Overview
This midterm exam is worth 25 points, weighted as shown (Q1=20 points; Q2=5 points)
Question #1 Worth 20 Points:
You are at a Thanksgiving dinner and Marco, your cousin from Chicago, approaches you with a very intriguing business proposal and related questions. He tells you that since you are taking an International Business class at UCI you may be interested in joining/investing with him in a new business venture.
Marco, age 35, is a successful small businessman and partner in Atlas Plumbing Supply (“Atlas”)”), a Chicago based partnership, founded by Marco’s friend Andrew and his dad. The dad started this business years ago but he died in 2022 from Covid and Andrew took over.
The business sells plumbing products (faucets,sinks,toilets,etc.) in the U.S that they import from Taiwan and sell to the Illinois professional plumbing industry. The partnership has been successful over the years with Andrew responsible for the administrative matters (H.R., Legal, and Finance/Accounting) while Marco is responsible for all sales and the purchasing of the plumbing products from Taiwan. Marco tells you that suddenly Andrew wants to retire from the business in mid-2025.
Then, with a lot of excitement, Marco tells you he has recently met Bob, a business technology consultant. Bob and Marco want to grow the business and expand internationally. They envision keeping the headquarters in the rented existing warehouse/office and expanding the sales operations into Canada, England, and Malaysia. Neither Bob nor Marco has much international administrative, regulatory or financial experience. Combined they have wealth, mainly from Bob, but his wealth is tied up in investments that are not very liquid and he thinks they should just borrow from a bank.
Marco and Bob would like your advice on how to go about launching this venture and are quite optimistic about the financial future of this new venture. They also think that with this great opportunity, possibly other members of your family would like to invest and want you and your family to consider investing with them to launch Atlas 2.
Your Mid-Term Assignment: Write a letter to Marco explaining your thoughts on Atlas 2, this proposed business venture, and thoughts on whether to invest your own money or money of other family members. Your letter should be based on info from lecture, Canvas readings, text or other substantive sources. Your letter should include such factors as
- What is the best form of organization to use for this multinational type of operation including factors such as formation, partnership or corporate, ownership, board of directors, annual meetings, subsidiaries, income tax impacts, etc.?
- How will their lack of familiarity with the foreign locations impact the launch of this enterprise? How does Internal Control fit into this international expansion?
- Does finance and accounting need to be considered from the early stage of this planning; the meaning and relevance of “Financial Statements”; and Bob’s attitude toward investing his own money and what Marco should consider of his own & family investing?
- And any other factors you think are relevant.
Question #2 – Worth 5 Points: Marco, from Question #1, is very optimistic about this being a successful venture.
He asks you the following question – “If, in say, 2030, we have a successful business with strong sales, profits and cash flow, what is the general rule on how to determine the value of my business at that time in 2030? Based on the material in your International Business class, can you give me some general rules on how to value an ongoing business?” He also asks you to explain the shortcomings of using GDP and growth of GDP as indicators of how well an economy is performing and any other factors of significance.
Write an essay explaining what you would tell Marco. END of Exam