Question 1

Financial Instruments are viewed as a means to accomplish many company goals. How to manage these instruments needs to be defined with specificity. What do you feel is the most efficient and effective way to manage financial instruments? Please provide examples.

Respond to tthis...I would put into place guidelines that follow FASB's accounting standards for management of financial statements. FASB created and issued IFRS 9 Financial Instruments. It provides guidance on classification and measurement of financial assets (Accounting for Financial Instruments, n.d.). There have been some updates made since then. The latest was "On January 5, 2016 FASB issued an Accounting Standards Update (ASU) intended to improve recognition and measurement of financial instruments. The ASU affects public and private companies, not-for-profit organizations, and employee benefit plans that hold financial assets or owe financial liabilities" (Accounting for Financial Instruments, n.d.).

A couple of examples:

FASB will be "requiring equity investments to be measured at fair value with changes in fair value recognized in net income" (Accounting for Financial Instruments, n.d.).

"Requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements" (Accounting for Financial Instruments, n.d.).

Accounting for Financial Instruments.(n.d.). Retrieved from Financial Accounting Standards Board: http://www.fasb.org/jsp/FASB/Page/BridgePage&cid=1351027210037#section_3

Respond to this...A companies goals can vary from company to company, some are happy being they way they are and some want to get bigger and bigger. Some times the only way to accomplish these goals is through financial instruments. I think that understanding your goals and how much you have to give up to receive more money is the most effective and efficent way to manage. And if you are not comfortable with what is being purposed as a way of getting more funds, stop and talk to advisors.

Question 2

Cost functions essentially break down how a cost reacts over time to changes to the activity that drives it. Variations in the cost drivers explain the variations in cost functions over time. Cost behaviors represent the differences in how these cost functions react over time to the changes of the cost drivers.

Describe an example of a specific cost function, and its associated cost driver. In your description, discuss how changes in the cost driver will impact that cost function and what types of cost behaviors you would expect and why.

Respond to this...A cost driver is the unit of an activity that causes the change in activity's cost. cost driver is any factor which causes a change in the cost of an activity. The most common cost driver would be direct labor hours. The more direct labor cost the more overall cost a product has, typically then the higher selling price. As direct labor hours declines, a lower price can be offered. This is why company's are continually evaluating their processes for efficiency and effectiveness. They are also willing to try new ways of producing something in effort to control their labor and keep their prices low and competitive.

Question 3

Dirt Bikes's management believes that the company could benefit from e-commerce. The company has sold motorcycles and parts primarily through authorized dealers. Dirt Bikes advertises in various magazines catering to dirt bike enthusiasts and maintains booths at important off-road motorcycle racing events. You have been asked to explore how Dirt Bikes could benefit from e-commerce and a Dirt Bikes website.

How could Dirt Bikes benefit from e-commerce? Should it sell motorcycles or parts over the Web? Should it use its Web site primarily to advertise its products and services? Should it use the Web for customer service? Justify your response.

Respond to this...This is a two sided answer for Dirt Bikes's, Selling directly to the end user will allow for additional profits as they do not need to sell as many products to authorized dealers at a certain discount below net, say 15-30% under net. However if you start taking business away from those which got you to where you are today, and they start selling less and you move their discount from 30 to 15%, they may pull their business with you and go elsewhere. Next your on the ground sales force has basically just walked away and is spreading positive information about your competition.

I believe they need to offer both in order to get the most sales out of each revenue stream. Meaning offering parts to your dealerships for 2-5% under what you do online. In doing so you give your dealers an opportunity to make a little bit of many and keep them as your on the ground sales force, and for those which like to order via online they can do the same.