ABC Company Management - Research Paper Example

The decision is of great importance for the organization because the results of the decision continue for many years hence such decision affect the profitability of a firm. Large amounts of money are invested in capital projects, the resources that are invested in a project are often committed for a long period of time and it may be difficult to reverse the effects of a poor decision. In view of the above, the viability of this new product line should be made based on the time needed to commit to the project, the expenses associated with the project , source of funds to finance the project ,level of return of new product and the additional revenue expected from the project. I. Regulatory and compliance risk-this is the risk of regulatory sanctions that arises when Company fail to follow the code of conduct as outlined by the rule of law in the course of carrying out its activities.

It includes failing to abide by laws regarding conservation of environment, health standards of its workers and quality standard s set for their products. This risk has disastrous impact on company’s existence as it may cause the company to be winded up if it fails to comply. Consumer demand shifts This is the risk associated with continued change in consumer preferences and tastes. This is brought about by changes in needs and fashion .a Company therefore should always be in line with this shifts so as to produce products that suit consumers needs Uncertainty Most business firms fear the challenges that may face the organization in the future.

The uncertainty in credit market, coupled with new laws and the fluctuations in the global economy influences investment decisions. Thus most firms shy away from long term commitment of funds to long term projects in favor of short term projects with uncertainty being their major excuse. This problem of uncertainty can however be solved by making long term strategic planning. Globalization This is a major challenge to firms today. Firms need to understand foreign cultures so as to penetrate new markets with their products and services.

Also firms face stiff competition from competitors who unknown to them are in foreign markets as a result of increased globalization. The challenge therefore can be solved by in depth understanding of international markets and diverse foreign cultures through better research of information for better analysis. Technology The technological advancement is running at an increasing rate. Some competitors use this as a tool to outdo their competitors that is they wait for next generation of technology which may be a half a year away then use it to gain a competitive edge over other firms.

Hence firms need to come up with a reliable long term technology plan and also remain flexible to use to their advantage any unforeseen technology development. II. ABC COMPANY CASHFLOW STATEMENT FOR THE YEAR ENDED 31 JUNE 20XX $ $ Cash flow from operating activities: Cash receipts from customers 10000 Cash paid to suppliers and employees (3000) 7000 Cash generated from activities Interest paid 200 Income taxes paid 500 (700) Net cash flow from operating activities 6300 Cash flow from investing activities: Purchase of property, plant and equipment ( 300) Proceeds from disposal of land (200) Purchase of equity investment ( 700) Interest received 300 Dividend received 200 (700) Net cash flow from operating activities 5600 Cash flow from financing activities: Proceeds from issue of share capital 4000 Proceeds from sale of long-term loans 300 Redemption of preference shares ( 210) Repayment of long-term loans ( 200) Dividend paid (130) 3760 net cash flow from financing activities 9360 Net increase in cash and cash equivalents 340 Cash and cash equiv