CIMA Gateway Nov 2017 Examination - A relevant scenario
"We must change our way of operations. Our current operations take too long to complete our orders and we need to consider the significant investments made in working capital. This is a question that is revolving around for long and needs to be addressed by the management before the next board meeting. We are spending too much time to complete every order." The Finance director needs your comments on the following matters:
Should ZX change its current manner of operations considering the fact that working too closely results into being able to serve the customers satisfactorily and also that the investment in working capital is alarming?
What change management issues that are required to be considered?
ZX's investments in the new store in Kordia has not worked well since the demand could not pick up despite significant investments made in the new business center. ZX has acquired a HHN - a distribution company in another country - Kormax. HHN will ensure that the goods made at ZX in Kordia are distributed in other nations. However, the pricing for the goods transferred between ZX and the HHN is still under discussion. Kormax does not have any tax treaty with Kordia and the tax rates are significantly higher as compared withi Kordia.
You are required to explain the ethical considerations while deciding the transfer pricing between the two companies.
Explain the implications of requirements of impairment review on the financial statements on the investments made in the new store.