tailieunhanh - PORTABLE MBA IN FINANCE AND ACCOUNTING CHAPTER 12

12 GLOBAL FINANCE. Eugene E. Comiskey Charles W. Mulford. MANAGER IAL AND FINANCIAL R EPORTING ISSUES AT SUCCESSIVE STAGES IN THE FI RM’S LIFE CYCLE. Fashionhouse Furniture started as a small southern retailer of furniture purchased mainly in bordering southeastern states. With a growing level of both competition and aff luence in its major market areas, Fashionhouse decided that its future lay in a niche strategy involving specialization in a high quality line of Scandinavian furniture. Its suppliers were mainly located in Denmark, and they followed the practice of billing Fashionhouse in the Danish krone. . | 12 GLOBAL FINANCE Eugene E. Comiskey Charles W. Mulford MANAGERIAL AND FINANCIAL REPORTING ISSUES AT SUCCESSIVE STAGES IN THE FIRM S LIFE CYCLE Fashionhouse Furniture started as a small southern retailer of furniture purchased mainly in bordering southeastern states. With a growing level of both competition and affluence in its major market areas Fashionhouse decided that its future lay in a niche strategy involving specialization in a high quality line of Scandinavian furniture. Its suppliers were mainly located in Denmark and they followed the practice of billing Fashionhouse in the Danish krone. Title would typically pass to Fashionhouse when the goods were dropped on the dock in Copenhagen. Payment for the goods was required within periods ranging from 30 to 90 days. As its business expanded and prospered Fashionhouse became convinced that it needed to exercise greater control over its furniture supply. This control was accomplished through the purchase of its principal Danish supplier. Because this supplier also had a network of retail units in Denmark the manufacturing operations in Denmark supplied both the local Danish market as well as the . requirements of Fashionhouse. More recently Fashionhouse has been searching for ways to increase manufacturing efficiency and lower product costs. It is contemplating a relocation of part of its manufacturing activity to a country with an ample and low-cost supply of labor. However Fashionhouse has noted that many such countries experience very high levels of inflation and other potentially disruptive economic and political conditions. It has also become aware that in some of 353 354 Planning and Forecasting the countries under consideration business practices are occasionally employed that could be a source of concern to Fashionhouse management. In some cases the practices raise issues that extend beyond simply ethical considerations. Fashionhouse could become involved in activities that could place it in violation