Key Reasons Why Dick Smith Failed When Others Survived?

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Key Reasons why Dick Smith failed when others survived? Role of Anchorage on Inventory and CashFlows: Anchorage bought DSH for $115million from Woolworths but according to an analysis by Matt Ryan from Forager Funds Management, they only forked out $7.4million from their pockets and settled the rest of the payments manoeuvring DSH’s balance sheet. Anchorage wrote down $121million worth inventory and plant & machinery using fair-value adjustments. These write down’s allowed them to reduce the COGS and depreciation and generate an additional $121million pre-tax profit. By selling $141million worth of inventory during FY14 at discounts in 2013, Anchorage was able to fund the remaining cost of purchasing DSH using company’s operating cash…show more content…
DSH employed a rapid growth strategy by opening new stores at a time when the retail industry is in decline and retailers are focusing on capturing the online market. Poor online strategy led to a bad reputation as customers left numerous negative feedbacks and complaints on their eBay store. Corporate Governance Issues In 2014, management believed that a separate nomination committee was not required and their functions were carried out by the board itself. They later ended up setting the committee in 2015. DSH’s chairman until 2014, Phil Cave held 20% of shares in the company given his position as chairman of Anchorage. This was against ASX corporate governance recommendations but the management felt compliance wasn 't company’s best interests as Phil had a deep understanding of the business. Anchorage sold their remaining shares later in 2014 which suggests that they were only looking for short-term gains. It is the company’s obligation to recognise and work towards the legitimate interests of its stakeholders but some practices seemed to deviate from that viewpoint. Key management personnel share reduced from 11.5% to 7.3% in 2015. Anchorage’s usage of earnings management and manipulation to influence market opinion worked against the code of ethics and is subject to senate inquiry. The company’s poor corporate strategy promised that

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