Lucky Prawn

Point of View

The case analysis will be taken from the point of view of a third party consultant to eliminate the possibility of any bias.

Statement of the Problem

Is it fair for plant managers to be evaluated and given incentives based on plant profits?

Analysis

Since Ben was left to operate the prawn business, the three non-resident partners, including myself, may have been feeling left out. We have given Ben some decision making capacity but I feel that Ben’s investment decisions should be limited as cash outlays are needed every now and then, even if there is significant cash balance by the end of each year. Inventory supplies were also high and some actions such as the water pump and excavation were done without the knowledge of the other members. I, together with the other members, feel that Ben is carelessly spending our money since Ben never invested in the business financially.

Decision/ Recommendation

Planning should be done as the first step when starting up the business. Ben, with our inputs, should plan everything we need so we will be prepared with the initial cash outlay and so that sudden cash infusion would no longer be necessary. Planning could set everything in place and should future cash infusions be needed, it would be as scheduled. Budgeting is also included in the planning where targeted sales would be projected, as well as the targeted expenses and expected net income. We can also use the budget as financial goals like the sales the business needs to hit and the expenses they need to limit. Planning in advance for big expenses would keep us, the other partners, in the light as to how our money is spent and this could also serve as an explanation as to why additional cash infusions are