Essay on Northern Rush

1632 Words Nov 9th, 2015 7 Pages
Following his investigation into the dorm furnishing industry, James was left with a decision as whether or not to invest his time and money to starting Northern Rush with a group of third year students as his partners. His first option was to maintain the status quo, that is, to choose not to proceed with the venture. The other option open to James would be to proceed with his $10000 investment into Northern Rush. If James chose not to proceed with the investment, he would have the freedom to spend his money any way he wish whether it be consumption, saving or investing in other ventures. As mentioned, he would also have significantly more free time during his summer months to allow him to travel. One advantage of pursuing the …show more content…
In comparison to the status quo, if James were to invest elsewhere, such as the bond market or choosing to save his money in a high interest savings account, his return on investment would remain relatively static or see small variations with the movement of the interest rate. The seasonality associated with Northern Rush can be viewed as a double edged sword when benchmarked against the status quo. Compared to other investments earning interest income monthly or year round, Northern Rush only makes revenues during the months of July and August, exhibiting strong seasonality. However, its expenses work much the same way, with the majority of the annual expenses incurred from June to September. With no liabilities, very little expenses and cash flow out of the business are incurred during the rest of the year (see cash flow statement). This means that James would be free to withdraw much of his investment or cash stake (in later years) in the off months between October and May as other needs for capital arise. He would be free to invest in other sources during this time as long as enough cash remains the business to handle minor charges such as that of the bank, or customer service platform. The main advantage that investing in Northern Rush poses over the status quo is the return on investment. Setting a

Related Documents