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(1) problem statement

(2a) list of alternatives, (2b) evaluation of alternatives,

(3a) recommendation, (3b) rationale

(4) data analysis/ supporting calculations

1
Case Analysis
Problem Statement
Juliette’s Lemonade Stands were both profitable over the first month of operation. However,
Juliette needs to maximize the profitability of the lemonade business by lowering the operating
cost and opening the additional business days. The major problem facing Juliette’s lemonade
business is allowing credit to the customers considering that it is a new business. Both Victor and
Sam are not familiar with the customers’ creditworthiness and may be in bad debt. When a
business offers goods on credit to customers, it is difficult to monitor accounts receivables in the
balance sheet since no one is sure when the payments will be received. Additionally, it means
that Juliette has first to finance these account receivables and hence ends up acquiring a $55 loan
from her father, which has a significantly high cost of capital.
Identification of alternatives
Juliette needs to ensure efficiency in the operations by scheduling strict opening/closing business
days to reduce the losses associated with the number of days the business is closed. For instance,
Victor did not open for five days, and Sam closed for 15days in the month. Both Victor and Sam
must turn down customers who want the lemonade on credit to increase profitability.
Evaluation & Recommendation
Both Victor and Sam are noble workers since they made some profits in the first month of
operation. However, Sam needs to have proper record management of his sales and make reports
to track performance. Victor needs to work harder to attain greater profitability goals since he is
a growth-oriented businessperson. I recommend Juliette offer the two employee’s bonuses for
2
attaining certain goals each month in addition to the one percent salary increment as a way of
motivating them.
Rationale/Supporting Calculations
Victor has a higher assets value than Sam from the balance sheets and income statements below.
However, Sam has a higher net income than Victor but misappropriates it and could not be
accounted for.
Victor Pres-Season Balance Sheet
Liabilities & Owner’s Equity
Assets
Cash
$10
Debt
$7
Table
$60
Owner’s Equity
$116
Glass Pitcher
$21
100 plastic cups
$5
Lemonade mixes
$20
Umbrella
$7
Total assets
$123
Total liabilities & owner equity
$123
Victor Income Statement
Revenue
$160
Cost of revenue
$50
Gross profit
$110
Net income
$110
Victor Post-Season Balance Sheet
Assets
Liabilities & Owner equity
3
Cash
$154
Debt
$3
Account receivables
$20
Owner equity
$264
Table
$60
Glass pitcher
$21
Umbrella
$7
1 Lemonade mix
$5
Total Assets
$267
Total liabilities & equity
$267
Sam’s Income Statement
Revenue
$153
Cost of revenue
$30
Interest (operating expenses)
$5
Net income
$118
Sam’s ending Balance sheet
Assets
Liabilities and Owner equity
Cash
$109
Debt
$55
Account receivables
-$10
Owner Equity
$104
Table
$60
Total Assets
$159
Total liabilities and equity
$159

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