You Make the Call-Situation 3

question 96

Essay

You Make the Call-Situation 3
Paul Bowlin owns and operates a tree removal, pruning, and spraying business in a large metropolitan area with a population of approximately 200,000. The business started in 1975 and has grown to the point where Bowlin uses one and sometimes two crews, with four or five employees on each crew. Pricing has always been an important tool in gaining business, but Bowlin realizes that there are ways to entice customers other than quoting the lowest price. For example, he provides careful cleanup of branches and leaves, takes out stumps below ground level, and waits until a customer is completely satisfied before taking payment. At the same time, he realizes his bids for tree removal jobs must cover his costs. In this industry, Bowlin faces intense price competition from operators with more sophisticated wood-processing equipment, such as chip grinders. Therefore, he is always open to suggestions about pricing strategy.

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Definitions:

Dividends Payable

A liability recorded when a company declares dividends but has not yet paid them to shareholders.

Cash Payments

Outflows of cash made by a business, including expenses, creditor payments, and other liabilities, during a specific period.

Statement of Cash Flows

It's a financial document summarizing the total cash entering a company from operational earnings and investment revenues, as well as the cash spent on business-related activities and investment outlays during a specific period.

Operating Activities

Business activities related to the day-to-day operations that generate revenue, such as sales and purchasing of inventory.