevaluated each period by dividing value of the facility by the new capex per unit
How to close down a facility
sell the facility by entering a 1 behind decision to sell the facility. Incur a loss of 20%.
How to stop the facility for one period
by manufacturing 0 units, you’ll then incur a non operating loss equivalent to fixed costs
How can you stop a line of business?
sell the facility, put a 0 on every engineering and marketing decision.
How to transfer funds from one region to another
use the transfer cash sheet to take cash out of the lender and make it available to the borrower
What do we know about engineering characteristics of the market?
By comparing real appeal and forecast appeal you can evaluate how valid your perceptions are
What is the field failure rate
ffr is the percentage of product returned for quality issue, can be reduced through investments in HR&Quality
How is the cost of non quality calculated?
FFR times Sales Revenue times 1/3
How is ROCE calculated?
ROCE = EBIT / (facility value +inventory)
What happens if a company is short of cash?
the government rescues it by providing a loan of enough for it to continue it’s activities
customer expectations and changes
other than consumption they remain unchanged and unknown.
how to get an evaluation of the clients perceptions relevance?
in global sheet line of business the % of evolution of product and market appeal is shown (compare previous to actual to improve perception of customer)
How can the marketing budget change when you havent changed any marketing decisions?
the engineering dept modifies number of models commercialized which will impact marketing budget and appeal .
If you transfer cars between regions, when are they available for sale?
immediately
When are the loans available?
Bank loans available next period. I/C loan is available immediately .
What is the impact of change in CAPEX decided by engineering dept?
impact occurs in the next period . the facility capacity will be recalculated .
How will the Capex evolve in region 2?
after the merger the capex in region 2 will be modified to match the capex in region 1 as both engineering depts have been merged
Accumulated Retained Earnings
earnings of a business that have been piled up, dividends that arent given out
CAPEX
capital expenditure , money spent on maintaining fixed assets e.g. land/equipment
leverage
borrowed capital for investment
total loans / shareholders equity
Facility capacity
facility investment/ capex per unit
can you upload a decision with negative cash flow?
never
impact of high variable cost
less flexibility in capacity utilization
importing cars has no impact on
cost of goods sold
decrease inventory by
improve customer value proposition
EBIT isnt influenced by
dividend payment
changing car specifications has no impact on
FFR
paying dividends
decreases ARE
what has a positive impact on cashflow
positive EBIT
when selling a plant theres no direct impact on
customer satisfaction
do dividends impact cash?
yes they decrease cash
impact of increasing the number of the model
high increase of engineering budget
