Question

If the estimated stock price from the operating plan is $109.23 but the actual price of the stock is $100, what is your assessment of the proposed operating plan? What are some actions the company can take to improve the operating plan? Explain how such actions would improve the plan.

Answer 1

Since the actual price is $100 as against the estimated price of $109.23, we can conclude that the company not performing to its full potential.

The actions that can be recommended for improving the operating plan is:

a. Improving the operational efficiency by reducing cost of goods produced

b. Reducing the selling and administrative expenses

c. Reducing the debt level

d. Increasing sales

e. Utilizing all the available fixed assets to support sales

These would improve operational efficiency, utilize assets to the full potential, increase top line, reduce interest expense and thereby improve the net income attributable to common shareholders