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Business Administration Multi-Part Assignment
Answer the following three questions. Two paragraphs for each question (150 – 200 words).
Following that, for every question there will be two responses. Please answer to each
response in 3 – 5 sentences. (agree with their response and point something that you find
interesting.)
Finance:
1- Discuss the factors that affect the AFN?
Response:
1. Additional funds needed (AFN) equation estimates the amount of financing a company
will need to implement growth. The factors that affect the additional funds needed
equation are sales growth rate, capital intensity ratio, spontaneous liabilities-to-sales
ratio, profit margin, and payout ratio. When companies grow quickly, they need more
money for things like inventory and machines, leading to a search for outside funding
which is why the sales growth rate is a factor. If a company uses its assets efficiently, like
keeping less inventory, it might not need as much extra money. Also, if it can delay
paying its bills without causing problems, it helps reduce the need for outside funds.
Making more profit means a company has its own money to grow, reducing the need for
external funds. However, giving less money to shareholders as dividends can free up
more money for growth, but companies have to be careful with this to avoid upsetting
shareholders. In short, how a company manages its assets, profits, and dividends affects
how much extra money it will need.
2. The Additional Funds Needed (AFN) is an equation that forecasts the addtional
financiing needed by an operation plan, and the basic idea of this equation is that it is
going to estimate new assets required, subtracts new spontatneous liabilities, and
subtracts reinvested profits. The factors that affect the AFN one being sales growth, the
higher the growth is the larger the AFN will be. As well as the capital intensity ratio, the
higher this ratio is, the larger the AFN will be. The spontanteous-liabilties-to-sales ratio
also affects the AFN because the higher this ratio is the smaller the AFN will be. Profit
margin also affects the AFN by the higher this margin is, the smaller the AFN will be.
Lastly, the payout ratio also affects the AFN by the lower this ratio is, the smaller the
AFN will be as well.
2- Discuss the agency conflict between shareholders and debtholders and shareholders
and managers?
Response:
1. Shareholders and debtholders:
Shareholders own the company and benefit from its growth and success, whereas
debtholders lend money to the company and are interested in its ability to repay debt.
This difference creates a conflict of interest. Shareholders, who control the company’s
decisions through their voting rights, might favor high-risk, high-reward projects
because they stand to gain the most if these projects succeed. The potential upside for
shareholders is significant profits and increased stock prices. However, this increased
risk is unfavorable to debtholders, as it also raises the possibility of default, putting their
interest at risk.
shareholders and managers:
The conflict between shareholders and managers, often referred to as the principalagent problem, arises because managers are hired to make decisions and run the
company on behalf of the shareholders. Shareholders seek to maximize their
investment’s value, while managers might have personal goals that do not align with
shareholder wealth maximization. Managers might resist taking necessary risks for
growth due to the fear of losing their jobs in case of failure, whereas shareholders might
prefer a more aggressive strategy for higher returns.
2. Shareholders and debtholders
Shareholders want the company to maximize their profits whille debtholders just want
to get paid back the money they are owed, this could then create an agency problem.
This being that if the company has to pay back the debtholders a lot of money, then that
money is not going back into the company which ends up hurting the shareholders
because the company took on too much risk in debts, this creates an agency cost
problem.
Shareholders and managers
Shareholders want the managers to do whats best for the company, and ultimately
maximize intrinsic stock prices that then benefits the shareholder, but managers dont
always do that. Sometimes there is a conflict of interest, that being the managers can
act in their own self-interests and those interests dont always align with those of the
shareholders, and then this turns into the value not being maximized like the
shareholders want. Managers could take on too much risk, not make those difficult
decisions or might use corporate resources in their own benefit, and all this could put a
conflict between the shareholders and managers because the managers are not acting
in the companies best interest that benefits them.
Operations:
1- If al observations are within control limits, does that guarantee that the process is
random? Explain.
Response:
1. In the book on page 419 it states that “every process generates output that exhibits
random variability. That is natural and cannot be corrected”. Then on page 426 it states
that “if nonrandom variations are present, the process is considered to be unstable”.
Then it states that corrective action will need to be taken to improve the process by
eliminating the causes of nonrandomness to achieve a stable process”. In short, the
answer is no, there must be some randomness in the process. Nothing is perfect. All the
observations can be within control limits but there can be some non-random patterns
developing in the data which will indicate an out-of-control process. These non-random
patterns developing in the data will suggest that process is not random & therefore, will
not be in control for long. When we check for points within control limits, we get to
know about only the extreme values that fall outside the limits, but it fails to reveal the
non-random patterns. The example that the book gives “older machines will higher
degree of natural variability, than newer ones, because of the worn-out parts”. Also
whenever fixing up older machines with newer parts can affect the machine works as
well. We all know what happens to stuff when we band-aid it to much, it breaks beyond
repair. Newer machines will also have their own kinks in the chains, because some
machines can not be tested in whole until it is installed in whatever building it is going
in, and different parts can come from different companies as well.
2. All observation can be within the upper and lower control limits and still suggest a
nonrandom process. Run tests are utilized to identify various types of patterns that
occur in data points that fall with control limits. For example, observation may be within
control limits but exhibit a steady upward or downward trend. It is possible that it
simply be a Type I error, however it should be investigated. If the investigation result in
finding an assignable cause of the variation then it should be corrected.
Answer the 3 following questions. Two-three paragraphs for each one (200 – 250 words).
(there is no response to reply for this ones)
1. How do you ensure consistency between the various observers in the quality control
process?
2. Give two examples of unethical behavior for each of these areas: inspection, process
control, process capability. For each, name the relevant ethical principle
3. In repetitive operations, it is often possible to automatically check for quality and then
reject parts that are unacceptable. In these situations, does that mean control charts
aren’t needed? Explain.
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