M3D1: Fuling Plastics: A Fork in the Road
When preparing for your discussion post on this case, it is recommended that you read through it several times. Read through it the first time to familiarize yourself with the case. On the second reading, consider your assigned role in the situation, and let that guide your perspective. Look deeper at the details: facts, problems, organizational goals, objectives, policies, strategies.
Next, consider the concepts, theories, tools and research you need to use to address the issues presented.
Then, complete any research, analysis, calculations, or graphing to support your decisions and make recommendations.
This discussion addresses the following Module Outcomes:
Evaluate a firm’s use of leverage using financial statement analysis. (CO1, CO2)
Evaluate trends in the firm’s pattern of operations using financial statement analysis. (CO2, CO3, CO4)
Evaluate the financial position of the firm using time and trend or peer-group analysis. (CO2, CO4)
Fuling Plastics USA is a subsidiary of Fuling Global, Inc
(Links to an external site.)
(Nasdaq ticker symbol FORK). Fuling manufactures environmentally-friendly plastic food-service disposable products (‘disposables’). Their historic strength has been in the production of disposable cutlery, the quality and value of which has satisfied the exacting requirements of large, sophisticated, multinational purchasers that have decades of experience sourcing foodservice disposables. Fuling has built on that strength to deliver drinking straws, cutlery and serviceware, such as cups and plates, to customers around the world (Fuling Plastics USA, 2015). However, their largest customer base is in the United States, which accounts for more than 90% of their revenues. Fuling has been in discussion with Bunzl Distribution USA, which owns and operates more than 100 warehouses that serve all 50 states and Puerto Rico, as well as Canada, the Caribbean and parts of Mexico. Bunzl Distribution controls more than 4,000 employees and 400,000-plus items in stock at any time (Bunzl Distribution, 2016).
For purposes of this discussion, assume that you are the finance manager for Fuling Plastics, USA. In speaking with other managers, the firm’s chief executive officer (CEO) has determined that substantial opportunities for growth exist. You have been invited to discuss Fuling Plastics, USA’s financial ability to take advantage of these opportunities. You are aware that acquisition of Bunzl’ssupply chain abilities and existing assets are seen as an important strategy in managing Fuling Plastics’ growth rate. Assume that current sales are $1,000. Fuling Plastics USA growth may exceed 50% in the upcoming year, and the Bunzl partnership may help alleviate the need for an expansion in fixed assets through other means. Using a percentage of sales methodology, assume that Fuling’s net fixed assets are a fixed percentage (180 percent) o
Discussion: Attitudes and Perceptions
There are so many statements and parables about “you are what you think” or “if you can believe it, you can do it.” These often trite statements are meant to inspire and embolden individuals to be better, do better, and become commonplace in the home and the workplace. Nearly every office has a statement or quotes somewhere in the office to inspire workers. What inspires you?
Begin by thinking about how attitudes and perceptions are created and how they impact the workplace. Using the theories of organizational behavior related to attitudes and perceptions, create 1 quote or statement that employers can utilize to inspire employees to complete their work better and interact with coworkers. Justify your response by identifying the theory or theories that led you to create your quote and your rationale for why the theory fits.
In response to at least two of your peers, discuss what you learned about how attitudes and perceptions differ when an organization has to go remote. Discuss how your quote would either apply or change with a distributed workforce. Your response posts are due by Sunday, 11:59 pm ET. Remember to read the feedback to your own major postings and reply to it throughout the module.
It is important that you review the Discussion Rubric and read the Discussion Posting Guide. These documents lay out the basis for how you should engage in discussions and how you will be evaluated.
All discussions combined are worth 20% of your final course grade.
Compute and evaluate Fuling’s external financing needed (EFN) in the event that sales grow 25% in the upcoming year, and explain each factor which the company must consider in planning for this level of growth. Specifically, consider capacity utilization and external financing needed.
Costs 0.8(sales) = $800
Net fixed assets 1.8(sales) = $1,800
Current assets 0.2(sales) =$200
25% sales increased:
Costs 0.8(sales) =$1000
Net fixed assets 1.8(sales) =$2,250
Current assets 0.2(sales) =$250
In this case, the net fixed assets would increase by $450 (2,250 – 1,800). Current assets would also increase by $50 ($250-200). The total increase in the total assets is $500 ($450+$50). Adding the increase of $250 sales, the total assets = $750. There is an increase in liabilities and owner’s equity of $225, which subtracted from $750, resulting in an EFN of $525.
It is now essential to consider the capacity in which Fuling is functioning. At 80% current capacity, the company would not need to add any additional net fixed assets.
Full capacity=sales/capacity =$1000/0.8= $1250
Net fixed asset=1.8(sales)=$2250
This significantly decreases the external funds needed as no fixed asset expenditures are required. ($525-$450) = $75
Compute and evaluate Fuling’s options in the event that sales subsequently grow an additional 50% and the firm wishes to maintain current assets at 20% of sales, explaining which components of its financial policy the company must consider in planning for this level of growth. Specifically, consider profit margin, dividend policy, financial policy, and total asset turnover.
Additional 50% sales increased:
Net fixed assets 1.8(sales)=$3375
Current assets 0.2(sales)=$375
In this case, net fixed assets would increase by $1125 ($3375-$2250), which would put it overcapacity and require additional external funding for net fixed assets, $3375 needed versus $2250 full capacity. The company could choose a short term, long term, or offer more equity of the company to finance initiatives.
In both cases, financial ratios such as profit margin, costs, dividends, and asset turnover are held constant. Net income must be improved by reducing costs or through greater operational efficiency. This would increase profit margin, which could allow increased internal funding of initiatives. In addition, coupling greater net income with allowing reduced dividends paid would also result in increased retained earnings, which could provide more incredible company wealth for investment. This strategy will enable greater external fund leveraging to drive growth through operational improvements; also, improving the total asset turnover through cost reduction could allow greater financial utilization of held assets (Carlson, 2019).
Carlson, R. (2019). Understanding and using the total asset turnover ratio. Retrieved from https://www.thebalancesmb.com/calculating-tot
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