We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Petal Providers Corporation Essay Sample

essay
The whole doc is available only for registered users OPEN DOC

A limited time offer!

Get a custom sample essay written according to your requirements urgent 3h delivery guaranteed

Order Now

Petal Providers Corporation Essay Sample

1.Sales Growth Rates, Sales, and Profits –  Petal Providers Corporation opens and operates “mega” floral stores in the U.S. The idea behind the super store concept is to model the U.S. floral industry after its European counterparts whose flower markets generally have larger selections at lower prices. Revenues were $1 million with net profit of $50,000 last year when the first “mega” Petal Providers floral outlet was opened. If the economy grows rapidly next year, Petal Providers expects its sales to growth by 50 percent.

However, if the economy exhibits average growth, Petal Providers expects a sales growth of 30 percent. For a slow economic growth scenario, sales are expected to grow next year at a 10 percent rate. Management estimates the probability of each scenario occurring to be: rapid growth (.30); average growth (.50), and slow growth (.20). Petal Providers net profit margins are also expected to vary with the level of economic activity next year. If slow grow occurs, the net profit margin is expected to be 5 percent. Net profit margins of 7 percent and 10 percent are expected for average and rapid growth scenarios, respectively.

A.Estimate the average sales growth rate for Petal Providers for next year.

Average sales growth rate = Rapid growth rate x Rapid probability + Average growth rate x Average probability
+ Slow growth rate x Slow probability
= (.50 x .30) + (.30 x .50) + (.10 x .20) = 32%

B.Estimate the dollar amount of sales expected next year under each scenario, as well as the expected value sales amount.

Sales with rapid growth = 1,000,000 x (1 + 50%) = 1,500,000
Sales with average growth = 1,000,000 x (1 + 30%) = 1,300,000 Sales with slow growth = 1,000,000 x (1 +10%) = 1,100,000
Expected value sales = 1,000,000 x (1 + 32%) = 1,320,000

C.Estimate the dollar amount of net profit expected next year under each scenario, as well as the expected value net profit amount.

Net profit with rapid growth = 1,500,000 x 10% = 150,000
Net profit with average growth = 1,300,000 x 7% = 91,000
Net profit with slow growth = 1,100,000 x 5% = 55,000
Expected value net margin = (.10 x .30) + (.07 x .50) + (.05 x .20) = 7.5% Expected value net profit = 1,320,000 x 7.5% = 99,000

2. Sustainable Sales Growth Rates – Petal Providers Corporation, described in Problem 1, is interested in estimating its sustainable sales growth rate. Last year revenues were $1 million, the net profit was $50,000, the investment in assets was $750,000, payables and accruals were $100,000, and equity at the end of the year was $450,000 (i.e., beginning of year equity of $400,000 plus retained profits of $50,000). The venture did not pay out any dividends and does not expect to pay dividends for the foreseeable future.

A.Estimate the sustainable sales growth rate for Petal Providers based on the information provided in this problem.

We can write a custom essay

According to Your Specific Requirements

Order an essay
Get Access To The Full Essay
icon
300+
Materials Daily
icon
100,000+ Subjects
2000+ Topics
icon
Free Plagiarism
Checker
icon
All Materials
are Cataloged Well

Sorry, but copying text is forbidden on this website. If you need this or any other sample, we can send it to you via email.

By clicking "SEND", you agree to our terms of service and privacy policy. We'll occasionally send you account related and promo emails.
Sorry, but only registered users have full access

How about getting this access
immediately?

Become a member

Your Answer Is Very Helpful For Us
Thank You A Lot!

logo

Emma Taylor

online

Hi there!
Would you like to get such a paper?
How about getting a customized one?

Can't find What you were Looking for?

Get access to our huge, continuously updated knowledge base

The next update will be in:
14 : 59 : 59
Become a Member