Answer:
Of course you should be concerned about negative cash outflows resulting from investing or financing activities.
Negative cash outflows for investing activities means that the company purchased more fixed assets or securities this year than the ones that were sold. E.g. the company purchased new equipment for $100,000. Investing activities usually require large amounts of cash.
If financing activities yield negative numbers, it means that either the company paid too much in dividends, or they paid long term debts (e.g. retired bonds or paid back bank loans), but at the same time did not raise enough capital to offset them.
When you are analyzing the finances of a company, cash is king. A company might be very profitable, but it will not survive it its cash flows are negative. If there are enough positive cash flows from operating activities to offset these other cash outflows, then the company should be OK. But if operating cash flows cannot offset them, then the company should be concerned.
Answer:
If the offer is accepted, the income will decrease in $7,500.
Explanation:
Giving the following information:
Harrison Ford Company has been approached by a new customer with an offer to purchase 10,000 units of its model IJ4 for $5 each.
Unitary variable cost:
Direct Materials= $1.75
Direct Labor= $2.50
Variable Overhead= $1.50
1) Because it is a special offer and there is unused capacity, we will not have into account the fixed costs.
Accepting the offer:
Relevant cost= Unitary variable cost
Relevant cost= 1.75 + 2.5 + 1.50= $5.75
Relevant benefits= $5
2) Effect on income= 10,000*5 - 10,000*5.75= -$7,500
If the offer is accepted, the income will decrease in $7,500.
<span>A buyer who needs a significant amount of trust with the seller is looking for an affiliative selling relationships.
When trust is an issue, a buyer and seller may join an affiliative selling relationship. By joining in on an affiliative selling relationship both parities are able to be judged if the wrong decision is made. Customers trust both parties and the parties typically are able to build trusting relationships because they wouldn't want to jeopardize their own. </span>
