Thomson Greenhouse - Case Study Example

Thomson Greenhouse Case Study One positive implication to the Thomsons obtaining additional department stores for their products is that operatingexpenses would reduce. This would be because a new greenhouse would not require huge investment in resources. The market will grow for some time yet so there is very little chance of any negative outcomes.2) With the construction of a new greenhouse, the Thomsons will need to put new structures in place to facilitate the needs of the new greenhouse. In order to determine what structures need to be put in place or decisions that need to be made, the Thomsons should use a rate of return analysis, payback analysis, and break even analysis.

Rate of Return analysis Cost of Greenhouse = $12,000; Lifetime of Greenhouse = 10 yearsProjected Profit = $10,000 expected profit per year -$6,400 interest ($8000 / 8%) -$240 depreciation = $3,360/ $6,000 = 56% Payback analysisCost of Greenhouse ($12,000) Income ($3,360) + Depreciation ($240)= 3 years and 4 months Break Even Analysis Cost ($12,000) Profit Margin (22.6%) = Sales Revenue of $53,097 The Break Even analysis shows that Thomson Greenhouse would need to significantly increase its sales revenue to be able to afford a new greenhouse.3) Thomson Greenhouse has a current ratio of 3.

71, which is quite good. This means that the business can easily turn assets into cash. The Accounts Payable record shows only $1,500 as money that is owed. Because Thomson Greenhouse does not have much debt, it is more attractive to potential investors and can borrow money from the bank more easily.4) a) If the business is passed onto one of the sons, then the parents would have to allow him the space to work. Also, any sons that are left out may feel aggrieved at being passed over. b) If, however, the business was sold to someone not in the family, then the business would have to be attractive enough for any investor to want to spend their money.