MANAGING FINANCE Essay Example | Topics and Well Written Essays - 3750 words

MANAGING FINANCE - Essay Example Financial analyses of the company reveal that though liquidity position of the company is good to meet short term obligations, but its earning powers, and efficiency to collect receivables and inventory turnover is much below the industry standards. It is suggestible that the company should make capital in investment in machine costing $3 million in order to make cash savings in cost of sales on the basis of in depth analysis of investment made as per payback and NPV methods of capital expenditure budgeting. The aim of any pricing strategy is to cover the costs involved in the project and earn desirable profit. Costs in any project can be traced as direct or indirect costs. Direct costs are those that are easily traceable by the management to specific items like direct material and direct labour for specific product. Whereas Indirect costs are common to many items and cannot be traces to any specific item or area. Indirect costs are charged to item on basis of certain allocation techniques. Again from the point of production the costs are either prime costs or conversion costs. Prime costs are direct material and direct labour costs and these are directly related to production. Conversion costs are related to transforming direct material into finished goods and these include direct labour and factory overheads. Costs further changes with volume of production. On basis of relationship to volume costs are either fixed costs, variable costs or mixed costs. Fixed costs remain constant over a relevant range of volume or output. Variable costs are assumed to change in direct proportion to changes in volume/ output. Mixed costs contain both fixed and variable attributes, and may be semi variable costs and step costs. Semi- variable costs usually represent a minimum fee for making a particular product or service available, and variable portion is cost for using