Aidy Segura was just hired by Chicago Powerboat, Inc. (Powerboat) to help out with the companys financial
Question:
Aidy Segura was just hired by Chicago Powerboat, Inc. (Powerboat) to help out with the company’s financial planning and to evaluate the company’s performance. Aidy graduated from NEIU about five years ago with a major in finance and has worked for a large Fortune 100 company since graduation. Powerboat was founded five years ago by two former NEIU buddies, Ben Moneghittie and Diana Hoffman. They’ve manufactured and sold their powerboats over the past five years and their product had gotten high grades for quality and reliability. They sell into a niche market, directly to individuals rather than to maritime stores or distributors. They have two product offerings – the mid-market Alpha which sells for about $53,000 and the up-market Omega which sells for about $78,000. Powerboat differs from their larger competitors not only because they sell their product directly to individuals, but also because they build their craft to order. Using prefab parts, they are able to shorten the manufacturing cycle to only five weeks without any compromise in quality. In addition, the company gets a down payment on each order and another payment before the boat is completed. This business model compares favorably to their competition which might take as long as 18 to 24 months to manufacture a craft from the time that the order is placed. Ben and Diana provided the following statements. Industry ratios are available from public sources.
1. Calculate the ratios for Chicago Powerboat and compare each to the Industry ratios.
2. Comment on Powerboat’s position compared to the industry norms, explain the circumstances, and
explain why each variance might be considered a positive or a negative.
3. Calculate the internal growth rate and the sustainable growth rate for Chicago Powerboat.
Expert Answer:
