business-strategy-40

Topic: Business Strategy

Before starting the discussion, please review the Discussion Board Checklist.

Watch the case study of Mack and his friend Peter.

After you watch the case study, please answer the following questions:

  • How should the business financing be recorded on the books of the company?
  • How should the company record the assets of the company?
  • How would a business plan have helped this company to succeed?
  • What are the main factors that contributed to the failure of this company in your opinion?

View Mack and Peter’s transcript. attached the transcript

Just do responce each posted # 1 to 3 down below only.

Posted 1

The business financing should be recorded as a a debit to Cash (current asset) $25,000 and a credit to Loan Payable (long-term liability) $25,000.

Assets should be recorded as a debit to Truck (fixed asset) $15,000, debit Office Equipment (fixed asset) $5,000, a debit to Cash Reserve (current asset) $5,000 and a credit to Cash.

A business plan would have helped the company succeed because it would have given them more focus and direction for the long-term. It would have allowed them to better prepare for the rapid increase in growth and adjust business operations accordingly.

The main factors that contributed to the failure of this company is the owners not having a proper business plan. Although the business model is “simple”, a good business plan is not as simple. For example, a good business plan includes analysis of the market. This would have given them insight on the growth to be expected, especially given their pricing of 20% lower than the competition. Another factor was that when sales got to a level where they were overwhelmed they simply closed shop. A different decision could have been made at this point had they had a good business plan, and even without one they could have reinvested the profits into hiring additional service technicians.

Posted 2

Hello Class and Professor,

The financing of the business should have been recorded as debit business loan and credit cash each month for payment. The company should have recorded the assets as debit Business equipment credit Cash. If they had advised a plan of how much income would be needed to pay back the loan and still have funding to stay active. The plan should have also advised at what rate they could handle daily, weekly, and monthly. If the demand was past that then looking into hiring someone to assist in taking calls or scheduling could have been considered. I believe the main factor in this companies failure was the low price on the services as well as the limited plan in what would happen if the demand exceeded what could be handled.

Posted 3

Good evening class,

The company will need to purchase accounting software for a small business. As Machelle said, Quickbooks is a good option. To record the loan, cash would be debited for the principal of the loan, $25,000, and notes payable would be credited.

When the company purchases its assets cash will be credited, and the assets (truck and office equipment) will be debited for their respective amounts: $15,000 and $5,000, which leaves $5,000 of cash remaining for the reserve.

The benefit of a business plan would have better anticipated the amount of demand. Consequently, the partners would have recognized that additional resources, including employees, were required for their business to operate successfully.

A lack of foresight is what contributed to the business’s failure. The partners failed to realize that lowering their price would inversely increase the demand for their services. Thus, they underestimated the number of personnel and amount of cash required for their business.

 

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