Pro-Forma Statements Essay

B1. Analyze Simulation ResultsA cypher is a financial plan which is expressed in real numbers, typically in m integritytary units, which machinate the expectations for the expenses the order result incur to cranial orbit its goals, and commission objectives. A good budget rehearses reckons to de full termine what amounts should be used to image desired competency and profitability. Budgets can be used to determine whether a non a process is working effectively, whether or non changes in operations compulsion to be made in order to reach goals, and can help solve problems to begin with they occur and help nominate changes when necessary. Budgets atomic number 18 meaning(a) because they al secondary a quantitative measurement to devote goals, coordinate efforts and departments, and help to realize changes are compulsory before problems occur. Budgets should be broken down into fragments ( in brief term, mid-term, and long term) which will allow for more than than circumstantial measurement of the success of a project, allow for changes to be made before moving onto new projects, and to expand on goals when appropriate.By inflexibleting short term budget goals and reaching them it helps to ensure that the beau monde is on maltreat to reach its long term objectives. Budgets need to be revised whenever they no longer useful for readiness and control purposes. Any cadence there are major(ip) changes in the processes or operations the budgets will also need to be revised. Budget figures should be measured frequently to ensure they are noneffervescent reason open and that the ships union is whitewash on track to reach its goals. A Pro-Forma parameter is defined as a financial statements prepared on the basis of nearly assumed events and transactions that set about non in so far occurred. (Ralph Estes).Unlike Historical Financial Statements which use real scientific breeding and are establish on facts, Pro-Forma Financial Statements use assumptions to help forecast the succeeding(a) and allow for the use of creativity and flexibility. Pro-Forma Financial Statements are akin to Historical Financial Statements in look and content, two use the akin major financial statements including the income statement and the balance sheet, barely the Pro-Forma Financial Statement allows for changes to be made in the volatile environment.Pro-Forma Statements are important because they set up the needed information to track progress towards goals. They are based on historic figures so they do provide realistic projections while til now allowing for adjustments as needed. Typically a long collection of historic selective information is used to produce a Pro-Forma Income statement since the company I created was a start up our information was limited there was even more of a reliance on projections to complete my statements. In the introductory billet I had start up factory expenses of $430,000 and spent $120,000 on com mercialize question. I had gained $3,000 in interest from a small deposit into a short term CD. I had invested $1,100,000 for fixed plant cognitive content. Of the $2,000,000 of initial big(p) $547,000 was used for start-up expenses leaving the company with $1,453,000 in current assets.Important conclusivenesss had to be made during Quarter 1 in order to knead my projections and set my budgets and expectations. First I had to choose what harvest-times to cook up. I cherished to look for devil segments which had some identical wants and necessitate. By proveing two intersections for two segments with similar wants and require the hope was that I would be pay off afterwards in saving manufacturing bells by utilizing customization of split, decrease training approachs, cold shoulder down on salary expense by having a gross revenue force that could be knowledgeable with some(prenominal) harvestings, and would allow the company to provide break down service after the sale. The decisions were all based upon the market research which had been by means of providing the wants and needs of the segments as nearly as the price voluntary to pay, the 12 month consider, and the request per city. By performing some guileless calculations (i.e. price willing to pay X Demand / terms to produce) I was able to devil an informed decisions on the two proceedss I wanted to develop, where I wanted to set up shop, the size of my gross revenue force, as well as the amount of caudex to produce.I heady to manufacture two products which I felt met the needs of two specific groups. The first group was decided upon due to the quantity of the consider. I felt approximately this product I could better reach my goal of utilizing an employee authorization schema, be able to utilize work prison cells due to less technical processes and needs, be able to take advantage of customization of parts, and also be able to spell better service after the sales du e to gaind employee knowledge of the product and the service needed. I decided to focus my efforts on the sniphorse and the traveler markets. Both markets had similar needs and the products would only need to differ in portability. The market was large and although the desired price would be lower, the high posit would help generate profit. The hope was to build the distinction of being the low price leader while still providing a reliable product and providing excellent service after the sale.By setting proper starting time budgets and being able to adjust accordingly by utilizing the pro-forma statements I was able to catch up with sound financial decisions throughout the simulation. I never had to use emergency loans so I was able to avoid that penalty and cost. By using the statements was even able to make small investments and earn some interest off of those property. Being a startup company I was precise conservative with my investments so I could ensure I would not i ncur those costs. At the end of the 4th whiff out my ending interchange balance was all over 4 million dollars. This allows for great expansion and high sales as well as the ability to invest more currency and take advantage of additional interest income. Without the use of the statements and the budget it would not fork up been possible to monitor the spending and make informed decisions.The Pro-Forma statements and budgets were used to make decisions throughout the entire simulation. Each Quarter I began by examining the capital flow statement. This allowed me to make proper decisions based on the Firms solvency as well as my companys potential for ripening. At the beginning of Quarter 1 I had $0 in my beginning property balance. Thus it was necessary to sell habitual stock. $2 million dollars were brocaded through the sale of common stock. It was very important to use my income statements, original budgets, and monitoring my balance sheet. $1.1 million of the funds wou ld be used to invest in my fixed plant capacity in order to reach the needed production levels. With the funds on hand I was only able to open 2 sales offices. I chose the locations based on the projected sales subscribe to, the allotted funds in the budget, and the money leftfield in the cash flow. The two offices cost $430,000 to start up and would also cost a do of $220,000 per quarter for lease.After setting up the Plant capacity and the sales Offices I had $470,000 dollars left. I still needed funds for Research and Development to ensure that I was fashioning proper decisions and to help guide my decisions in future quarters. I decided to spend $120,000 on research and training. This left me $350,000 in overmuch cash. I decided to invest a portion of it tho was careful using my Pro-Forma statements to ensure that I would not run into the cost of emergency cash loans. $200,000 was take aimd into a conservative short term C.D. which earned me $3,000 in interest income. T he $3,000 and the excess $150,000 would be carried over into the nigh quarter.The same techniques were used every decision every quarter. Any time I made a decision it was based on my cash flow, income statements and demand projections. Lessons were learned from these decisions, more funding into research and development needed to be used early in the simulation. The issuance of the execrable planning led to the expense of products needing to be re programmeed. The carry over equipment had to be interchange for salvage value and additional funding needed to be raised to develop the new products. With the proper products in place for the market demand the profits would have been much larger for my company.B2a. Just-in-timeJust in m operations is basically a system which helps force problem scan and drives down start-up costs and schedule costs by initiating a pull system driven by consumer demand and reducing gunstock to admit the nodes needs only when the client has that need. If the product is not available at the time of demand a problem is lay down and improvements need to be made. This is very important to any company that especially for a start-up company who really need to watch their cash flow to avoid any emergency loans and the cost and fees associated with them. In my projections I had to take into account the demand of the segments in the cities decided to serve and make educated estimates on how much to produce based on those calculations. at that place were still questions which needed to be answered which led to less self-assertive manufacturing would my denote efforts convey the right message to my target audience? Would my choices on where to agitate be successful on reaching my target audience? Would my product designs and crossing fit the needs of my customers or would new products need to be developed? The answers to these questions could lead to major adjustments to our entire process and if not done well could lead to an e xcess of loose inventory which would only be able to recover a small part of the cost it took to develop them.Estimates were made based on the projected sales demands of the markets. Fixed capacity, sales force decisions, and of course inventory decisions were made based on these projections. The liking of course was to have the perfect amount of inventory available to my customers at the exact time they needed them, with very little cost from carrying over unused inventory. Proper use of a Just-in-time dodge could have relieve me money and helped expand my companys growth. During the manufacturing process a Just-in-time system wouldve have uncovered the need to increase production to meet my customers demand as the products were being pulled through the multitude process.The improper use of the JIT strategy resulted in a loss of 278 fortuity II customers and 143 customers of Quest II. The result of these lost customers was $578,453 in profit. By properly utilizing the strateg y profits could have been even higher and future growth could have increased. Going forrader it will be important to utilize the performance of the past form and make better decisions to provide for a better customer experience. luckily after the losses occurred decisions were made to make sure it did not tone up again throughout the simulation. A good Just-In-Time strategy would have allowed the mistakes to be caught prior to having to absorb the losses and the poor customer experiences.B2b. Lean trading operationsLean operations work hand in hand with making J.I.T. effective. By definition lean operations are used to understand customers needs and then to stock and prepare appropriately based on said needs. In my project this was done by successful forecasting based on potential demand of the customers in the given areas and based on the chosen products. By basing our inventory on a lean operations focus the company will be able to decrease the costs of waste in its operatio ns, both in unused inventory and the cost of storing excess inventory.B3. Applicability of Work Cells versus Traditional Straight demarcation Method An effective layout design strategy is important because the decision alone can help decide the efficiency of production as well as help to determine a firms competitive advantage. How will the firm be spirit to set itself apart? Will it be through differentiation, low cost, or response? Will the companys priorities focus on capacity, processes, flexibility, and/or cost, etc.? In its very basic form an effective layout design will improve efficiency by better utilizing space, mint, and machinery, amend communication, improving inspection, and by allowing for flexibility. Work Cells are specially arranged groups of workers and workstations designed to make the production of a single product or group of think products more efficient by allowing workers to have more reach in the work area, allow for immediate inspection of complete pr oduct, fewer workers are needed, less work space, and promotes better communication between workers.Workers very much include the responsibility of building the product from start to finish in a more positive light because of the empowerment it provides and the specialized training and grow knowledge. Work Cells are often in the shape of a U allowing for better balance and division of work. The U-shape also will take up more space on the floor than the Traditional Straight Line process method acting. A Traditional Straight Line process method is the old assembly line assembly process. Each worker is trusty for a piece of a product. That piece is then put unitedly with other pieces and the final product is put together in a series of pieces. The assembly line relies on workstations to be balanced in the share of the work to be effective however the layout alone often leads to an unbalanced division of the workload. The pieces cannot be inspected until the finished product has be en fully assembled by the varying teams, and communication and diverse learning is very limited.The assembly line approach also leads to the possibility of a bottleneck effect where total production can be slowed by slow production from one of the work units. The advantages of the assembly lines are of course a less high-ticket(prenominal) and quicker training process, more standardization of parts, and lower handling costs. The decision on which method to use was a arduous one. One of the reasons I chose the two products that I did was because of their similarities and the ability to use customizable parts. However another get word to the success was the ability to capitalize on efficient inventory vigilance and processing. Another key was employee empowerment through knowledge which would lead to better service and the ability to recognize and fix problems as they occur during the assembly process. With this being said I would implement a work cell assembly approach.B4. Decisi ons Involving Inventory ManagementUnderstanding the relationship between inventory levels and customer needs is a critical part of any companys success. Too much inventory can lead to unneeded costs for the company in the form of storage costs of unused inventory and the expense of selling off unused inventory at discount prices. Not having enough inventory can lead to poor customer experiences by not being able to meet the customers needs when needed. This leads to fewer repeat sales and poor relationships. In order for a company to have a low cost strategy they must master inventory levels.As discussed earlier I did not do a good job of inventory vigilance and it cost me in the form of profits and customer satisfaction. The idea is to be perfect and I was far from it. I underestimated the increase in demand after improvements were made in product design and marketing. The result was having higher demand than inventory available. The miscalculations of potential demand cost my co mpany through the simulation and it is very important to execute better inventory focussing decisions in the future to avoid such issues and losses in the future. My growth decisions were made properly in the form of additional markets, additional sales and service staff, and more fixed capacity capabilities. However, I did not make good inventory management decisions to match the growth demands.The idea of inventory management is of course to find the perfect balance of meeting my customers needs while limiting my costs in holding costs and excess capacity costs. It was again necessary to utilize my pro-forma statements to monitor these expenses. The inventory needs were based on demand projections, marketing efforts, and the number of sales masses hired. Since my company was a start-up company with little or no brand recognition it was important to find a conservative figure which would still fit the customers wants and needs. In the initial Quarter I chose to project demand at 100 units per sales person. I had arrogance in my product in the first quarter and decided to leave 43 units of feign and 32 units of Quest as carryover.The hope was not to run into issues of Sales lost and a loss of customers due to poor experiences. The problem I ran into was due to poor research and development the target market did not find either of my products desirable to fit their needs as they were. My confidence quickly turned into an error in Inventory Management. The remaining units had to be sold at a Salvage price ($846.40 for Venture and $870.40 for Quest). The set price on Venture was $2500 and Quest was $3200, the cost to produce Venture was $1667 and Quest was $1698. This was an enormous loss in potential profits for my company and better use of inventory management and of course research and development could have prevented it.The new products were produced that met the customers wants and needs and I decided based on the research which was provided and the his tory of sales I would be more aggressive with my inventory levels. The sales force was increased to 16 people in Quarter 3 with a demand per sales person of 148, and based on the success in Quarter 4 the sales people were increased to 25 people with an estimate of 225 units per sales person. Due to the increase in demand caused by the additional production more inventory would left at the end of the quarter.The recommendation was that inventory levels should be left at a range of 25 to 50 units of each product, moreover based on the confidence of sales I increased those ranges and decided to have 86 Venture II units and 64 Quest II units in inventory left at the end of each quarter. I had no missed sales because of a lack of inventory and as luck would have it did not have to sell any unwanted inventory at salvage prices. Costs did increase in Quarter 4 both in holding costs and excess capacity costs but the cash increases were more than enough to justify the additional inventory. B5. Use of specialised Continuous Programs to Achieve Quality Assurance Goals.Having a culture which promotes timber from top to bottom affects the company in many positive ship canal if it starts at the top it becomes a culture which then empowers employees and leads to better customer satisfaction. There are several different programs which help to measure feature 1.) Continuous Improvement, 2.) Six Sigma, 3.) Employee Empowerment, 4.) Benchmarking, 5.) Just in Time (J.I.T.), 6. Taguchi Concepts and 7.) Knowledge of measure Quality Management (T.Q.M.) Tools. Every aspect of operations can be improved and of course the overall goal is perfection. The cost of defective parts and or systems can be dramatic for a company and difficult to recover. Therefore it is very important to have the proper programs in place to measure quality.I believe two Quality Inspection programs would have been beneficial for my company. It was very important to my company as well as my target customers for us to provide a quality reliable product and have the service in place after the sale for my customers. I believe by implementing an Employee Empowerment program I can help develop quality on both the production side as well as on the service side.Employee Empowerment involves expanding the employees roles and responsibilities so that empowerment and belief is spread throughout the company from the highest to the lowest level. By including such responsibilities to the lowest level there is a greater chance that defections or needed improvements will be both addressed as well as shared by the employees who are using the machinery and involved in the everyday operations of the company. With high morale and open communication lines the company should be able to reach the desired quality.The desired quality which the company will be seeking will be determined by using a quality program called Benchmarking. That desired quality will be what our products and services will look like a t their very best. All other performances will be judged by comparing to this benchmark. A team will need to be assembled, benchmarking partnerships will need to be formed, data will need to be collected and compared, and improvements will need to be to try and reach our benchmarks. Our benchmarking efforts will analyze such important factors as percentage of defects, customer satisfaction rate, cost per unit, return on investment, customer retention, and response time.References1. Ralph Estes Dictionary of Accounting (MIT, Cambridge, 1981, p. 105)