Follow Up Responses to Discussion Questions

Responses to Discussion Questions

Response to Peer Discussion 1

Financial reports are critical in the decision-making process; as stated in the discussion, they serve as core determinants of strategic action based on changes in the business environment. For example, income statements prepared quarterly or annually help business managers examine the revenue streams and the expenses incurred to generate the income. Consequently, they have critical information to determine if the company’s expenditure habits are suitable for growth or need adjustment for more expenditure plans focused on the activities generating income or growth of new revenue streams (Cote, 2020).

For example, at the beginning of the Covid-19 pandemic, Nike revised its expenditure on brick-and-mortar distribution systems towards more online driven distribution channels, accommodating the regulations for closure of business but meeting the demand for exercise garments and gear (Kohan, 2020). Notably, Nike was also able to expand their physical stores across the globe with decreasing leasing charges due to low demand in preparation for reopening physical stores. Consequently, a 32% growth in direct-to-consumer sales and digital sales were up 84%.

References

Cote, C. (2020). How & Why Managers Use Financial Statements | HBS Online. Business Insights Blog. Retrieved 7 March 2022, from https://online.hbs.edu/blog/post/how-managers-use-financial-statements.

Kohan, S. (2020). Pandemic-Proof Nike Delivers Another Strong Quarter With 9% Sales Increase. Forbes. Retrieved 7 March 2022, from https://www.forbes.com/sites/shelleykohan/2020/12/19/pandemic-proof-nike-delivers-another-strong-quarter-with-9-sales-increase/?sh=49ecd6de1469.

Response to Peer Discussion 2

Indeed, at the initial stages of business, every decision involving the expenditure of the few resources available must be informed by the company’s financial position. Consequently, examining the financial performance to determine liquidity, cash flow cycle, and availability of a credit line is critical in determining the expenditure and terms of payment offered to clients. Notably, the ability of a business to borrow is determined by its debt-to-equity (D/E) ratio. Consequently, the business should have a healthy debt to equity ratio to reserve creditworthiness to help the business in case of unprecedented business incidents. Further, it can be leveraged to meet demand growth beyond business capability (Cote, 2020). Consequently, businesses should pay attention to the assets, liabilities, and equity line by maintaining a monthly invoice to inform investment and operation activities. The growth of a healthy credit line and reserves, applying a quarterly evaluation of the company’s financial position is feasible since the company can withstand unprecedented changes in the business environment.