Proposed Alternative Action #1: Order the raw materials on Wednesday to avoid working overtime.
Strengths of Action #1: The raw materials would be here by late Wednesday. This gives the employees the opportunity to work on the order all day Thursday and Friday. The order will take five solid days of work without overtime to produce the order. Therefore, since the following Monday is a holiday the order would be ready by the following Thursday. This would mean we would have produced the order and be able to receive payment for the order a day early without having incurred any overtime.
Weaknesses of Action #1: If the materials are purchased on Wednesday, we would have to write a check. That means the cash flow from operating activities for this year will be much lower, which our stockholders won’t like. Also, our acid test ratio will go down from 1.01:1 to .90:1, so our creditors may be upset.
Proposed Alternative Action #2: Order the raw materials on the following Tuesday and work overtime to complete the order.
Strengths of Action #2: The purchase of the raw materials would not affect our acid-test ratio for the current year, so our creditors would not be upset with us. Our cash flow from operating activities for this year would not be lower, which our stockholders would be happy about.
Weaknesses of Action #2: The raw materials would not get here until the following Tuesday, which only gives us Wednesday, Thursday, and Friday to complete the order. We know the order will take us five solid days of work without overtime, but we obviously would not have the five full days to complete it. Therefore, we would need to work overtime causing our profit and operating cash flows for next year to be lower.
Proposed Alternative Action #3: Req ...