Gone Rural Case Write Up Essay

1031 Words Feb 1st, 2015 5 Pages
Gone Rural Case Write-Up
11/19/14

1. How would you advise Ms. Thorne concerning growing her organization, being financially viable and achieving her mission?

In order to grow her organization, our group advises that Ms. Thorne invest a total of R1 million in new additional facilities to double the operating capacity of the company. In order to grow the company and expand into foreign markets, the company needs to build another facility. It was made clear that the limiting factor in production is not the number of people, rather it is the fact that the old facilities have been outgrown. The way our group advises funding the building would be through debt. Using equity to finance the deal would likely mean giving up part of the company
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2011
2015
Current Ratio
3.73
9.54
Quick Ratio
1.84
7.43
NWC to Total Assets Ratio
0.64
0.81
Total Debt to Total Assets Ratio
0.47
0.20
Debt to Equity Ratio
0.89
0.26
Return on Total Assets
0.08
0.18
Return on Equity
0.14
0.23
Gone Rural will be able to pay their current liabilities 3.73 times with their current assets in 2011 and 9.54 times in 2015(one year term)
Gone Rural will be able to pay their current liabilities 1.84 times immediately in 2011 and 7.43 times immediately in 2015
Over the 5 years Gone Rural will become less leveraged, thus less financially risky going from 0.47 in 2011 to 0.20 in 2015 debt to equity ratio decliens from 0.89 in 2011 to 0.18 in 2015 meaning they will be using less debt to finance themselves and becoming less risky financially return on equity almost doubles from 2011 to 2015 meaning profits generated by the investment increases

3. Analyze the various options concerning payment terms with various customers and the financial implications for Gone Rural. Based on your analysis, where should Ms. Thorne seek to increase growth?
a. Payment terms and accounts receivable affect a business’ cash flow in a big way. As such, Gone Rural needs to view the accounts receivable as an investment because the money that is tied up in it is unavailable to pay Gone Rural’s bills. With an average collection period of 4-6 months and large orders having no deposits, Gone Rural has a very large investment in accounts receivable. Typical

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