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Winter Temperatures Affected the Firm's Revenues

Autor:   •  September 6, 2012  •  Essay  •  315 Words (2 Pages)  •  1,221 Views

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Problems:

Winter temperatures affected the firm’s revenues because it is supposed to be the season with the greater electricity usage, and the last few years had offered a warmer than average winter climate, resulting in adverse financial results.

The weather combined with rapid deregulation in the company’s market area, meant that the firm reported substantially no EPS growth from 1995 to 1999.

PNW’S stock price has been falling, and another unseasonably warm winter is willing to come.

PNW has been spending about 1 billion a year in capital projects increasing their capital cost, and their rating had slipped from A to BBB+ producing a cost of debt higher by 75 basis points at the margin.

Possible Solutions:

- Hedging with weather derivatives, to minimize the company’s risk according to the information delivered by the weather advisory service, even if there is a small possibility to have a normal winter.

- Not doing nothing and hoping to have a normal winter.

- Reduce their projects, and low their debt to improve their rating, and to gain more liquidity in the long term.

The Body Shop company, would like to forecast its financial statements to have a better perspective of how their earning will be in the future. With this information, they are going to be able to make easier decisions about the projects that they are willing to start. They had three main objectives: To enhance the Body Shop Brand through a focused product strategy and increased investment in stores; to achieve operational efficiencies in their supply chain by reducing product and inventory costs; and to reinforce their stakeholder culture. It is also important to take notice that if you forecast the financial statements, then you will be able to know how much

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