Hisco summary annual report

Ace your studies with our custom writing services! We've got your back for top grades and timely submissions, so you can say goodbye to the stress. Trust us to get you there!


Order a Similar Paper Order a Different Paper

DUE AT MIDNIGHT EASTERN STANDARD TIME ON JUNE 5TH, 2023

TOTAL OF 18 PAGES MINIMUM 

Prior to gaining access to the Summary Annual Report. Download Summary Annual Report Template.

The summary annual report is a scaled down version of a full annual report. Naturally, you are encouraged to review real world annual reports which can be used as a strawman in preparation. Your recently completed Annual Operating Review should be aligned with your Annual Report.

Preparing your HISCO summary annual report will be one of the most comprehensive assignments you will have completed so far. You will gain an appreciation for the complexity and responsibility the senior executives continually face. Hopefully, you have experienced the holistic and competitive environment from the simulation. Your recently completed Annual Operating Review will provide the basics.

The information, qualitative and quantitative, in an annual report should provide current and prospective investors (as well as any stakeholder) a complete insight into the company’s historic performance and its plans for growth and improvement over the next few years as defined by its strategy. Publicly traded companies are required by law to prepare and submit to many constituencies a variety of filings.  The most well-known is the Annual Report to Shareholders and related Form 10-K. An annual report is technically an unofficial document. The Form 10-K will typically provide the most comprehensive summary of the company’s history, financials, risks and opportunities, and current operations. The Form 10-K is submitted annually to the U.S. Securities and Exchange Commission (SEC).  Technically, HISCO is a private company (you may have sold equity to the venture capitalist) and only if it had publicly trades debt would be required to file a Form 10K.

As a future leader of a public or private company, you will learn the integrative nature of any business while you complete the HISCO summary annual report.  This document can become an important part of your e-portfolio in the program.  Your owner, Stanley Sloane, looks forward to reading your HISCO summary annual report.  While details may vary state by state, even if your career leads to growing a small private business, you will need to file an annual report with The Secretary of State in your jurisdiction, another benefit to learning from our final activity.

The following identifies specifics instructions for preparation of each required section.  The required sections to be completed will be found the word document from the model. Please remember to periodically save your work.  An online search will reveal innumerable sites devoted to annual reports.

The HISCO Summary Annual Report

  • Must be completed using the template Summary Annual Report Template a guide to formatting your work. Standard APA formatting will not apply to this assignment.
  • Must include the following:
    • Cover Page
      • You can design your own cover page. Should be reflective of your corporate image and may include a picture and/or logo. At a minimum, it will include the name, [year 2024] HISCO Summary Annual Report, as well as your name and date. The cover page can only be 1 page.
    • CEO Letter
      • The CEO Letter is designed to share the Strategy, Financial Highlight Summary, and Business Overview of the past year. Evaluate quantitative and qualitative techniques for business analysis and decision-making. It will typically also include the future growth outlook for the business (detailed in the Sales, Marketing and Industry pages below). The CEO Letter can be a maximum of 3 pages.  
    • The “Stan Sloane Letter”
      • HISCO’s owner, Stan Sloane, is very happy that he decided to hire you to help turn the company around. He is interested in having you stay on with the company. However, he will need assurance from you that you are committed to continuing to grow HISCO. Explain to Stan how you plan on running the company over the next two years. You should discuss the majority of the items you developed when you first came on with the company, including: whether you would make any changes to the SWOT analysis, whether you would change the company strategy, negotiations you would make with company stakeholders, future technology suggestions, growth expectations in general for the industry and specifically for HISCO over the next two years, any concerns that occurred in the past year that you would address, and any other information you believe would be relevant in order to reassure Stan that he has placed the company in the right hands. You will add this letter at the end of the standard Annual Report. This letter is not part of a traditional Annual Report. The “Stan Sloane Letter” can be 3-4 pages.
    • Sales, Marketing, & Industry
      • This section should detail all aspects of HISCO’s Value Chain, from supplier to manufacturing to the customer. Products, NPIs, Pricing, in an industry perspective of competition should be elaborated on. Utilize tools from marketing to manage the profitability of overall business operations. A review of your SWOT would probably help as well as your recently completed Annual Operating Review. An essential element is for current and prospective investors to understand how HISCO makes money and will be able to create growth and deal with risks. The Sales, Marketing & Industry section can be a maximum of 5 pages.
    • Financial Statements
      • Financial statements are the heart and soul of the annual report. This is a quantitative section that provides current and prospective investors a look into HISCOs financial performance. The financial statements consist of the Income Statement, Balance Sheet, and Cash Flow. We suggest you show a minimum of 4 Qtrs. for each of the past two years for the Income Statement, Balance Sheet, and Cash Flow. Utilize tools from finance management to manage the profitability of overall business operations. Consider expanding the lines within each statement in the model. You will need to provide details on the Credit Line. The Financial Statements section can be a maximum of 6 pages.
    • Management Discussion and Analysis (MD&A)
      • The Management Discussion and Analysis section provides the real detail on year to year performance. In your case, this will be simulation year vs. prior simulation year. Topics will be both qualitative and quantitative in all aspects of simulation year relative to prior simulation year. MD&A will certainly include a complete variance analysis of performance and the successes and failures of your decisions for the year.  It is the time you will delve into the details of your operating decisions. The MD&A section is typically devoted to the past (your future was described in prior sections). Reference to the Financial Statements is crucial as well as your recently completed Annual Operating Review. Graphics from your Business Intelligence Dashboard and your Variance walks on Income and Cash can provide visual insight into your performance. The Management Discussion and Analysis (MD&A) can be a maximum of 6 pages.
    • Notes, Appendices, and References
      • Any supporting documents, comments, information, a glossary of terminology, and/or clarifications you deem relevant to your annual report to assist current and prospective investors. The Notes, Appendices, and References are required and can be a minimum of 1 page and a maximum of 2 pages.  References can be in a bulleted or numbered format.

Annual Report

Instructions:

1. Read through the Annual Report instructions in the template very carefully. It will give you detailed

instructions on how to complete the Annual Report.

2. Using the available charts, graphs, and information from the simulation you just played, fill out the

Annual Report according to the guidelines given.

3. You should save your draft Annual Report frequently.

4. When you feel that your Annual Report is complete, save the file on your computer.

Learning Outcomes

1. Through the careful analysis of previous decisions you will demonstrate that you
learned the how to adjust strategies by using knowledge gained to impact company
operations on a short-term and long term basis. You will discuss what changes that
you would make if you could replay a quarter, as a discussion thread.

2. Demonstrate your ability to construct a Summary Annual Report and receive
feedback.

Introduction
Welcome to the final week of your Capstone experience. You have been managing a
HISCO product offering. Deeply consider what you would do different if you could
replay the simulation. In the business world planning for the next year may occur months
before the current year ends. Even if you finish in first place in a market, you will need to
focus on continuous improvement in order to stay ahead of your competition. By
analyzing your results from feedback and data you will be able to make
recommendations for improvement.

HISCO Annual Report

There are two sections to this assignment:

1) The ‘Stan Sloane Letter’, and

2) The Annual Report

The ‘Stan Sloane Letter’. HISCO’s owner, Stan Sloane, is very happy that he

decided to hire you to help turn the company around. He is interested in having

you stay on with the company. However, he will need assurance from you that you

are committed to continuing to grow HISCO. In three to four pages, explain to

Stan how you plan on running the company over the next two years. You should

discuss the majority of the items you developed when you first came on with the

company, including: whether you would make any changes to the SWOT analysis,

whether you would change the company strategy, negotiations you would make

with company stakeholders, future technology suggestions, growth expectations

in general for the industry and specifically for HISCO over the next two years, any

concerns that occurred in the past year that you would address, and any other

information you believe would be relevant in order to reassure Stan that he has

placed the company in the right hands. You will add this letter at the end of the

standard Annual Report. This letter is not part of a traditional Annual Report.

*The ‘Stan Sloane’ letter is from you, as the CEO, to the owner of the company.*

*The ‘Stan Sloane’ letter is a forward-looking discussion around specifically how

you will continue to grow Hisco over the next two years.*

HISCO Summary Annual Report Template

This HISCO summary Annual Report template is to be completed as part of your

year-end activities. The due date is no later than Day 7 of Week 6 and is your final

deliverable in BUS687. The HISCO summary Annual Report is worth 20% of your

overall grade.

The goal is to capture the essence of the major sections of an annual report and

provide an opportunity to synthesize your learnings from the simulation. This is

the reason we refer to it as a summary annual report. For example, you are not

responsible for the Auditor’s Report. Naturally, you are encouraged to review

real-world annual reports, which can be used as a strawman in preparation. Your

HISCO Annual Report should be your own original work. Your recently completed

Annual Operating Review in Week 5 – as well as your QBRs – can be leveraged in

preparing your Annual Report.

Preparing your HISCO summary annual report will be one of the most

comprehensive assignments you will have completed during your MBA. You will

gain an appreciation for the complexity and responsibility the senior executives

continually face. Hopefully, you have experienced the holistic and competitive

environment of the simulation.

The information – qualitative and quantitative – in an annual report should provide

current and prospective investors (as well as any stakeholder) a complete insight

into the company’s historic performance and its plans for growth and

improvement over the next few years, as defined by its strategy. Publicly traded

companies are required by law to prepare and submit to many constituencies a

variety of filings. The most well-known are the Annual Report to Shareholders and

related Form 10-K. An Annual Report is technically an unofficial document. The

Form 10-K will typically provide the most comprehensive summary of the

company’s history, financials, risks and opportunities, and current operations. The

Form 10-K is submitted annually to the U.S. Securities and Exchange Commission

(SEC). Technically, HISCO is a private company (you may have sold equity to the

venture capitalist) and only if it had publicly-traded debt would be required to file

a Form 10-K.

As a future leader of a public or private company, you will learn the integrative

nature of any business while you complete the HISCO summary Annual Report.

This document can become an important part of your e-portfolio as you continue

throughout your career. Your owner, Stanley Sloane, looks forward to reading your

HISCO summary Annual Report. While details may vary state by state, even if your

career leads to growing a small private business, you will need to file an Annual

Report with The Secretary of State in your jurisdiction; another benefit to learning

from our final activity.

The following page identifies specifics instructions for preparation of each

required section. Please remember to save your work frequently. An on-line

search will reveal innumerable sites devoted to annual reports; all work on your

HISCO Annual Report must be your own.

Required Sections in

HISCO Summary Annual Report

We leave to your imagination, creativity, and perusal of real-world Annual

Reports as to what Financial Statements, Graphics (e.g., from the Business

Intelligence Dashboard, Variance Walks, and all others in your model), pictures,

etc., to copy and paste (or alt-print screen, paste and crop) from the simulation

model into the Word document below.

The required sections are as follows:

Cover Page

You can design your own cover page. It should be reflective of your corporate image and may
include a picture and/or logo. At a minimum, it will include the name [Simulation Year] HISCO
Summary Annual Report as well as your name and date. The cover page can only be 1 page.

CEO Letter

The CEO Letter is designed to share the Strategy, Financial Highlight Summary, and Business
Overview of the past year. It will typically also include the future growth outlook for the

business (detailed in the Sales, Marketing, and Industry pages below). The CEO Letter should
be 2-3 pages.

Sales, Marketing, and Industry

This section should detail all aspects of HISCO’s Value Chain, from supplier to manufacturing
to the customer. Products, NPIs, Pricing, in an industry perspective of competition should be
elaborated on. A review of your SWOT would probably help as well as elements of your
recently completed Annual Operating Review. An essential component is for current and
prospective investors to understand how HISCO makes money and will be able to create
growth and deal with risks. The Sales, Marketing & Industry section should be 4-5 pages.

Financial Statements

Financial statements are the heart and soul of the Annual Report. This is quantitative section
that provides current and prospective investors a look into HISCOs financial performance. The
financial statements consist of the Income Statement, Balance Sheet and Cash Flow
Statement. This section should discuss key metrics or line items from the financial statements
that you want your audience to focus on. We suggest you show a minimum of the past two
years for the Income Statement, Balance Sheet and Cash Flow. You will need to provide
details on the Credit Line. The Financial Statements section should be 4-6 pages.

Management Discussion and Analysis (MD&A)

The Management Discussion and Analysis section provides the real detail on year-to-year
performance. This section contains the real substance of the Annual Report. In your case, this
will be the current simulation year just completed vs. the prior simulation year. Topics will be
both qualitative and quantitative around all aspects your recently-completed year relative to
the prior year. The MD&A should include a complete variance analysis of performance and
the successes and failures of your decisions for the year. It is the time you will delve into the
details of your operating decisions. The MD&A section is typically devoted to the past (your
future was described in prior sections). Reference to the Financial Statements and your
recently completed Annual Operating Review is crucial. Graphics from your Business
Intelligence Dashboard and your Variance walks on Income and Cash can provide visual
insight into your performance. The Management Discussion and Analysis (MD&A) should be
5-6 pages.

Notes, Appendices, and References

Any references, supporting documents, comments, information, glossary of terminology,
and/or clarifications you deem relevant to your Annual Report to assist current and
prospective investors should be included. The Notes, Appendices and References should be 1-
2 pages.

  • Instructions:
  • Learning Outcomes
  • Introduction
  • CEO Letter
  • The CEO Letter is designed to share the Strategy, Financial Highlight Summary, and Business Overview of the past year. It will typically also include the future growth outlook for the business (detailed in the Sales, Marketing, and Industry pages belo…
  • This section should detail all aspects of HISCO’s Value Chain, from supplier to manufacturing to the customer. Products, NPIs, Pricing, in an industry perspective of competition should be elaborated on. A review of your SWOT would probably help as wel…
  • Financial Statements
  • Financial statements are the heart and soul of the Annual Report. This is quantitative section that provides current and prospective investors a look into HISCOs financial performance. The financial statements consist of the Income Statement, Balance …
  • Management Discussion and Analysis (MD&A)
  • Notes, Appendices, and References
  • Any references, supporting documents, comments, information, glossary of terminology, and/or clarifications you deem relevant to your Annual Report to assist current and prospective investors should be included. The Notes, Appendices and References sh…
  • LINKS
  • https://www.forbes.com/sites/fotschcase/2017/09/05/six-tips-for-planning-a-great-2018/?sh=5b4d43c565c6
  • https://www.forbes.com/sites/louismosca/2017/10/18/business-planning-for-2018/?sh=359dbec2692d

Page 1 of 3

Annual Operating Review

What key concept or technique from the week’s readings and/or discussion were

you able to utilize in the quarter’s decisions?

Throughout our prior conversation, I gained a profound understanding of the Annual Operating Report

(AOR). As we aim to elevate our company’s overall performance, we must conclude the year

positively. Initially, I needed to recognize the importance of investing in our company’s strengths,

which resulted in our competitor, Matek, exceeding us due to our lack of quality. Therefore, we must

prioritize our strengths instead of focusing on areas that require improvement. Although it may seem

tempting to seek external assistance in areas needing more expertise, we must remain committed to

our core competencies to succeed.

Using the Pre-Tax Net Income (Plan vs Actual) Walk Chart, explain all variances

and explain the key drivers. Provide data to support your explanations.

Hisco, a leading company in its industry, has again experienced a considerable increase in pre-tax net

income. This success can be attributed to the company’s impressive growth and sales, clearly

demonstrated in the chart indicating that Hisco is executing its plan efficiently. In addition, the

company’s growth and market share are almost equal, indicating a balanced and sustainable strategy.

To ensure that Hisco stays on track, the company has increased its advertising and marketing funding

compared to previous quarters. Despite these efforts, the final quarter saw such high sales that Hisco

could not break even. However, the base costs reveal a significant increase in sales, with a record-

high of $160k for Hisco. This is an impressive milestone for the company, indicating it is on the path

to even more significant achievements. As the company expands globally, its growth is expected to

continue, and Hisco can look forward to a bright future.

Using the Cash Flow Walk Chart, explain all sources/uses of cash and explain the

key drivers. Provide data to support your explanations.

The financial performance of Hisco this quarter has been notably impressive, showcasing a consistent

trend of positive cash flow over the past year. Despite the revenue generated from sales being wiped

out by receivables, this is a common challenge when dealing with hospitals that tend to delay

Page 2 of 3

payments. However, negotiating for quicker payment agreements can resolve this issue. In addition,

since taking over, Hisco’s cash flow has seen substantial enhancements, despite currently sitting at –

$160K, the highest negative figure in the company’s history. Nonetheless, we remain optimistic that

cash flow will continue to improve and eventually become positive. As a result, by Q3 next year, we

anticipate a much better cash flow position for Hisco.

What revisions would you make to your original SWOT analysis going forward

over the next 2 to 3 years? Be specific within each of the four categories.

Our engineering expertise at Hisco is highly esteemed and our most valuable asset in the market. To

maintain our edge over competitors, we recognize the importance of securing funding, despite

limitations. Throughout the first quarter, we diligently worked towards reducing our reliance on credit

and are proud to say we have become self-sufficient. As we focus on expanding our global outreach

and providing top-notch services to hospitals worldwide, we acknowledge the challenges we continue

to face, including stiff competition from new players in the East as we grow.

In what ways were you surprised by the final team rankings in the value creation

winning? Within each metric on the ‘Winning’ slide, what did or did not reflect

your expectations?

I was surprised by the turn of events when Matek emerged as the victor in the competition, leaving

Hisco in the dust. Hisco had been performing admirably in the initial three quarters, but Matek gained

the upper hand in the fourth quarter. Upon scrutinizing the financial statements, I observed that Matek

had a higher net income despite having less cash flow. This indicated that Matek had invested in their

enterprise to gain an advantage over their rivals. I realized that net income carried more significance

in the competition, and thus, I shifted my focus towards increasing our own company’s net income as

well.

Over the next 2 to 3 years, in what potential new market/product/service

opportunities could Hisco invest for growth? Discuss at least 2 specific

opportunities

Page 3 of 3

Hisco must expand its global presence and increase its market share within the next two years. Our

achievements in the eastern market have set the foundation for growth. We plan to invest in eastern

locations with additional financial resources to secure more substantial expansion. Our latest research

project, number three, is a true game-changer. It introduces innovative hospital housekeeping,

maintenance, and dietary control features, significantly enhancing our readers’ functionality. This

project alone can potentially increase our market share by a staggering 50%, surpassing Redex’s Q3

breakthrough and positioning us to compete at a higher level.

If you could make one single change over the past year, what would it be? How

might that change impact the outcome?

Investing in Research and Development is crucial for the growth and success of a company. During

the first and second quarters, my main focus was on generating more cash flow and net income for the

organization, which resulted in limited investments during those periods. However, I may have

underestimated the impact of R & D on the company’s overall progress. Had I invested in all projects

alongside engineering earlier, Hisco could have released new and better-quality products, gaining an

edge over competitors. While it is impossible to go back in time, it is still possible for Hisco to increase

its investment in R&D in the coming years, which can lead to the realization of new ideas and their

successful implementation. Proper investments in R&D can pave the way for the future success and

growth of the company.

“Growing Your Business” – A Management

Simulation

Our Educational Objectives to Growing a Business,

while not Exhaustive, Necessitates that Future Leaders can:

• Derive a Strategy from an Understanding of SWOT and Porter’s Five Forces in Uncertain,

Ambiguous and Complex Global Environments,

• Convert that Strategy into an Executable Plan in the Short Term while Investing and Creating

Options for the Long Term,

• Make Decisions under Time Pressure, Scarce Resources, Limited Information and Divergent

Opinions,

• Communicate and Negotiate with Internal and External Constituencies for Win-Wins,

• Manage the Interdependencies across Functions,

• Measure, Interpret and Explain the Financial Impact of Decisions in an FP&A Methodology of

Variance Analysis

• Have a responsible mindset in Meeting Commitments within an Ethical Framework, and

• Be a Coach and Teacher to everyone within their sphere of influence.

All in the Context of Creating Shareholder Value !

To:New Management

From:Stanley Sloane

Welcome to Hisco
Welcome to the Hisco Corporation! We’re delighted to have you join us. I promise you two things: A lot of

hard work to turn this company into a profitable enterprise, and an opportunity to achieve the goals and

objectives that you set for yourself.

You can catch up on the history of Hisco when you have time to read the enclosed materials. The important

facts are clear. We’ve been in business for 2 years, and we’re not doing well. Losses exceeded $130,000 last

year and all our cash is gone. We have used our entire credit line, and we are concerned about our ability

to stay in business. We have a good product and a market with tremendous potential. We currently have

excessive manufacturing capacity in place; we need to grow sales to stay afloat.

We know engineering; this is probably one of our strengths. We need to develop our skills in manufacturing

and marketing to become more competitive and learn where and when to invest our resources for results.

Most important, as we face the next year of operation, we need a new business plan. We need a set of goals

and objectives, a strategy to get us there, and a system to monitor and measure our progress.

Our two competitors are not sitting still. They are also re-organizing and building their ability to compete

in the same market with similar products. Redex has been good in manufacturing, and Matek has an edge

in marketing. We need to offset their advantages without losing our own engineering strengths. The

business environment is excellent. Our product is in the infancy phase of the life cycle, and we believe that

exponential growth is possible. We need to compete with a quality product at an attractive price, and we

need to let people know how good we are. We must invest in our future now and continuously. Pricing will

be critical for our success, and I do not want you to move price more than +/- 20% per quarter. We cannot

afford to sacrifice earnings for market share; I will be watching product margins closely and expect to see

significant improvement next year. Do not forget about the product quality. Our products help nurses

improve the quality of care at the hospital, and we cannot afford to jeopardize our reputation in the

marketplace.

I have assembled some memoranda to fill you in on where we have been and where we are now. The

information is mostly historical, yet it gives you a starting point. I am more concerned with where you take

the company rather than where it has been. I assume you will share that concern.

The primary reason the prior management team is no longer with us was their inability to plan and budget

for growth. The prior management team submitted a plan with approximately $240,000 of Net Income. This

target is unacceptable. Your net income commitment for the coming year needs to be between $300,000

and $400,000 to convince me that you can truly grow this business. Executing on this plan is fundamental

to our value of meeting commitments.

The Board and I wish you well. We will monitor your progress.

Regards,

Stanley Sloane

Chairman

To:Functional Managers

From:William Sellums (Marketing Manager)

Product & Industry Background
We are developing an advertising theme, which will focus on the history of our product, its labor-saving

and productivity features, and its high degree of reliability. We will be asking each of you for your input as

we develop the advertising plan.

Most of you are aware of the background of our product and our industry. To summarize:

• Three companies entered the Reader technology business in 2021 and began selling products

in the first quarter of 2022. The Reader was developed to satisfy a need to reduce the time

hospital nurses devote to paperwork and administration. Several independent studies revealed

that approximately 40% of a nurse’s time was consumed in non-patient activities. Trial

installations of standard computer terminals at nurse’s stations have not solved the problem

because data entry and computer training requirements placed resource demands on the

hospital staffs that were unattainable.

• Hamada, Ltd., a Japanese electronics producer, developed a pick-up cell constructed as a solid-

state magnetic sensor using tunnel diodes and special ceramics. This pick-up cell detects marks

made with magnetic ink and records their position on a predesigned form. The cell is extremely

tolerant of registration errors and allows the remainder of the Reader device to be relatively

simple and inexpensive to build using off-the-shelf materials. The Reader is an input peripheral

that can be programmed to work with virtually all hospital computer systems. Each Reader

requires one pick up-cell.

• When installed, a Reader system includes a Reader, a special pen containing magnetic ink, and

preprinted, computer-generated patient forms. These forms are coated with a special chemical

compound similar to that used on heat-sensitive paper for fax machines. Using the pen

provided, a nurse marks the form to indicate procedures, drugs, dosages administered, and other

information relating to the patient. The form is inserted into the Reader, which converts the

marks to computer sensible form for transmission to a database.

Like our competitors, we sell Readers to hospital equipment distributors who package the Reader and its

ancillary components for sale to some 5,300 hospitals in the United States. We believe that we make a

quality product that will get better. We sell at a competitive price. The industry is healthy and on the verge

of tremendous growth. Aggressive advertising, marketing, and pricing strategies will stimulate demand.

TO:Functional Managers

FROM:Ferris Futrell (Finance Manager)

Discretionary Operating Plans 2024

(Company Use Only)

During our November 2023 planning meeting, we agreed on the following discretionary budget for 2024:

Quality Engineering:

$150,000

R&D:

$295,000

Marketing:

$219,000

Advertising:

$90,000

Lean Six Sigma:

$128,000

However, since that time, each functional manager made increases in one or more areas. I have heard from

you that we need to increase overall investment to successfully improve the product, the manufacturing

process, and our market position. Clearly we have limited cash resources at this time, and although we have

a line of credit, we must be sensitive to our cash position so that we do not exceed that credit limit.

I suggest that we revisit the planning decisions for 2024 during our next staff meeting to ensure that our

spending is consistent with our competitive strategy and the availability of resources. At that time, we may

wish also to continue our discussions on our resource allocation policies. For example, some of you have

suggested that discretionary expenditures in your functional area should increase as our sales volume grows.

We must come to agreement as to how this should be done.

Product pricing is extremely important to our fiscal strategy and corporate profitability. The market may be

receptive to a higher price until demand is satisfied, but we must watch this carefully. Be aware that Stanley

Sloane will not approve any price changes exceeding 20% up or down in one quarter. Control of our

production costs is essential if we are to be competitive and profitable. Marketing and Manufacturing must

address these topics if we are to be profitable.

TO:General Manager

FROM:Ferris Futrell (Finance Manager)

Line of Credit

In response to your question about State Street Bank’s method of determining our adjustable line of credit,

I am providing a portion of the most recent bank letter from Loan Manager, Francine Friendly, on the

subject.

“. . . Our analysis of your industry reveals consistent, modest growth during the past year with little

fluctuation in price or terms.

After discussions with your parent company regarding the prior quarter’s performance and your company’s

increased cash needs to align with potential industry growth, we are pleased to extend your credit line to a

minimum of $425,000. We will continue to review your position and adjust your credit line every quarter,

as we do with all new companies. Your credit line will increase as your company grows, but it will not go

below $425,000. In each quarterly review, we will allow:

1. $100,000 for personal collateral now held;

2. Sixty percent of Accounts Receivable;

3. Thirty percent of the value of all finished goods inventories.

Your total line of credit will be either the sum of the above or $425,000, whichever is greater.

An interest rate of 15% per annum (3.75% per quarter) will be charged on money borrowed. Borrowing up

to the limit of the credit line will be automatic. As cash is received, repayment will also be automatic. In

any quarter, interest will be charged based upon the outstanding loan amount (i.e., your negative cash

balance) at the end of the previous quarter. You may, therefore, borrow automatically against your credit

line during any quarter, and you will pay no interest until the following quarter. We will inform you of any

changes in our policies or interest rates.

When a line of credit is exceeded, dependent upon the severity of the overdraft and the company plan to

remediate the issue, the bank will determine the appropriate actions. In the quarter following the overdraw,

the current rate of interest will be charged on money borrowed up to the credit line; a loan restructuring

fee of $3,500 will be charged, and an interest rate of 21% per annum may be charged at the bank’s discretion

on money borrowed in excess of the credit line. If such an incident should occur, the bank and the company

will make every effort to resolve the overdraw condition immediately. Should that not happen and should

a successive overdraw occur, the bank may invoke additional remedial steps.”

I hope this clarifies any questions you have on the terms of the line of credit. Please note that exceeding the

credit line is not acceptable operating procedure. I recognize that certain negative business conditions may

be unforeseen, but for the most part, I would recommend appropriate sensitivity analysis to avoid an

overdraft situation.

TO:General Manager

FROM:William Sellums (Marketing Manager)

Market Growth

During our first 24 months of operation, we have gone from sales of 422 units in the first quarter to 829

units during the last quarter. That’s nearly 100% growth since we started.

We are convinced there is tremendous potential growth for our product in the market. Growing demand

will follow expanding sales, marketing and advertising investment and decreasing prices. To get a major

share of that growing market, we need to be price competitive with a quality product, and we must make a

major dollar investment to market our product. Even though we have been in business for over a year now,

our name is still unknown; it will take the right balance of marketing and advertising monies to build our

brand image. The marketing dollars will support our distributor in his efforts to get “air time” with our end-

users. Our distributor charges 10% of the selling price to the customer as his margin to cover pre and post

sales costs of supporting our products. For example, if our price to the distributor is $630, the price to the

customer is $700. The distributor receives 10% of $700 or $70 per unit.

Our expenditures for 2022/2023 were as follows:

2022/2023 EXPENDITURES

ADVERTISING

MARKETING*

1st Quarter 2022

$36,000

$31,000

2nd Quarter 2022

$36,000

$31,000

3rd Quarter 2022

$36,000

$31,000

4th Quarter 2022

$39,000

$34,000

1st Quarter 2023

$18,000

$35,000

2nd Quarter 2023

$23,000

$38,000

3rd Quarter 2023

$28,000

$42,000

4th Quarter 2023

$31,000

$46,000

*Includes the cost of the MAA Marketing Report.

We recommend an aggressive marketing program – we should be looking at investing 15% of sales into

marketing and 5-10% of sales into advertising each quarter in 2024. This market will not reach its potential

without stimulation, and we cannot depend on our competitors to do the stimulating for us.

Of course, there is a downside to this life cycle phenomenon. At some point, the “mature” phase follows the

“growth” phase. Demand begins to level off and eventually declines. The marketing challenge is to anticipate

when that is going to happen. We must balance our manufacturing and marketing efforts to be able to serve

the market when the demand exists and to curb manufacturing before demand declines.

Our manufacturing capacity is of real concern to me. Our projection for major growth must be matched by

manufacturing expansion to keep up with that growth. There is more at stake than losing a few sales. An

industry that lacks the manufacturing capacity to meet increasing demand often keeps prices high and loses

sight of keeping costs low. Such an industry offers a tempting opportunity for a low-cost producer to enter

into the market with a significantly lower price.

Whenever we have shortage of capacity to meet the demand, we lose all of the unfulfilled demand. There

is no backlog that would roll forward to the next quarter. We cannot afford to allow any unfulfilled demand.

TO:Functional Managers

FROM:William Sellums (Marketing Manager)

Marketing Plan 2024

(Company Use Only)

MARKETING PLAN

2024

ASSUMPTIONS:

1. Demand for the product will increase as the product gains acceptance. The market is stimulated by

advertising and marketing expenditures and value pricing.

2. Product quality will become a major factor in product selection. Competing manufacturers will emphasize

quality improvements.

3. Costs to produce will be reduced through efficiencies and manufacturing improvements so that cost

savings can be passed on to customers through more attractive prices and/or payment terms.

OBJECTIVES:

1. Achieve a 36% market share by year-end 2024.

2. Price the product competitively to gain and maintain share; avoid erratic price shifts regardless of the

competition; keep the price consistent with reasonable profit margins.

3. Increase our marketing investment as quickly as possible to 15% of sales, and maintain reasonable levels

of investment through year end. Periodically evaluate our investment needs as our product offering evolves.

4. Stimulate market growth by attaining a 7% of sales advertising investment, and maintain reasonable

investment through year-end.

5. Position the company to take advantage of an exploding market fed by innovation to drive expanding

demand for our product.

TO:Functional Managers

FROM:William Sellums (Marketing Manager)

Market Analysis and Quality Surveys

Marketing Analysis Associates (MAA), which covers our industry in depth, has provided us with survey

results and forecasting data which we have found useful in the past year. We assume our competitors receive

the same data.

MAA estimates that there are approximately 5,349 hospitals in the United States suitable for our product.

The nature of the equipment (technical and computer integrated) and the distribution channels available

for hospital equipment suggest that we will sell most effectively through equipment distributors. The

optimum use of the product is one Reader for every ten hospital beds. Initially we should target hospitals of

100 beds or more because the product requires an existing computer system in place. The following table

illustrates demand potential.

# Beds/Hospital

# Hospitals

Total # Beds*

Total # Readers

100-199

2,209

331,425

33,143

200-299

1,155

288,750

28,875

300-399

720

252,000

25,200

400-499

477

214,500

21,450

500 or More

788

472,500

47,250

Total

5,349

1,559,175

155,918

MAA offers quality surveys of our product and those of our competitors. For a small fee, MAA will analyze

the product’s technical quality in independent laboratories and survey the product’s perceived quality

among current and potential customers and users. In the future, it hopes to also provide demand projections

in the service. Whether or when this will happen is not yet certain.

A subscription to the survey reports costs $5,000 per quarter. Once we subscribe, we do not need to request

it again each quarter; it will be delivered automatically. To start the subscription service, simply check the

“Marketing Report” check box on the “Qtrly Decisions” tab in the quarter in which you want to start the

service. Below is a complimentary demand forecast at the end Q4 2023.

I highly recommend subscribing to this service. We will only have access to limited competitive information

if we do not subscribe, which will put us at a competitive disadvantage and negatively impact our ability to

complete the Quarterly Business Report. I cannot overemphasize the value this survey will add to our

understanding of the market.

02,2504,5006,7509,000Q3’23Q4’23Q1’24Q2’24Q3’24Q4’242,0912,485

The graph shows the market forecast as of Q1 2024 with a 90% confidence level. It shows actual total market

demand for prior quarters, and expected demand for future quarters based on low, expected, and high

estimates. Q3 2023 shows 2,091 units of actual total demand. Q4 2023 shows 2,485 units of actual total

demand. For Q1 through Q4 of 2024, the low demand estimate is 2,934, 3,702, 4,743, and 6,166. For Q1

through Q4 of 2024, the expected demand estimate is 3,118, 4,003, 5,330, and 7,088. For Q1 through Q4 of

2024, the high demand estimate is 3,438, 4,638, 6,289, and 8,718.

TO:General Manager

FROM:Mr. Fix-It (Engineering Manager)

Engineering Quality & NPIs

I have reviewed our 2022/2023 performance and our prospects for 2024, and conclude that we need to

commit more money to engineering quality. I understand Finance will recommend spending $30,000 to

$45,000 per quarter for quality engineering in 2024. We can barely hold our own with that amount. In all

of 2023, the company invested only $142,000 in engineering quality, about 9% of net Sales. We have

invested $90,000 in Engineering Research which should yield results of the feasibility study shortly.

It costs money to be competitive. We cannot expect customers to accept a product that is inferior in design

or quality. The market will not grow if the industry produces an inadequate product. Quality cannot happen

without substantial investments in engineering. With a new product, we need to quickly find ways to make

it better. If we don’t, a competitor will.

I am convinced that our company will rise or fall on its engineering. Hisco has an engineering edge now,

but that can change if we do not have consistent and increasing engineering quality investments.

We began the studies using product development money. Now we need specific research funding to get some

results. The prior management team did begin funding project #2 listed below. We still have to complete funding

before we can commercialize the product. Any one of these projects could give us a competitive edge. We will need

dollars and time. When you arrive at your company headquarters, we will provide you with the project

details. (Corporate policy is not to let new product designs out of the control of our headquarters.)

The projects we know of are summarized for your information and support:

#1. A simplification of some of the assemblies in the product – Success in this area could significantly reduce the scrap

rate, hazardous waste generation, and the labor content of the product; thereby reducing the cost to produce each unit.

#2. An increase in the speed and amount of throughput of the product – This could result in a major product advantage

which would translate into a better market share position. The product would also utilize standard paper forms instead

of the current heat-sensitive paper, which is not recyclable. Our Environmental Manager indicates this may have a

long-term environmental advantage to the end-user because of possible future legislation restricting the use of non-

recyclable papers.

#3. An expansion of the applications of the product – The product is now designed for use at nurses’ stations. Expanding

the applications to housekeeping, maintenance, dietary control, etc. would greatly increase the size of the potential

market.

Note that proper planning around new R&D projects is essential. Given the long-term nature of R&D, once

we start on a project, we must finish it in a reasonable period of time. Starting and stopping and then starting

again is a poor process with respect to new product development—negatively impacting productivity and

jeopardizing timely commercialization of the product. Once we commit time and resources, we must see

the project through to the end as originally planned, even if budgets are tight.

Please see the email from Michael Reasoner regarding the potential impact of Project #3 on the Total Market

Demand.

TO:General Manager

FROM:Henrietta Peoples (Manager – Human Resources)

Labor Costs and Performance

Hire/Fire Costs: Industrial Opportunities handles our labor requirements for a hiring fee and a discharge

fee. Our contract will be in effect through 2024. The hiring fee of $2,000 per hire includes preliminary

training costs. The discharge fee of $4,000 per individual includes placement and severance costs.

Pay Rates: The average pay rate (Qtr 4-2022) was $85.02 per day. This increased to $86.30 per day in Q2-

2023, an increase of 1.5%. The pay rate will continue to increase at this rate semi-annually for the next three

years. (Thus, increases will take place in Q4-2023, Q2-2024, etc.).

Effectiveness: We will end this quarter with a direct labor force of 27 employees. New employees can be

added to the payroll as needed; however, Industrial Opportunities cautions that, realistically, hiring more

than 40 employees in any given quarter may be difficult to achieve. The hiring cost is as noted above. New

hires (first time or former employees) are immediately available, but take about five months on the job to

become fully effective. In addition, they require 20 hours of basic health and safety training before they are

allowed to work with certain paints, solvents, and solders. The overall impact of new hires and the labor-

production balance is revealed in “% Effectiveness” and “Idle Time” shown on the Quarterly Operating

Report. Effectiveness is the ratio of the planned days required to build a unit to the actual time used. Idle

time is time paid for but not used in production. Effectiveness decreases as new hires are added; it increases

as these new hires become fully trained. Idle production time increases when production and labor levels

are out of balance. Effectiveness also decreases when new inspection equipment is installed at the

factory. Experience indicates that a single line installation will reduce the entire assembler workforce

effectiveness by 5%. Multiple lines will have more significant impacts to the workforce.

We achieved our target production of 1166 units, the fourth quarter figures were:

% IDLE PRODUCTION TIME

0.3%

% EFFECTIVENESS

85.4%

PLANNED TIME

1.30 DAYS/UNIT

ACTUAL TIME

1.28 DAYS/UNIT

Our capacity in the quarter was 1,170 units:

27 People X 65 Working Days/Quarter X 85.4% Effectiveness

1.28 Days/Unit

The % IDLE PRODUCTION TIME shown above is computed as follows

% Idle Production Time = 1 – (Actual Production/Maximum Production Capacity) = 1 – (1 – 1,166/1,170) =

0.3%

Potential production bottlenecks are available labor, inspection line capacity, and/or units of raw material.

To better understand estimation of effectiveness, let’s assume that this quarter we will hire 5 new people.

Their effectiveness will be 50%. Previously hired employees’ effectiveness would be around 98%. Please

keep in mind that we should never assume 100% effectiveness as there are many human, process and

business factors that affect actual effectiveness.

Estimated Weighted Average Effectiveness = (27 x 98% + 5 x 50%)/ (27+5) = 91%

If one new line is installed, estimated effectiveness will reduce by 5% to 86%. If two new lines are installed,

the effectiveness will reduce by 10% (2 x 5%) to 81%. Please note that with many human, process and

business factors, the actual effectiveness may fall in the range of +/- 9% from the estimated effectiveness.

TO:General Manager

FROM:Stall Brick (Manufacturing Manager)

Manufacturing Report

Despite some start-up problems, in our first year, we did not lose any potential sales. We ended the fourth

quarter of 2023 with 566 units in finished goods inventory. We are charged 8% on the value of goods and

materials in Inventory at the end of each quarter as an Inventory carrying cost. This is not a problem if we

manage our inventories and balance our manufacturing output with sales.

Marketing and Manufacturing agree that we need a modest Inventory of finished goods to serve the market

and to operate manufacturing efficiently. Furthermore, we need to coordinate a production expansion plan

with the marketing sales forecast. For our part, Manufacturing will coordinate the inspection lines, the raw

material purchases and the labor required. We have already opened discussions with Purchasing and Human

Resources. This will be a priority effort in 2024.

Our current equipment (6 lines) has a rated capacity of 6,000 units/year; that is 1500 units/quarter. The chart

compares the quarterly level of production and potential sales for 2022/2023.

02404807209601.2KQ1’22Q2’22Q3’22Q4’22Q1’23Q2’23Q3’23Q4’23ProductionSalesProduction vs Demand

The graph shows quarterly units of production and sales from Q1 2022 through Q4 2023. Quarterly unit

production from Q1 2022 through Q4 2023 was 427, 452, 566, 602, 600, 636, 700, and 1,166. Quarterly unit

sales from Q1 2022 through Q4 2022 was 422, 457, 490, 517, 559, 611, 698, and 829.

We must grow our production capacity, but we must do it in a controlled manner. If we get ahead of

demand, we will lose control of our inventories and incur potentially ruinous costs. If we lag the market

and sales, we lose sales, market share and revenue. If the market explodes, we need the capacity to serve it.

Environmental permits take time to process through the state”s Department of Environmental Protection

and the EPA. No matter how much we push the construction of new lines, we will still have to wait up to

three months for the permits to construct and operate them. If demand declines or grows slower than our

capacity, we may find it necessary to remove inspection lines and labor.

TO:General Manager

FROM:Stall Brick (Manufacturing Manager)

Supplier Report

The manufacturing process for our reader uses a pick-up cell imported from Japan and assorted other

materials purchased locally. The pick-up cell is the key component and is ordered for delivery one quarter

before requested receipt. All other materials arrive “just-in-time” and are not inventoried. The JIT materials

program is stable and unlikely to change for 3-5 years.

The pick-up cells are another problem. Our vendor, Hamada Ltd., holds an exclusive license to produce the

pick-up cells for the next three years. It is possible that another supplier could enter the cell market after

Hamada’s license expires, but it is too early to speculate. Distance, competition, and changing world

conditions give us concern about working with a sole source supplier. For example, our Environmental,

Health and Safety Manager has visited the manufacturing operation and reports that a high pressure heat

treatment autoclave is used at one key step in the process. Regulations concerning vessels of this type are

extremely strict in Japan and the slightest infraction in operating procedure may prompt a mandated

shutdown and agency investigation. Shipment delays could result.

If Hamada has insufficient supplies to fill a complete order, its policy is to guarantee shipment equal to the

prior quarter’s order, with backlogs ranging up to 50% of the new order’s increase over the previous quarter’s

order. Hamada also supplies our competition. If Hamada is unable to supply demand in any period, it will

back order all of its customers using the standard policy. To illustrate: Order in Q1 for delivery in Q2 = 1000

units. (No previous back order.) In Q2, 700 units are delivered and 300 are back ordered. Order in Q2 for

delivery in Q3 = 1200 units. Guaranteed delivery in Q3 is 300 units (back order) plus 100 units (50% of

difference in Q2 vs Q1 orders) plus 1000 (amount of old order (Q1)). In this example, Hamada guarantees a

minimum delivery of 1400 units and a maximum delivery of 1500 units. Backorders are not known until

delivery.

We have recently signed a contract with Hamada. The first clause of our contract states that Hamada will

quote delivery prices for its cells — that is, the price we pay per unit when it is delivered. If we order in one

quarter for delivery in the next, we will pay the price in effect at the time of delivery. The same is true for

backorders, which are paid for upon delivery at the current delivery price. In Q4-2022 we paid $86.10 per

unit. This price was held through Q4-2023. This price increased to $87.39 for Q1-2024 on the chips ordered

in Q4-2023. New contracts will be negotiated for Q2-2024 and beyond.

TO:General Manager

FROM:Stall Brick (Manufacturing Manager)

Production Report – Variable Costs

VARIABLE COST TO PRODUCE:

The 2022 Lean Six Sigma investment was $68,000; 2023 Lean Six Sigma investment was $121,000. This chart

shows how the variable cost per unit has declined in response to that investment and learning about the

process.

QuarterDollar$203 $237$271 $305 $339 Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 Q3’23 Q4’23$307.91

$295.77 $299.49 $264.89 $261.9 $275.74 $265.67 $225.77Variable Cost To Produce

The graph shows the variable cost to produce, per unit, on quarterly basis, from Q1 2022 through Q4 2023.

The quarterly unit variable costs to produce over that period of time, starting with Q1 2022, was $307.91,

$295.77, $299.49, $264.89, $261.90, $275.74, $265.67, and $225.77.

The learning curve theory suggests significant additional reductions in cost are possible. Increased Lean Six

Sigma benefits will be achieved if greater amounts of money are invested. Expect some lag between the

spending and reduction in costs, and expect little or no savings if the investment is erratic. At current levels,

we will be lucky to hold our own. Most of the money will have to go into cost avoidance efforts. A new

item, Planned Time, has been added to the Quarterly Operations Report to make it easier to see what’s

happening. Planned Time shows in days/unit how much labor is required to make one unit of product at

100% labor effectiveness.

O:General Manager

FROM:Stall Brick (Manufacturing Manager)

Production Report – Facility Base Costs

Facility Base Costs have been increasing about 6% per quarter in 2022/2023, as shown below:

QuarterDollar$52,417$61,300$70,183$79,066$87,949Q1’22Q2’22Q3’22Q4’22Q1’23Q2’23Q3’23Q4’23$58,2

42$64,650$67,691$70,775$70,951$75,015$75,841$79,953Facility Base Costs

The graph shows facility base costs by quarter, from Q1 2022 through Q4 2023. The facility cost per quarter

over that period of time, starting in Q1 2022, were $58,242, $64,650, $67,691, $70,775, $70,951, $75,015,

$75,841, and $79,953.

Facility expenses are expected to increase 2 to 5% per quarter through 2024. A major contributor to that

expense is our building rent. The lease includes utilities and is pegged to inflation and is also dependent on

the number of inspection lines and number of readers produced. In order to accurately estimate the utility

costs, plan on $30-$40 of utility costs per production unit. The present facility will accommodate 25

inspection lines. To expand beyond 25 lines will require a one-time expansion cost of $50,000 to build the

new facility and obtain the necessary permits.

Expansions beyond 50 lines will necessitate very careful long term planning. Our Environmental Engineer

indicates that the total air emissions from the plant will reach a point at which the manufacturing facility

will be classified as a major air emission source and will require a Prevention of Significant Deterioration

air permit. The facility will also have to be disconnected from the municipal wastewater treatment system

and will have to treat and discharge its effluent directly into the Ramsey River. If we expand to 51 or greater

lines, it will take one year to obtain the required permits and a one-time expenditure of $250,000.

TO:General Manager

FROM:Stall Brick (Manufacturing Manager)

Inspection Line Policies and Pricing

Diversified Products leases inspection lines to us. It has informed us of several policy revisions to be effective

for the next three years.

1. The reader inspection lines can be fabricated, shipped and installed in 30 days; however environmental

permits to construct and operate currently take 90 days for final sign off. Hence, we should plan for a three-

month delay between placement of an order and start up.

2. Five-year lease agreements (equipment, installation, rental and removal) will be in effect. Quarterly

payment terms will be firm price. Prices for new lines will be adjusted once a year.

3. Inspection lines, as presently developed, will have a capacity of 1,000 units per year.

4. Given production constraints at Diversified as well as installation team limitations, a maximum of five

lines can be installed in any given quarter.

5. The original two lines are leased at $5,950 per quarter. The third line costs $6,300 per quarter. The next

two lines were leased at $7,486 per quarter. The last line was leased at $7,711 per quarter. Next increase of

about 3% will be in the 3rd Quarter of 2024.

With line leasing costs increasing, labor rates increasing, and the cost of materials increasing, we urgently

need to find means to reduce production costs. The impact of dollars invested in Lean Six Sigma is significant.

Engineering and Research efforts to identify product and process changes that will decrease the costs to

manufacture deserve support. Without improvement in these costs, we will be under margin pressure.

TO:General Manager

FROM:Michael Reasoner (Marketing Analysis Associates)

Project #3 Impact on Total Market Demand

I’ve completed some additional research into the impact that Project #3 is expected to have on Total Market

Demand. Project #3 increases the market demand by a one-time 50% increase. Keep in mind that any

marketing reports you might have received to date do NOT currently include Project #3 potential demand,

as customers do not yet know about Project #3. Once a company launches Project #3 in sales, then the

subsequent demand forecasts will include the impact of Project #3; however, remember that only companies

with Project #3 capability can sell in the expanded portion of the market.

A simplistic example of how it works:

Assume that current total potential demand in the world equals 3,000 units, and each team has 33% market

share with 1,000 unit potential demand.

When a company introduces Project #3, the Project #3 potential demand would be 1,500 units. Therefore,

total potential market demand equals 4,500 units. Individual shares depend on how many teams are entering

the market at once. Assume all other things are equal (price, quality, marketing spends, etc.) for the

following:

• If three companies enter at the same time, then each company’s potential demand would be 1/3

of Project #3’s potential market demand (1500/3 or 500 units) + original potential demand (1000

units) = 1500 units

• If two companies enter, then each company’s potential demand would be ½ of Project #3’s

potential market demand (1500/2 or 750 units) + original potential demand (1000 units) = 1750

units

• If one company enters, then the single company’s potential demand would be the entirety of

Project #3’s potential market (1500 units) + original potential demand (1000 units) = 2500 units

After Project #3 has been introduced, it will be included on the marketing reports. The initial 50% boost is

one time only!

Keep in mind that normal market growth demand will also occur. In the example above, if one company

enters into the market with Project #3 in Q3, the market demand would increase by 1,500 units in that

quarter due to Project #3, and normal market demand in the original market would probably increase as

well. If another company enters into the Project #3 market in Q4, they would share demand based on normal

market growth conditions in the original market and those created by Project #3. A company, who does

NOT enter into the Project #3 market would share demand based only on normal market growth conditions

in the original market.

TO:General Manager Hisco

FROM:M. Shinn, Director – Corporate FP&A

New Variance Analysis and Profit Lever Tools
We are introducing two new planning & analysis tools to help you better understand our business and make

operational decisions. The first tool is for variance analysis and second is for understanding the profit levers.

Both of these tools any business leader must have a working knowledge of. I suggest you review TRI Critical

Equations found in the Help Section.

Tool 1 – Variance Analysis

All business leaders need to be able to create and manage a budget given their strategic direction for the

long term. Careers have been made or lost because of the ability or inability to understand, communicate

and take effective action on how a business is doing relative to its plan or budget. The difference between a

budgeted amount and the actual amount over a specified period of time, in either absolute dollars or

percentages, is commonly known as a variance. The heart and soul of managing any enterprise and its FP&A

(Financial Planning & Analysis) Unit is in understanding the drivers of your business in the form of

variances. The primary variances are price, volume, cost and productivity variances from plan for income

and cash flow. This tool is often referred to as a floating bar or walk chart and is a graphical portrayal of

variances. Samples for Pre-tax Income and Cash Flow are given by

Your assiduous attention to the various applications of this tool should position your business to meet the

commitments expected from Mr. Sloane. Using this tool thoughtfully will improve your planning and

decision process. Remember, you have to come up with a plan. You cannot wish things will get better.

Tool 2 – Profit Levers

This tool shows, in the top section, the impact of a 1% improvement in each of the depicted levers (ceteris

paribus) on Operating Margin (OM). For example, a 1% increase in price would increase OM$ by

approximately 14%. This is the well-known power of price. The bottom section of the chart indicates the

percent improvement at the CM% level required in the depicted lever to offset a 1% price reduction. For

example, if price dropped by 1% you would need approximately a 2.5% increase in volume to offset the

negative impact of pricing power. This tool is included in your Quarterly Decisions and will be updated

quarterly. Please use this tool sagaciously to help you meet commitments, and recognize it holds everything

else constant including competitor reaction. The asterisked footnotes are essential to interpretation of this

tool.

This tool should prove useful to the sensitivity analyses you will find necessary in making your quarterly

decisions/assumptions. This should give you a sense of the vagaries of the business and may be helpful for

your forward planning and forecasting. Remember, if you have to forecast, do it often.

Please call if you have any questions.

TO: ALL INDUSTRY SURVEY CUSTOMERS

FROM: MICHAEL REASONER, PRESIDENT OF MAA ASSOCIATES

NEW COMPETITIVE INTELLIGENCE NOW

AVAILABLE!!!!!

It is more good news for our valued customers. At the request of many industry participants, MAA has been

diligently collecting, analyzing and synthesizing very strategically insightful information concerning the

producers in the handheld diagnostic imaging & analysis industry. Our intent is that industry participants

use this comparative competitive insight to carry their performances to new heights.

This syndicated report contains excellent comparative information in the form of graphical portrayals of

financial and operating data – the raw material for understanding competitive advantage. The report

contains analysis around Performance, Costs, and Manufacturing. For example, you will see how you

compare, by quarter, with your competition in regards to Sales and Net Income; COGS and Marketing spend

as a % of Sales; and Planned Time and Finished Goods Inventory. Keep in mind these are just a few of the

metrics we will supply!

The annual cost for this valuable supplement is only one payment of $50,000 (Other Costs) for four quarterly

reports. To order, please check the “Business Intelligence Report” in the quarter you’d like to start receiving

the report, and from that quarter on, you will automatically receive it. No need to do anything else!

Key business leaders who have seen the report can’t say enough about the value the Dashboard adds to their

ability to analyze and understand their industry. Stay ahead of your competition by getting the latest

intelligence information hot off the press!

Note that you can order this report at any time during the year. However, the one-time $50,000 cost stays

the same. To get all four reports, order now!!!!

  • Welcome to Hisco
  • Product & Industry Background
  • Discretionary Operating Plans 2024
  • Line of Credit
  • Market Growth
  • Marketing Plan 2024
  • Market Analysis and Quality Surveys
  • Engineering Quality & NPIs
  • Labor Costs and Performance
  • Manufacturing Report
  • Supplier Report
  • Production Report – Variable Costs
  • Production Report – Facility Base Costs
  • Inspection Line Policies and Pricing
  • Project #3 Impact on Total Market Demand
  • New Variance Analysis and Profit Lever Tools
  • NEW COMPETITIVE INTELLIGENCE NOW AVAILABLE!!!!!
Writerbay.net

Looking for top-notch essay writing services? We've got you covered! Connect with our writing experts today. Placing your order is easy, taking less than 5 minutes. Click below to get started.


Order a Similar Paper Order a Different Paper