Harvard case study Toy World

Toy World – Page 230

 Solution to To Toy Worl World, d, Inc. Case 32A Toy Toy World, World, Inc. Cash Budgeting Copyright � 1996 by the Dryden Press. All rights rights reserved. CASE INFO!ATION INFO!ATION

PURPO! "his #ase analy$es a straight%or&ard straight%or&ard #ash b'dgeting b'dgeting proble(. )t is designed to ill'strate the (e#hani#s o% a #ash b'dget and the &ay #ash b'dgets are 'sed. Dis#'ssion *'estions %o#'s on the rationale behind the 'se o% #ash b'dgets as &ell as on their inherent  proble(s. "he #ase also raises the iss'es o% the target #ash balan#e+ the opti(al si$e o%  the #redit line+ the invest(ent o% e,#ess #ash+ and prod'#tion s#hed'ling %or a seasonal  b'siness. ")-! R!U)R!D /itho't 'sing the (odel+ 3 ho'rs o% st'dent preparation sho'ld be ade*'ate %or (ost st'dents+ &ith possibly another ho'r or so to &rite 'p the #ase i% it ('st be handed in. Use o% the spreadsheet (odel #an greatly red'#e preparation ti(e+ espe#ially i% the #o(pleted (odel or the easy (a#ro version is given to st'dents. CO-P!)"4 A relatively si(ple+ b't &ith a %air a(o'nt o% n'(ber #r'n#hing %or st'dents not 'sing the spreadsheet spreadsheet (odel. 5o&ever+ 5o&ever+ a n'(ber o% related iss'es iss'es #an be dis#'ssed+ dis#'ssed+ so st'dents #an p't in a signi%i#an signi%i#antt a(o'nt o% ti(e on the #ase. #ase. till+ till+ they #an get the gist o% it &itho't too ('#h tro'ble. /A4 /! 5A! U!D "5! CA! /e have have 'sed this #ase in t&o very di%%erent &ays. 7irst+ &ith both introd'#tory introd'#tory and not very&ellprepared se#ond #o'rse st'dents+ &e as8 the( to read the #ase and to be#o(e generally %a(iliar &ith it+ and then &e go thro'gh the #ase in #lass in lie' o% a le#t're to ens're that st'dents st'dents see the iss'es iss'es involved. /hen &e 'se the #ase in this this (anner+ &e al&ays assign the the dire#ted version. version. "he *'estions *'estions in the dire#ted dire#ted version lead st'dents st'dents thro'gh the topi#s topi#s &e &ant to address+ and they provide str'#t're str'#t're to the #lass. "he #ase itsel% sets the #onte,t in &hi#h all #al#'lations and de#isions are (ade+ and this o%ten &or8s better than a p're le#t're be#a'se the #ase (a8es the (aterial see( (ore relevant. relevant. /e parti#'larly parti#'larly li8e this 'sage &ith evening st'dents st'dents and:or e,e#'tives e,e#'tives and (anagers. /ith /ith (ore advan#ed advan#ed st'dents+ st'dents+ &e assign assign the #ase to to 2 person person tea(s. One tea( is as8ed to present their %indings %indings and #on#l'sions #on#l'sions to the #lass+ and the other tea(s are as8ed to prepare &ritten reports ;< page (a,i('( %or te,t+ pl's e,hibits=. /e as8 the st'dents to play the role o% internal or e,ternal #ons'ltants+ reporting to (anage(ent. /hen the #ase is assigned in this (anner+ &e highly re#o((end the nondire#ted version. /ith /ith the dire#ted version+ version+ the presentation presentation and reports are too (e#hani#al (e#hani#al st'dents >'st ans&er the spe#i%i# *'estions. /ith the nondire#ted version+ st'dents have (ore s#ope to #onsider di%%erent things+ and to 'se di%%erent n'(bers in arriving at their  ans&ers. "his (a8es things things (ore interesting+ interesting+ and dis#'ssions a(ong a(ong the st'dents are (ore li8ely to arise.

Toy World – Page 231

)n either type 'sage+ &e tell st'dents to read the relevant #hapter in their te,tboo8 in #on>'n#tion &ith &or8 on the #ase. ;O'r st'dents are as8ed to have a standard %inan#e te,tboo8 %or re%eren#e in the #o'rse. o(e te,ts &or8 better than others %or re%eren#e  p'rposes+ b't all te,ts #over the (aterial in this and other #ases.= /e also tell st'dents that in this #ase+ as in the real &orld+ they (ay not be provided all the data and other  in%or(ation they &o'ld li8e. "hen &e tell the( that i% an iss'e is addressed in the te,t #hapter that see(s relevant to the #ase+ b't no data is provided in the #ase+ that &e &ill give the( bro&nie points %or dis#'ssing ho& they+ as #ons'ltants+ &o'ld go abo't getting the (issing data and then 'sing it+ and &e en#o'rage the( to (a8e 'p realisti# data and then analy$e it &ithin the #onte,t o% the #ase. "his so(eti(es %or#es st'dents to thin8 abo't di%%i#'lt b't relevant iss'es+ and it really opens things 'p in ter(s o% giving the( s#ope %or digging into the s'b>e#t. /e have had st'dents loo8 'p %'t'res (ar8et data+ yield #'rve data+ and so %orth. O% #o'rse+ &e have had other st'dents &ho >'st do the (ini('( a(o'nt o% &or8 #alled %or dire#tly in the #ase. ?'t the nondire#ted #ase does give st'dents s#ope to go on &ith e,tra &or8 i% they &ant to.  @O@D)R!C"!D CA! ")P "his #ase #o(es in both dire#ted and nondire#ted versions. )% yo' are 'sing the non dire#ted versionthe version &itho't endo%#ase *'estionyo'r st'dents &ill re#eive general g'idan#e in the #ase+ b't they &ill not have a spe#i%i# list o% *'estions to ans&er. "h's+ the %irst step that st'dents ('st ta8e in solving the nondire#ted version o% this #ase is to develop a sol'tion strategy. "hen+ they ('st e,e#'te their strategy to arrive at a #ase sol'tion. /hen &e 'se the nondire#ted version o% this #ase+ &e tend to give st'dents a great deal o% latit'de. O% #o'rse+ &e e,pe#t all st'dents to do a #redible >ob o% #reating the base #ase. ?eyond that+ ho&ever+ &e tend to (ost re&ard those st'dents that dig deepest into the #ase and thereby dis#over that there is a lot (ore s'b>e#tivity to #apital b'dgeting #ash %lo& analysis than %irst appears. As in the real &orld+ &e re&ard innovation and #reativity (ore that (ere (i(i#ry+ ass'(ing o% #o'rse that so'nd %inan#ial prin#iples are not violated. in#e the dire#ted and nondire#ted versions o% this #ase are very si(ilar+ the sol'tion to the dire#ted version that &e present here provides an e,#ellent prototype sol'tion to the nondire#ted version. )n %a#t+ &e %ollo& the dire#ted #ase sol'tion &hile st'dents are (a8ing #lass presentations o% their sol'tions to the nondire#ted #ase. /e then raise those iss'es that st'dents (iss in their analysis either d'ring or a%ter the presentation. )n that &ay+ &e ens're that the (ain points o% the #ase are #overed. )@"RUC"OR PR!PARA")O@ Regardless o% &hi#h version yo' 'se+ &e re#o((end that yo' read thro'gh the #ase and then read thro'gh the *'estions and ans&ers provided in this sol'tion. "he *'estions are %ro( the dire#ted #ase+ and they to'#h on (ost o% the points that o##'rred to 's and that st'dents are li8ely to bring 'p &hen they go thro'gh the #ase. Obvio'sly+ other points #o'ld be (ade+ b't the *'estions and ans&ers &ill give yo' a good idea o% ho& &e deal &ith the #ase.

Toy World – Page 232

!O"E# INFO!ATION

D!CR)P")O@ "he spreadsheet (odel %or this #ase+ %ilena(e CA!32A)+ #reates both a (onthly and a daily b'dget on the basis o% a set o% inp't variables. @ote that all per#entages ('st be entered in their de#i(al %or(. "he -OD!!@!RA"!D DA"A se#tion is #al#'lated in a relatively straight%or&ard (anner no #o(ple, e*'ations or (anip'lations are 'sed. "he only potential #on%'sion &o'ld probably o##'r in the e,pe#ted sales vers's the reali$ed sales se#tion. 5ere &e have based #olle#tions on reali$ed sales+ b't e,penses are #al#'lated 'sing e,pe#ted sales. "his has the e%%e#t o% (a8ing all e,penses %i,ed &ith respe#t to %ore#asted sales regardless o% reali$ed sales+ &hi#h is the ass'(ption 'sed in 'estion 9. "he )@PU" DA"A and B!4 OU"PU" se#tions are sho&n belo& )@PU" DA"A Pro>e#ted ales

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