NikoTech Assignment SCM800

1. Please include the cover page at the end of this assignment which includes your name, email address, assignment name, and date.

2. Please use an 8.5 by 11 portrait type document for this assignment. I WILL NOT ACCEPT ANY OTHER FORMATTING ARRANGEMENT. I would suggest you use the Word Print Preview function to make sure your work fits. Many times I receive over 25 pages for this assignment…that is not correct---somewhere around 5 or 6 pages is correct. The problem is normally formatting!

3. Please use a Word Document format (NO PDF or Excel files will be accepted).

4. Please submit all of your work including the equations used for the calculations.

5. Please use citations as necessary--do not plagiarize.

6. Points will be deducted for not following formatting directions!

ASSIGNMENT QUESTIONS:

Note: The instructor reserves the right to change the points for this assignment and these questions at his discretion. Points shown below are only approximate and may change.

Please answer the following questions in your presentation:

Question 1. From the data provided, is days payable outstanding (DPO) contributing significantly to the change in value of NikoTech’s cash-to-cash cycle between Y1 and Y2? (12 points)

From the data provided, the payable outstanding (DPO) is contributing to change of the cash cycle because it’s a variable in the equation that forms that cash cycle (Cash Cycle=DIO+DSO+DPO)

Question 2. This question has three parts (24 total points):

1. Calculate inventory turnover for Y1 and Y2, again assuming that the values in the balance sheet are average values for each year.

1. Mathematically express inventory turnover in terms of days of inventory, being sure to show how you derived your mathematical expression.  In other words, write an equation such as: Inventory turnover = expression, where “expression” contains the DOI term.

Cost of Goods Sold/Average sales = Inventory turnover

Days of Inventory = Inventory Turnover

1. Would you consider the change in inventory turnover from Y1-Y2 a positive or negative indication of inventory management performance for NikoTech?  Please explain.

Question 3. Calculate the following Strategic Profit (du Pont) Model measures for Y1 and Y2 for NikoTech: (24 points)

1. Net profit (income) margin (%)

Net income after tax/revenue =Net profit margin

1. Asset turnover

Revenue/assets

1. Return on assets (%)

Annual net income/average total assets

Question 4.  NikoTech’s return on assets deteriorates between Y1 and Y2 despite a 23% increase in sales and a nearly 18% increase in net sales from Y1 to Y2.  Identify the financial reasons or drivers of this deteriorating performance by answering the following two questions (24 total points):

1. Is net profit margin or asset turnover primarily driving the Y1-Y2 change in NikoTech’s return on assets?  Please be sure to explain your response, using data and calculations where appropriate to enhance your explanation.

They are both equal because the profit margin and asset turnover affects the Return on Assets since the changes in the assets turnovers results in positive to the ROA. The equation has both variables and any change will result in the other as shown:

ROA = annual net income/average total assets

Asset Turnover = revenue/net assets

1. For the primary driver (net profit margin or asset turnover) identified in part a, what are the 2-3 principal financial factors that account for the deteriorating trend in this measure? Please be sure to explain your response, using data and calculations where appropriate to enhance your explanation.

The three principal financial factors that account for the deteriorating trend in this measure are the taxes charges, increase interest rates for 2 years, and the level of depreciation that is taken into account for the net assets/profits. As seen below using the equation for net profit margin there are the factors that conclude those taken into this measure as seen in Year 1 and 2.

Question 5.  Are measures of NikoTech’s supply chain velocity improving or deteriorating between Y1 and Y2? The two principal measures of velocity are the operating cycle and the cash-to-cash cycle. You calculated both of these items in Q1 and Q2 of Part 1. (16 total points):

1. Describe the impact of this change in supply chain velocity as represented by the operating cycle on asset utilization and the flow of cash. Please be sure to explain your response, using data and calculations where appropriate to enhance your explanation.

1. Describe the impact of this change in supply chain velocity as represented by the Cash-to-cash cycle on asset utilization and the flow of cash. Please be sure to explain your response, using data and calculations where appropriate to enhance your explanation.

SCM 801

Cover Page

NikoTech Case Part 2

Score: _______________/100

Date Submitted: ______________

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PLEASE SIGN THE FOLLOWING PLEDGE! If it is not signed you will not be given a grade!

I, ____________________________________________ <Your Name>, affirm that I have neither given, received, nor witnessed unauthorized aid on this assignment and have completed this work honestly and according to the professor’s guidelines and the Smeal Honor Code!