Description
What is Inventory Management? What is Investment Management? Please review the Simulation Example on a Camera Warranty.
Explain how inventory and investment management are related to this example regarding Discount rate/cost, Warranty period, NPV, etc.?
write down 2 response for 2 classmate.
first post:
Inventory Management: Inventory management oversees and controls the movement of goods, raw materials, and finished products, as well as keeping track of them to ensure a business has an adequate supply (Nirmala et al., 2022).
Investment Management: Investment management is the professional management of various securities (shares, bonds, etc.) and assets (e.g. real estate), to meet specified investment goals for the benefit of the investors.
Simulation Example on a Camera Warranty: A manufacturer offers a one-year product warranty. The manufacturer has data on past warranty claims, which can be used to simulate the expected number of warranty claims in the future. Using this data, the manufacturer can estimate the warranty cost, which can then be used to set the camera’s price.
Cost of providing the warranty: The cost of providing a warranty may be determined as the cost of the company’s existing inventory or buying and replacing all of the new camera’s expected warranties.
The warranty cost can be determined as: The company’s Existing Inventory: The company’s existing inventory is simply the cost of the cameras purchased during the year covered by the warranty.
The company’s New Inventory: The company’s new inventory of cameras is estimated by finding the average selling price (ASP) of all cameras sold during the one-year warranty (Nirmala et al., 2022).
Cost of replacing the new inventory: The expected number of cameras needed to replace the current cameras is determined by dividing the year covered by the warranty, one year, by the one-year average ASP for all cameras sold. The resulting value is assumed to be the number of cameras needed to replace the existing inventory.
NPV: NPV is the discounted cash flow formula used to determine the present value of future cash flows. NPV is the discounted sum of cash flows, such that the present value is obtained by discounting all cash flows in the future (Bagui et al., 2022).
post 2:
Inventory management is defined as, “Inventory management helps companies identify which and how much stock to order at what time. It tracks inventory from purchase to the sale of goods” (Jenkins, 2020). This helps to show the company which products are being purchased more than others. It can help them to increase the orders of those products therefore making sure the customer demand is met.
Investment management is defined as, “Investment management refers to the handling of financial assets and other investments—not only buying and selling them” (Chen, 2021). There are a lot of different investments and ways for people to invest. The investment management is not just dealing with investments it could mean banking, budgeting, and tax services. (Chen, 2021).
When it comes to buying products, many people invest in warranties to cover protection if anything ever happens to the product. This is shown in an example using a camera warranty. From the example there is a time frame in which the warranty is valid. This is called the warranty period which is 1.5 years. People who are looking into investment management want the longest warranty period so they can get a replacement for little to no cost. There are no failures within the warranty which means that it is a good product for the company because if people buy the warranty that is extra profit to the company.
When looking into discount rate I was not sure exactly what was meant by this until I researched it. I found, “This helps determine if the future cash flows from a project or investment will be worth more than the capital outlay needed to fund the project or investment in the present” (Majaski, 2022). For the company they have to make sure that the investment management is making more money than they are losing. The company also has to make sure that they are correcting any inventory management that needs to be changed. If they need more cameras being made or less cameras to make sure the company is making revenue and not losing money.
NPV (net present value) is defined as, “net present value a method used to determine the current value of all future cash flows generated by a project, including the initial capital investment” (Jagerson, 2022). The NPV in the camera example is in a profit from a customer. This relates to the investment management because the company keeps getting profits from each camera that is sold.
