Posted: May 24th, 2022
Accounting Advice Letter to CTS Plastics
From: Financial Advisor at XYZ Inc.
To: CTS Plastics
The Strategies that CTS should implement to Increase its Performance
Businesses need to ensure that they implement innovative strategies that increase their competitive advantage if their going concern is to be assured. According to Lynch (2018), companies operate in very competitive environments, thus the need to implement innovative strategies that will enable them to increase their performance. A firm’s performance is crucial as it dictates whether the business achieves its goals or not. This letter is intended to inform the management of CTS Plastics on the appropriate strategies they need to implement to better its performance and ensure its going concern. The advice presented to the corporation is based on its performance over the last three years. The firm’s performance has been declining for the last three years. It is expected that the corporation’s performance will increase if it implements the strategies this letter recommends.
Pro-active leadership systems are lacking at CTS Plastics. The models adopted by the enterprise owners of reducing their involvement in the firm’s day-to-day operations have had a massive influence on its decreasing performance. According to Barney & Hesterly (2020), business owners are better positioned to implement the strategic management process than any other party. The founders of an enterprise have more incentives to ensure that their company succeeds than anyone else. An analysis of the incentives that a corporations managers have to ensure its success is that they will get an income from it. On the other hand, the owners of an enterprise take a long-term view of their businesses and are usually willing to implement innovative strategies that will likely affect their short-term bottom line compared to hired managers. Anh Ngyuen, Mike Yang, and Simon Green should become more actively involved in managing their business as they have more incentives to do so.
The following table shows the KPIs of the firm from 2018-to 2020
Table 1: CTS Plastics KPIs
Financial Ratios 2018 2019 2020
Current Ratio 4.06 3.66 0.93
Debt to equity ratio 0.17 0.20 0.64
Return on Assets 0.2 – 0.041 -0.34
Profit margin 0.09 -0.02 -0.17
An analysis of the company’s current ratio shows that it has decreased from 2018 to 2020. According to Brigham & Ehrhardt (2019), the current ratio shows the ability of an enterprise to meet its current liabilities using the current resources it has. The current assets that can enable a corporation to pay for its current liabilities include cash and cash equivalents. A look at the performance of the enterprise shows that its ability to cover current liabilities is decreasing due to the declining performance over the three years. My advice to the owners of CTS Plastics on how to increase their current ratio is to adopt more long-term financing options, put in place an effective system to manage receivables and payables so that they are effected on time, and implement an effective cost-management system that will enable the company to reduce costs. Also, the company should incorporate technology into its operations to enable timely cost-tracking and response mechanisms.
An analysis of the return on assets ratio shows that it has decreased from 2018 to 2020. The return on assets shows the efficiency of an enterprise’s resources in creating value for shareholders (Brigham & Ehrhardt, 2019). The decreasing return on assets shows that the company is ineffective in utilizing its resources to create more value. Companies need to create more value in all their dealings, as failure to do that will result in the enterprise suffering losses and being forced to cease operations. My advice to the owners of CTS Plastics on how to increase the return on assets is to use effective technologies in production, implement effective cost-management systems, and increase labor productivity. If effective production technologies are implemented, the company will be better placed to increase its performance.
An analysis of the profit margin over the three years shows that it has been decreasing. In 2019 and 2020, the company had a negative profit margin. The negative profit margin means that its expenses were more than the revenue generated. A business whose expenses are more than the revenue generated is a business facing precarious situations. According to Lynch (2018), the profitability of an enterprise is a crucial element as it determines whether it is in a position to implement effective strategies or not. Profitability is a critical part of a firm’s operations, defining its competitive advantages (Brigham & Ehrhardt, 2019). Analyzing the trends in the alternative business idea the owners of CTS Plastics want to implement shows that the recyclable paper industry will keep growing soon. My advice to the owners of the corporation is that they should increase the competitiveness of the plastic factory first before availing additional resources to effect the recycling paper enterprise.
A look at the debt to equity ratio shows that the ratio has been increasing from 2018 to 2020. The use of debt financing presents various challenges to a business. According to Brigham & Ehrhardt (2019), debt financing presents challenges to businesses since interest on the loan has to be repaid irrespective of the companys performance. Another issue that debt financing causes are that it can result in the enterprise being placed under receivership if it does not meet its loan repayments. The increasing use of debt-financing to effect operations at the business is placing it in a precarious situation. My advice to the owners of CTS Plastics is that they need to use other alternatives to debt financing. The financing structure adopted should present fewer risks to the enterprise since its performance has declined. The business should use more equity financing instead as it seeks to implement strategies to increase its performance.
The company needs to make sure that its line of business will not be negatively impacted by government legislation. There is an increasing realization in various parts of the world that plastics present environmental hazards (Carvajal Rodrguez & Benavides Fernndez, 2022). The fact that there is a likelihood that plastics will be banned or limited should inform the need to diversify businesses by the enterprise. Since the owners of the corporation are discussing implementing a new business of creating recyclable paper for the hospitality industry, I recommend that they do that in conjunction with increasing the performance of the current business. Creating a new business requires significant capital expenditure that will take time to break even. Since the need to ensure environmental conservation will be one of the most critical determiners of a companys success, the enterprise should effect the new business while at the same time putting in place strategies to better the current corporations performance.
The employment model adopted by the enterprise for its staff is ineffective as most of them are casual laborers. According to Markey & McIvor (2018), casual laborers are less motivated than permanent staff. They feel less motivated as they believe that their input is only needed for the short term and that their contribution to the enterprise’s success is minimal. The lack of motivation among casual laborers decreases their performance or not performing optimally. Also, there is a challenge with predicting labor performance since the output or performance of casual workers is difficult to ascertain. A company is better positioned to predict the performance of its employees if it has in place workers with long-term contracts. Therefore, for the owners of CTS Plastics to increase the firm’s performance, they need to make the employment contracts of staff long-term.
In conclusion, this study has evaluated the factors that have made the performance of CTS Plastics decline. As found by this study, the factors that have contributed to the declining performance of the firm include ineffective management systems, inefficient employment structure, and the need to ensure environmental conservation. Also, the factors that decreased the corporations performance include inefficiencies in the technology employed and an ineffective cost-management structure. The solutions that the enterprise can implement to increase its competitive advantages include implementing an effective leadership structure, bettering the terms of employment for most of the staff on a long-term basis, and implementing effective cost-management systems. Also, the company needs to better the performance of the current factory before venturing into the new business line. There is a need to better the performance of CTS Plastics as the challenges experienced are primarily from within.
Financial Advisor at XYZ Inc.
Barney, J. B., & Hesterly, W. S. (2020). Strategic Management and Competitive Advantage: Concepts. Pearson.
Brigham, E. F., & Ehrhardt, M. C. (2019). Financial management: Theory & practice. Cengage Learning.
Carvajal Rodrguez, L. V., & Benavides Fernndez, C. D. (2022). Recent Trends to Address Plastic Waste at the Global Level. In Impact of Plastic Waste on the Marine Biota (pp. 81-99). Springer, Singapore.
Lynch, R. (2018). Strategic management. Pearson UK.
Markey, R., & McIvor, J. (2018). Regulating casual employment in Australia. Journal of Industrial Relations, 60(5), 593-618.
Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?
Whichever your reason is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.
Students barely have time to read. We got you! Have your literature essay or book review written without having the hassle of reading the book. You can get your literature paper custom-written for you by our literature specialists.
Do you struggle with finance? No need to torture yourself if finance is not your cup of tea. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts.
While psychology may be an interesting subject, you may lack sufficient time to handle your assignments. Don’t despair; by using our academic writing service, you can be assured of perfect grades. Moreover, your grades will be consistent.
Engineering is quite a demanding subject. Students face a lot of pressure and barely have enough time to do what they love to do. Our academic writing service got you covered! Our engineering specialists follow the paper instructions and ensure timely delivery of the paper.
In the nursing course, you may have difficulties with literature reviews, annotated bibliographies, critical essays, and other assignments. Our nursing assignment writers will offer you professional nursing paper help at low prices.
Truth be told, sociology papers can be quite exhausting. Our academic writing service relieves you of fatigue, pressure, and stress. You can relax and have peace of mind as our academic writers handle your sociology assignment.
We take pride in having some of the best business writers in the industry. Our business writers have a lot of experience in the field. They are reliable, and you can be assured of a high-grade paper. They are able to handle business papers of any subject, length, deadline, and difficulty!
We boast of having some of the most experienced statistics experts in the industry. Our statistics experts have diverse skills, expertise, and knowledge to handle any kind of assignment. They have access to all kinds of software to get your assignment done.
Writing a law essay may prove to be an insurmountable obstacle, especially when you need to know the peculiarities of the legislative framework. Take advantage of our top-notch law specialists and get superb grades and 100% satisfaction.
We have highlighted some of the most popular subjects we handle above. Those are just a tip of the iceberg. We deal in all academic disciplines since our writers are as diverse. They have been drawn from across all disciplines, and orders are assigned to those writers believed to be the best in the field. In a nutshell, there is no task we cannot handle; all you need to do is place your order with us. As long as your instructions are clear, just trust we shall deliver irrespective of the discipline.
Our essay writers are graduates with bachelor's, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college degree. All our academic writers have a minimum of two years of academic writing. We have a stringent recruitment process to ensure that we get only the most competent essay writers in the industry. We also ensure that the writers are handsomely compensated for their value. The majority of our writers are native English speakers. As such, the fluency of language and grammar is impeccable.
There is a very low likelihood that you won’t like the paper.
Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.
We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.
You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.
We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.
You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.
Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.
You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.
The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.
PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET A PERFECT SCORE!!!
Place an order in 3 easy steps. Takes less than 5 mins.