Wilson Wheels Case Study

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Furthermore, after reviewing the financials of Wilson Wheel Company from 1993 and projecting next year’s statements, we were able to see that the company’s ROA and ROE were slightly favorable even though the company had experienced a decline in sales and seen its bicycle market become saturated. When analyzing which decision was most appropriate for the future of this company we decided to project the future financials for two scenarios using details obtained from the case study. Using Exhibit C, we were able to predict that Wilson Wheels would increase their net income by over $200K from the previous year if they decided to accept the proposal offered by BigBox. This was due to the fact that the company would increase its sales volume by 25,000 with the addition of its new line of bikes offered at BigBox stores. If they decided to reject the offer they would see an increase in their net income of only $20K based on the fact that they would increase existing sales to a volume of 100,000. Using Exhibit D, we were able to conclude that our projections would lead to Wilson Wheels increasing their ROA by 2% and their ROE by 5% if they choose to accept BigBox’s deal. However, if they choose to forgo the deal we predicted that they would see no change in these ratios. These financial indicators changed based on increases in revenue generated from existing and new sales along with low production costs.

In Conclusion, with the growing uncertainty in the industry and the company’s need to expand their bicycle market we recommend that Wilson Wheels accept the deal and work with BigBox to produce a private-label bicycle. We believe that this relationship would allow Wilson’s Wheels the opportunity to expand their business and reduce their risk in the current market. However, we do believe that this company should consider present and future values when evaluating the deal with BigBox. Although we believe that joining BigBox is the best option for Wilson Wheel’s at this time, the company should continue to evaluate this deal each year and weigh the cost of variable costs like inflation fees and taxes.

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