Dispensers of California Case Study - preparing a profit plan and balance sheet.
CASE STUDY
DISPENSERS OF CALIFORNIA
Q1: How might Hynes and the investors use the profit plan in managing the business?
Ans: The profit plan prepared by Hynes can be helpful in forecasting the financial position (assets and liabilities) of the business. This would assist Hynes and investors to plan the business in advance and improve on profits. The information can be used to determine the solvency of the business by showing how much assets are available for payment of liabilities and dividends.
Profit plan can also help in predicting the progress of the business and ascertain the amount of capital employed in business. It can prove as a good tool for budgeting and can uncover many potential bottlenecks before they occur. Hynes and investors may use the profit plan to decide on goals and objectives that can serve as benchmark for evaluating subsequent performance.