Wonderful Wire Cable Berhad (manufacturing company) Essays

Wonderful Wire Cable Berhad (manufacturing company) Essays Wonderful Wire Cable Berhad (manufacturing company) Essay Wonderful Wire Cable Berhad (manufacturing company) Essay As for the manufacturing company, the business risk may arise whether the company able to control the output prices. If the company has ability to adjust output prices when there are changes input costs, such as raw material, the lower the degree of business risk. Manufacturing company has the authorities to increase the selling prices of its products, when the raw material costs increases, subsequently company would not bear extra losses. Alternatively, company could not raise the selling prices when the raw material costs increases, the profit of the company will be reduce. Hence, company bears the business risk. For instance, there was a significant decreased in Wonderful Wire Cable Berhads sales which may due to unexpected and unprecedented escalating prices of copper and aluminium which seriously hurt the earnings of cable manufacturers in the country. On the other hand, retailing company, Hai-O Enterprise Berhad does not face this problem as the company does not incurred raw material costs as the manufacturing company. Retailing company get the final goods from the manufacturer and sell off the goods through branches, therefore retailing company does not have significant problem on this. The price of final goods that purchased from the manufacture is more stable. Furthermore, for the manufacturing company such as Wonderful Wire Cable Berhad, will need more finance in order finance its fixed assets. Due to its nature, manufacturing company need more assets to produce their products, so company need more fund to get assets and maintain the assets. Company may have not enough cash or fund to finance; in order to get more fund, short-term borrowings and long-term borrowings will be adopted. Therefore, the gearing of the manufacturing company will be higher than the retailing company. In 2007, Wonderful Wire Cable Berhad has negative financial gearing which mean the company has very high accumulated losses. This is caused by the increased prices in copper and aluminium. Companys equity unable to cover the borrowings, this could lead company into difficulties. However, retailing company such as Hai-O Enterprise Berhad has high operating gearing might be due to the large inventory that the company need to keep in the warehouse. The inventory that kept in the warehouse need to be guard by security or managed by the staff, this may incurred more extra expenses. As we know that, operating expenses is the ratio of the companys fixed cost to its total costs. Therefore, the Hai-O Enterprise Berhad has higher operating costs compare to financial gearing. Company have low financial gearing which mean company does not rely much on borrowings. This gearing indicates that this company is safe for investment. In conclusion, Hai-O Enterprise Berhad and Wonderful Wire Cable Berhad does not represent all the retailing and manufacturing industry. But, it has indicates that the companies need a good risk management to reduce their risk into an acceptable level. Thus, this could ensure the company able to run their operations smoothly without liquidation problems.

Income Elasticity of Demand

Income Elasticity of Demand A Beginners Guide to Elasticity: Price Elasticity of Demand  introduced the basic concept and illustrated it with a few examples of price elasticity of demand.   A Brief Review of Price Elasticity of Demand The formula for price elasticity of demand is:   Price Elasticity of Demand (PEoD) (% Change in Quantity Demanded) à ·Ã‚  (% Change in Price) The formula quantifies the demand for a given as the percentage change in the quantity of the good demanded divided by the percentage change in its price.   If the product, for example, is aspirin, which is widely available from many different manufacturers, a small change in one manufacturers price, lets say a 5 percent increase, might make a big difference in the demand for the product. Lets suppose that the decreased demand was a minus 20 percent, or -20%. Dividing the decreased demand (-20%) by the increased price (5 percent) gives a result of -4. The price elasticity of demand for aspirin is high a small difference in price produces a significant decrease in demand.   Generalizing the Formula You can generalize the formula by observing that it expresses the relationship between two variables, demand and price. A similar formula expresses another relationship, that between the demand for a given product  and consumer income Income Elasticity of Demand (% Change in Quantity Demanded)/(% Change in Income) In an economic recession, for example, U.S. household income might drop by 7 percent, but the household money spent on eating out might drop by 12 percent. In this case, the income elasticity of demand is calculated as 12 à · 7 or about 1.7. In other words, a moderate drop in income produces a greater drop in demand. In the same recession, on the other hand, we might discover that the 7 percent drop in household income produced only a 3 percent drop in baby formula sales. The calculation in this instance is 3 à · 7 or about 0.43.   what you can conclude from this is that eating out in restaurants is not an essential economic activity for U.S. households the elasticity of demand is 1.7, considerably great than 1.0 but that buying baby formula, with an income elasticity of demand of 0.43, is relatively essential and that demand will persist even when income drops.    Generalizing Income Elasticity of Demand Income elasticity of demand is used to see how sensitive the demand for a good is to an income change. The higher the income elasticity, the more sensitive demand for a good is to income changes. A very high-income elasticity suggests that when a consumers income goes up, consumers will buy a great deal more of that good and, conversely, that when income goes down consumers will cut back their purchases of that good to an even greater degree.   A very low price elasticity implies just the opposite, that changes in a consumers income have  little influence on demand. Often an assignment or a test will ask you the follow-up question Is the good a luxury good, a normal good, or an inferior good between the income range of $40,000 and $50,000? To answer that use the following rule of thumb: If IEoD 1 then the good is a Luxury Good and Income ElasticIf IEoD 1 and IEOD 0 then the good is a Normal Good and Income InelasticIf IEoD 0 then the good is an Inferior Good and Negative Income Inelastic The other side of the coin, of course, is supply.