Hbr Solution Unidentified Industries Essay

| The company has a few different suppliers but relies on each supplier to bring in the stock for them to sell, if they didn’t have more than one supplier then they wouldn’t have anything to sell if one stopped production or went on strike.

The company’s increase in inventory (illustrated on the statement of cash flows) rose after 1970 and culminated by a drastic increase in 1973. This increase in inventory (especially in 1973) appears to be heavily financed by short-term and long-term borrowing rather than the typical accounts payable. This is a bit unusual and in 1973 (when they acquired the greatest amount of debt equity, their accounts payable decreased. Their sales were not sufficient to offset the large outflows of inventory related costs. Furthermore, Grant’s decentralization was also a cause of their financial woes because rather than corporately controlling credit extension and credit terms, they allowed each store manager to set their own policies (and manipulate them as they desired). This disastrous policy imploded in 1975 when the company had to make a $155.7 million provision for bad debt expense. So not only did the company have substantial debt and bad debt to equity ratios, they were forced to write off about 8.8% of their total sales from 1975.

13. Use the following data to determine the total dollar amount of assets to be classified as property, plant, and equipment. Eddy Auto Supplies Balance Sheet December 31, 2014 Cash $84,000 Accounts payable $110,000 Accounts receivable $80,000 Salaries and wages payable $20,000 Inventory $140,000 Mortgage payable $180,000 Prepaid insurance $60,000 Total liabilities $310,000 Stock investments $170,000 Land $190,000 Buildings $226,000 Common stock $240,000 Less: Accumulated Retained earnings $500,000 depreciation ($40,000) $186,000 Total

James Gitanga was not sure about the unusual capital structure of the Company, avoiding the long-term debt. We believe that the long-term capital structure across the industry was pre-determined by the high capital expenditures and steady cash inflows. Thus, issuing long-term debt was more preferable. Besides, by issuing debt they would enjoy the tax shield since interest on long-term debt is tax-deductible.

* The company has sufficient liquidity to finance ongoing operations without taking on additional debt.

The financial aspects of a business can make or break a company. In the case of Haefren Baum, the company does not seem to be excelling financial. The company is funding itself through long-term debt and the deferment of payable and expense accounts. Funding from the bank can be seen as the liability account Notes Payable (Bank) increases. The company may be forced to fund itself through the bank because of liquidity issues and the fact that its payments from customers are taking a long period of time, as seen in the average collection period. Factors that may be

Analyze the fundamental differences between the working capital structures and components for each chosen company, and speculate upon the main reasons why such differences exist.

4. May Department Stores is a merchandising company and I would link it with balance sheet number four. First clue are the inventories, 23, 2 % of total assets, usual for this type of company. As stated above, the offer their own credit cards, which can be explained the level of account receivables, 25, 7 % of total assets. Compared to the other five companies, May Departments Stores have an amount of PPE (20 % of total assets) that suits best for this type of company. The current liabilities are relatively high, 38, 3 % of total liabilities and shareholders’ equity, usual for merchandising company and a low level of long term debt, 9, 3 %.

Warehouse Club, Supermarket and Consumer Products firm. Remaining financial statements are B, E & H.

In the Case of the Unknown Industries, we matched several industries with their corresponding balance sheets. We used several different methods to come up with our conclusion. An important factor we had to remember was the economic state industries were in their respective year.

Managing debt levels to maintain an investment grade credit rating as well as operate with an efficient capital structure for its growth plans and industry

The company’s debt ratios are 54.5% in 1988, 58.69% in 1989, 62.7% in 1990, and 67.37% in 1991. What this means is that the company is increasing its financial risk by taking on more leverage. The company has been taking an extensive amount of purchasing over the past couple of years, which could be the reason as to why net income has not grown much beyond several thousands of dollars. One could argue that the company is trying to expand its inventory to help accumulate future sales. But another problem is that the company’s

With this company the inventory management ratios further indicate that there may be an issue with inventory and inventory controls. The inventory turnover ratio is lower than the industry average and the days’ sales in inventory are high. A company wants to turn inventory quickly to reduce storage costs, and

In 1997, the Kosta Bros could be identified as a large proprietary company. Under CA 2001 s45A (1)*, a proprietary company could be defined when there are less than 51 non-employee shareholders. By 1990, there were 30 shareholders existing in the company. Also, it did not raise funds from the public since most of the capital was obtained from the interest bearing debt provided by major banks. Thus, the company was a proprietary company. When we are evaluating the size of a company using CA 2001 s45A (2)*, Kosta Bros employed 85 EFT staffs, which were greater than 50*; the gross assets obtained were $19m, which were greater than $12.5m; the gross operating revenue was $20m, which was less than $25. When two of three thresholds are achieved, the proprietary company is regarded as large*.

Exhibit 6, 8, and 9 (figures in $ millions) provides selected balance sheet items for Ford, General Motors, and DaimlerChrylser. The given information indicates that Ford carries the highest amount of cash and marketable securities among the three companies. In 1999, Ford had $25,173 of cash and marketable securities while General Motors and Daimler-Chrylser have only $12,140 and $9,163. Comparing at an industry level, we as a team