COMP XM CHAPTER 1,2,3,4

COMP XM CHAPTER 1,2,3,4 Segment/Perf/Size - CORRECT ANSWERS-Thrift +-0.5 -0.5 Core +0.8 -0.8 Nano +0.8 -1.1 Elite +1.1 -0.8 *THE ONLY PRODUCT THAT DOES NOT MOVE, IT'S THE PRODUCT IN LOW END SEGMENT. LEAVE THIS PRODUCT AT 3.0 AND 17.0* You want to increase performance and reduce size as much as you can without the revision date reaching July. Prices between each round - CORRECT ANSWERS-Don't change the price! Price for each product - CORRECT ANSWERS-Nano - max Elite - max Core - a few bucks below Thrift - a few bucks below Automation - CORRECT ANSWERS-increase automation by 1 point each round in each product get low end up as high as you can What is your target leverage and how do you get there? - CORRECT ANSWERSborrow money until you hit 2.2 and get 60 days of working capital (will have to pay dividends) To calculate leverage, - CORRECT ANSWERS-divide total assets by total equity. This number will represent the number of dollars of assets owned per dollar invested by equity holders. If a company has leverage of four, that means they have $4 in debt for every $1 in equity. sales and promo budgets (all four rounds) - CORRECT ANSWERS-For all products Round 1: 2,000 Round 2: 1,500 Round 3: 1,400 Round 4: 1,400 Recruiting hours and spend - CORRECT ANSWERS-$5,000 80 hours TQM - CORRECT ANSWERS-$1,500 first round $1,500 second round $1,000 third round $0 fourth round adding capacity - CORRECT ANSWERS-a couple hundred each round best date for new products to come out - CORRECT ANSWERS-June 26-28th forecasting shift capacity - CORRECT ANSWERS-forecast next year's demand directly This year's potential market share * next year's demand is a good starting point, but then make judgment adjustments as necessary (e.g. is my product improving, are my competitors improving, etc.) use 200% of plant utilization you must calculate capacity _____ rounds ahead - CORRECT ANSWERS-2 rounds MTBF - CORRECT ANSWERS-Set to maximum amount Steps for getting a good finance position - CORRECT ANSWERS-Goals is to get a cash position of $5,000 in Decembers Step 1: get as much issue stock as possible Step 2: get as much issue long-term debt Step 3: get whatever you need left from borrow when to retire stock - CORRECT ANSWERS-when you have a good cash position and you have some money left over to purchase stock back from the market when to give out dividends - CORRECT ANSWERS-it's for when you have cash leftover in capital investment to give to your shareholder. when to retire long-term debt - CORRECT ANSWERS-it's for when you want to pay your debt early (This usually decreases your interests expense) Buy/Sell Capacity Strategy - CORRECT ANSWERS-You want to keep 2 nd Shift Production % between 20% and 50% If you have less than 20%; you have to sell capacity If you more than 50% you have to buy capacity After you make you decisions on production, check how much capital investment you have; If you have capital investment leftover, try to spend it in Automation or Capacity If you are spending more than you should, try to sell capacity or not invest as much. production schedule formula - CORRECT ANSWERS-((Units Sales Forecasted) * (1.2) ) - Inventory on Hand) forecasting strategy - CORRECT ANSWERS-From the Market Share page in the Capstone Courier, take your last year's market share and multiple it by the next year demand of each segment. To calculate Next Year Demand, you take current demand and multiple it by the growth rate Multiple your Market Share by Next Year's Demand Finding the profit margin - CORRECT ANSWERS-Look at "ROS" under the Selected Financial Statistics A +/- ROS is directly correlated to - CORRECT ANSWERS-a +/- ROA ex) negative ROS means you will have a negative ROA more on ROA - CORRECT ANSWERS-Return on assets is an efficiency ratio. The ratio answers the question, "How good is the company at producing wealth with our assets?" It compares the profits generated by the company with the asset base. To calculate ROA, - CORRECT ANSWERS-divide profit by assets. ROA is also the product of multiplying the ROS by the AT (asset turnover). Which three segments are the new products most likely compete in the following year year? - CORRECT ANSWERS-high end performance size The industry best practice is for leverage to be in the range of - CORRECT ANSWERS1.8 to 2.8. 1.8 breakdown: 56% equity, 44% debt 2.8 breakdown: 36% equity, 64% debt what's included in the contribution margin (4) - CORRECT ANSWERS-sales - labor exp - material exp - inv carry costs = contribution margin Name the four ways you can increase your contribution margin - CORRECT ANSWERS-Reduce cost of materials Lower MTBF Increase the product price Increase automation A profitable product should not have more than about X% of their sales consumed by inventory carrying costs (about X months of inventory). - CORRECT ANSWERS-3% 3 month