Financial Scope

Final Exam

Financial Scope of SCM

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December 3, 2014

Part A (Case Study) Canadian Air Goes International

Background

Canadian Air was founded 10 years ago and the company, has manufactured and sold light airplanes over this period, and has a reputation for safety and reliability. The company has two models, the Birdie, which sells for $53,000, and the Eagle, which sells for $78,000. To date the company manufactures aircraft to order. By using prefabricated parts, the company is able to complete the manufacture on an airplane in only five weeks. The company also receives a deposit on each order, as well as another partial payment before the order is complete.

Amalie Diefenbaker, the dealer in Europe wants to add Canadian Air’s Eagle airplane to her line of products. Amalie feels she will be able to sell 30 airplanes per month. Amalie is prepared to order 30 now and pay in Euro’s $65,000/e per plane and with a payment term of 90 days.

Chris Guthrie their financial analysis has been asked to prepare an analysis of the proposed international sales and answer the following questions, using the information that was given to Chris.

Canadian Air Inc. 2007 Balance Sheet

Canadian Air Inc. 2007 Income Statement

1. What are the pros and cons of the international sales? What additional risks will the company face?

a. Some of the pros are:

i. New markets and an opportunity to expand its sale internationally

ii. Taking exchange rate into consideration, there is potential for profit

b. Cons of the international sales are:

iii. With the fluctuation in exchange rate there is a risk of profit loss

iv. Terms - receiving payment in 90 days

v. Expertise in international laws, currency, taxes etc.

vi. Legalities – Different countries have different laws

vii. Operational Difficulties

viii. Cultural Differences

c....