Imagine you have been selected as the consultant to develop a business plan for Durango Manufacturing Company, a startup medium sized public manufacturing company. The CEO has a background in manufacturing and is well versed in supply chain management. However, the CEO has limited experience in financial management and creating value for various stakeholders’ groups. Your business plan must include a five-year strategy to increase revenues by 10% and a recommendation for creating an organizational structure to comply with SOX mandates for strong corporate governance over the internal controls. Your business plan must also include prescriptions for creating an ethical environment. Your recommendation must be approved by the board of directors before the company can begin its operations.
Based on your knowledge of accounting and financial prepare a 10-to-12-page report in which you answer the first three questions one page each (3pages total) and the last five questions should be 2 pages each.
1 As the consultant create an argument to present to the CEO that suggests accounting and financial management knowledge and skills will be essential to the company’s success and stability over the next five years. Provide support for the argument
2 Suggest to the CEO how the company’s stakeholders (investors, lenders, and employees) will use financial statement information and ratio calculations to make key determinations related to the financial condition and operational efficiency of the company. Provide support for the rationale.
(Question #2. Do not include any ratio formulas to discuss any specific ratio in this answer. Discuss how ratios might be used in the decision process by both direct stakeholders (investors, lenders and employees) and indirect stakeholders such as suppliers. Briefly discuss some limitations of using a ratio.)
3 Give the strategy to increase revenue during the five-year plan period which will need to be achieved through expansion and capital expenditures determine which capitol budgeting ratio is appropriate for Durango to evacuate its proposals for capital expenditures such as NPV IRR etc. Defend your position
(Question #3. Do not define the calculations of IRR and NPV. Durango will only use these methods to evaluate the acceptability or rejection of capital projects. Some possible projects do not rely on whether another project is accepted or rejected. These project decisions are considered independent of each other. Will the use of both the IRR and NPV methods lead to the same accept or reject decisions? )
4. For the company to improve its operational efficiency recommend which production department should use process job order and activity-based costing all three of which must be implemented within Durango. Defend the choice for each department.
(What if unforeseen problems or opportunities arise, what options may Durango have? Under what conditions should Durango scale back or expand the project? )
5. The CEO would like to consider outsourcing manufacturing operations if labor can supplied cheaper overseas than in the United States. Create an argument for or against outsourcing the manufacturing operations to a foreign country. The argument should include key points that support the position. The key points should address economic and business management aspects related to outsourcing. (Question #5. What costs should be considered in the decision whether to outsource? Should opportunity costs be even considered in the outsourcing decision? What if Durango is operating at full capacity, should this be a factor in the outsourcing decision? )
6. Predict the economic and business environment over the next five years, indicating at least two ways it may affect Durango’s ability to achieve the desired 10% growth in revenue. Provide support for the prediction.
( Questions #6 and #7. I may not have read our text very carefully but I could not locate any part of our required readings that would help answering these questions. These questions may require some research. )
7. Formulate a strategy to improve the opportunities for Durango to reach its revenue goals (I.e., increase revenue by 10% within five years).
8. Assess the potential for fraud within Durango based on the lack of it controls, and determine at least two ways Durango will structure its internal IT controls to ensure that such controls are effective in detecting fraudulent transactions. ( Question #8. Would SOX and a Code of Ethics influence the organization structure of Durango to reduce the potential for fraud? )
9. Use six quality academic resources in this assignment.
The last paper requires the application of course material related to financial and managerial accounting, forensic accounting analysis, and auditing concepts that should have been covered in earlier courses. Our course text is a review of some of the concepts introduced in past courses.
Relying on suggestions made from students who took this course in prior quarters I am providing some of these now.
One week is too short of time to complete this assignment given that two tests must be completed in addition to the discussion questions. Start this paper very early!
Each of the first three questions are only assigned 5% of this assignment’s total points. These answers will be relatively shorter than the questions assigned more points.
The answers to each of the first three questions should be about one page.
The answers to each of the five remaining questions should be about two pages each.
This assignment is only a small part of a business plan. Only answer the listed questions.
Be sure to follow the paper guidelines posted earlier in this course.
I have slightly modified three questions to hopefully reduce the time taken to complete this assignment. These suggestions may or may not be taken.
I have changed the goal from maximizing revenue to maximizing net income from operations.