Earlier in the session we discussed relevant range, where fixed costs remain fixed until capacity is reached, or an additional investment is made. You are the CFO of a company that has reached production capacity for its innovative LED lighting.
Other companies manufacture LED lights, but your product is that much better: they last longer and they use even less energy.
LED lights will have a long-term market share, so they are not a fad product. You are faced with two options: 1 build more capacity, or 2 buy another LED manufacturer and retool their operation to manufacturer your product.
What factors would you consider whether to build a new plant or acquire another manufacturer and retool. There is no right or wrong answer: just what should you, the CFO, consider.
You are a CFO in a manufacturing company, with three unrelated products. The unrelated products is important; no one relies on the output or waste product of one to complete manufacturing of another product.
While two of the products are doing well, the third is definitely in decline. The CEO and COO stop by to discuss the declining business.
They are trying to decide if they should sell the declining business, close it down, or possibly relook at how to reinvest and improve sales. As the CFO, what might you suggest to the CEO and COO to consider when selling, closing or reinvesting. Again there is no right or wrong answer.