Ongko Furniture Store Recommendations
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Ongko Furniture Store Recommendations
Dawn Reynolds-Smith
International Corporate Finance/FINGM571
June 7, 2010
Ongko Furniture Store Recommendations
As a financial organizational tool, a budget represents a working document that helps in the day-to-day operations of any organization. Ongko Furniture Store’s financial reports give an overview of its current financial performance. The company also uses a flex budget that allows the company to project revenues and costs at various levels of output. This paper will therefore give an analysis of the alternatives available to the company to help the owner make an appropriate business decision. The paper will also suggest a recommendation using a pro forma cash flow budget to help justify the decision. Likewise, the paper will establish the company’s opportunities and risks associated with global growth.
Analysis of Alternatives
Ongko Furniture has three alternatives available to the company. The best alternative selected must consider the incremental benefits and risk-trade off determinants. Ongko’s first option, although expensive, involves investing in a high-tech solution that would increase production and reduce labor costs. The second option involves a forward vertical integration in the form of distribution and this would put the company in a new global market. The third option involves exploring the market that demands a flame retardant finish on furniture. However, this means keeping the current operations and suffering losses from the competition and changes already affecting the company (University of Phoenix, 2010).
Recommendation and Justification
Today, small...
Dawn Reynolds-Smith
International Corporate Finance/FINGM571
June 7, 2010
Ongko Furniture Store Recommendations
As a financial organizational tool, a budget represents a working document that helps in the day-to-day operations of any organization. Ongko Furniture Store’s financial reports give an overview of its current financial performance. The company also uses a flex budget that allows the company to project revenues and costs at various levels of output. This paper will therefore give an analysis of the alternatives available to the company to help the owner make an appropriate business decision. The paper will also suggest a recommendation using a pro forma cash flow budget to help justify the decision. Likewise, the paper will establish the company’s opportunities and risks associated with global growth.
Analysis of Alternatives
Ongko Furniture has three alternatives available to the company. The best alternative selected must consider the incremental benefits and risk-trade off determinants. Ongko’s first option, although expensive, involves investing in a high-tech solution that would increase production and reduce labor costs. The second option involves a forward vertical integration in the form of distribution and this would put the company in a new global market. The third option involves exploring the market that demands a flame retardant finish on furniture. However, this means keeping the current operations and suffering losses from the competition and changes already affecting the company (University of Phoenix, 2010).
Recommendation and Justification
Today, small...