Scribd
Upload
29 views1 page

Scenario 1 - Adding Rental Space, Growth 15%

Greenwood focused on educating customers about organic products through blogs and being a resource for queries. This aligned with her values of creating long-term value over maximizing short-term profits. When operating cash flows were exhausted, she financed through debt rather than giving up control through equity financing.

Uploaded by

Asim Malik
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
29 views1 page

Scenario 1 - Adding Rental Space, Growth 15%

Greenwood focused on educating customers about organic products through blogs and being a resource for queries. This aligned with her values of creating long-term value over maximizing short-term profits. When operating cash flows were exhausted, she financed through debt rather than giving up control through equity financing.

Uploaded by

Asim Malik
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 1

Q1)

Greenwood was of the view that product quality might suffer if she gave up control of her business.
That is why she was willing to finance her business through debt rather than equity. This shows how
her personal values and beliefs influenced her decisions to finance the business.

Greenwood wanted her customers to learn about organic products, and she raised awareness
through her blogs. She had already become the go-to person for people who had queries related to
organic products. Greenwood focused more on educating customers because, in the long run, it
created more value, and that is why she spent the operating cashflows wherever required. In case
she maxed out of operating cash flows, she went with debt financing.

Q5)

Scenario 1 – Adding rental space, growth 15%.

Advantages

1. Opting for rent means that B&B will not add to its financial leverage which means that there
will be no effect on financial distress.
2. The cash flow statement shows that the cash balance increases from 2014 to 2017. B&B can
use this cash for investment purposes.
3. Annualized payments of debt is $80,000, whereas the rental payment is $75,000. Renting
the building costs less.

Disadvantages

1. ROA will fall over the years.

Scenario 2 – Adding rental space, no growth.

Advantages

1. There is lesser financial exposure because annualized payment of debt is $80,000, which is
$5000 more than the rental payment.

Disadvantages

Profit after tax is negative in the last year we have modelled.

Owners will not be able to withdraw dividends because cash balance will be less than $50,000

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy