Evaluation of Purchase Decisions in International Finance

Running head: INTERNATIONAL FINANCE
International finance
Name of the student
Name of the university
Author’s note

1INTERNATIONAL FINANCE
Executive summary:
The above case study highlights the purchasing decisions of modern engineering of
instalment of new machines and how the process is evaluated in taking the business decisions
of the organization of the company. Apart from that the case study analyses the arguments
made by the purchase managers of the company. The statements also analyse and interpret
the financial investment decisions of the company. The company have also made some
recommendations regarding the policies and procedure and how the decisions are affecting he
business decisions. Lastly a suitable conclusion is provided in support to the statement.

2INTERNATIONAL FINANCE
Table of Contents
Introduction:...............................................................................................................................3
Evaluation of purchase decisions:..............................................................................................3
No economic value:................................................................................................................4
Addition of another assembly machine:.................................................................................4
Limited warehouse capacity:..................................................................................................4
Which factors should (or should not) be taken into account while doing financial analysis?...4
Revenue generation:...............................................................................................................5
Profit generation:....................................................................................................................6
Resource utilization:...............................................................................................................6
Capital efficiency and liquidity:.............................................................................................6
What should be the decision of Morden Engineering?..............................................................6
The decision has to be economical:.......................................................................................7
Cost minimization:.................................................................................................................7
Risks and other alternatives:......................................................................................................7
Conclusion:................................................................................................................................9
References................................................................................................................................10
Introduction:

3INTERNATIONAL FINANCE
The following case study interprets and analyse the purchase decisions taken by
modern engineering which is a well-known company of United States of America and Clyde
engineers who is a competitor brand are producing the same product and offering to sell the
product to modern engineering company. The case study also analyses the situation on what
forced the company management to reject the purchase decisions of the product. The case
study also interprets the statements provided by the company regarding the decision making
and the future effects of this decisions. The decisions taken by the company are backed by the
financial statements provided. Apart from that the decisions are also supported by a suitable
recommendation on what should be decision of the company at this point of time along with a
suitable conclusion supporting the statements of the financial organization.
Evaluation of purchase decisions:
The purchase decisions of any company is affected by different alternatives. It
depends on the predictability and viability of the project, value addition of the project and
lastly how much time the project will take to implement. All these decisions are taken care of
before choosing an appropriate project. Similarly modern engineering is a company who
focuses on producing good quality engineering and mechanical products. For this reason they
have purchased a new machinery for €45000 for manufacturing a part of the machine. The
manufacturing cost of the machine is estimated at 50 pence and 40 pence for raw material
cost. Because of the business this company have a lot of competitor in the market. One such
competitor is Clyde engineers who are a competitive manufacturer of this machine part have
invented a new technology to produce that machine part which will take less time and cost
saving (Erdogan, 2013). Apart from that the company have also offered to supply the
products for 83 cents and also have offered to produce 30000 items of the same part for every
year. According to the purchase manager of the company this offer is very much lucrative
because the cost associated with manufacturing the products are less and also it is time saving