2week 4 interactive assignment – operating budget valero employs approximately 10 B u s i n e s s F i n a n c e
Guided Response: Respond to at least two of your fellow students’ posts in with an analysis of their operating budget and provide recommendations to extend their thinking using information from the week’s readings, or examples from current events and/or other scholarly or credible resources, using the Scholarly, Peer Reviewed, and other Credible Sources (Links to an external site.) table for guidance. Properly cite any references according to APA style as outlined in the Ashford Writing Center’s APA Style (Links to an external site.) resource.
Please respond to each one separately and cite with each response: NO WORD COUNT IS NEEDED FOR EITHER QUESTION
Nike is a multinational sports equipment company. While it started off as a sneaker company it over the years has expanded into different areas of the sports industry. Branding itself with the Nike swoosh gave it worldwide recognition and has helped the company change its image from a sports gear store to an all-inclusive brand where any type of athlete from professional to beginner can feel comfortable in their products and chase whatever dream they have.
Nike not only sells shoes and clothes but also sponsors legends in the sports arena and develops programs for children who wouldn’t usually have access to their products both locally and internationally.
Nike is currently a 32 billion-dollar company. With the current situation or crisis, Nike is one of the companies that has prospered throughout the pandemic. At the critical time of the global economic crisis, the company had made huge investments in advertising and brand promotion in order tomaintain and sustain its image (Deng, 2009). Nikes success during the pandemic is it emerge in new markets like China where people were still looking for a way to exercise and still buy the equipment they needed while being quarantined.
Since Nike is a worldwide company it has lots of liabilities and assets that can affect the balance sheet. The performance of any system, including a company, is thus never equal to the sum of the performance of its parts considered separately, but rather the product of their interactions (Ackoff, 1986). Nike had a gross profit of 15.95 billion in 2018 with a revenue of 36.39 billion for a profitability ratio of 43.8 and in 2019 revenue was 39 billion and gross profit was 17.4 for a ratio of 44.7. Nike saw stability in its Liquidity ratio. It has been able to keep it debt around 2.6 billion while still having around 4 billion in cash and assets for future investments.
The reasons for the budgetary changes is because the markets that Nike normally sells to are changing more people are working out at home with an app instead of going outside to play sports or going to a gym. In the next quarter, Nike would have to reassess its goals with the weather warming up and outside activity starting again even with the pandemic.
Ackoff, R. L. (1986). Management in small doses. New York: John Wiley & Sons.
Deng, T. (2009). “Just Done It”— Nike s New Advertising Plan Facing Global Economic Crisis. International Journal of Business and Management, Vol 4 (3)
Week 4 Interactive Assignment – Operating Budget
Valero employs approximately 10,000 people and is the largest independent refiner that does not drill its own oil (Gale Business Insights, 2017). The company operates 15 refineries in the United States, Canada, and the UK that produces 3.2 million barrels of crude per day (Valero Summary Annual Report, 2019). Valero also has its wholesale gas stations positioned in dozens of cities throughout the country.
In analyzing the financial statements of Valero by quarter in 2020, it is evident that the company has been struck by the recent economic downturn and low demand for fuel from consumers. A significant dip in net income had a negative impact on Valero as a whole. The number of liabilities was not sustainable with the combination of a decrease in both sales revenue and investment activity. The gross margin ratio is measured as [sales revenue/cost of goods sold] (Elmerraji, 2017). For Valero, this ratio was below one, meaning the cost of sales outweighed the sales themselves. Regarding the current ratio, Valero has nearly double the value of assets relative to its liabilities, meaning it has a liquid position.
The operational targets I chose are aimed at increasing sales and decreasing costs to improve the overall profitability of the company. Using the gross margin ratio should clearly indicate to the company that it either needs to significantly reduce costs or increase sales. For this, sales revenues show an aggressive projection in Q4 2020 at a 30 percent increase. However, this is reasonable compared to the near 50 percent rebound the company experienced between Q2 and Q3 in 2020. Those margins and ratios that remained healthy have more conservative projections in the coming quarter. Based on historical data, expenses have remained relatively steady and it is revenues that lag, but the company should still pursue cost savings as indicated by the (-10%) variance while revenues continue to bounce back.
Elmerraji, J. (2017, January 30). Analyze investments quickly with ratios (Links to an external site.) (Links to an external site.). Retrieved from (Links to an external site.)
Gale Business Insights: Global. (2017). Company Profile of Valero Energy Corporation. https://bi-gale-com.proxy-library.ashford.edu/glob…
Valero Summary Annual Report. (2019). https://s23.q4cdn.com/587626645/files/doc_financia…