Mark X

“People think about trucking as a meat and potatoes business where you pick something up and then deliver it to a destination, but it’s not that simple, it’s a highly competitive business, and in order to thrive, firms need to implement innovations that will give them a competitive edge.”

The company started off producing 20,000 units of mountain bikes. We did not change the production quantity. Last year our forecast sales were 24,000 when we only sold 19,866; therefore we thought it would be best to leave production at 20,000 bikes. Having excess inventory, we concluded that 20,000 units should be enough considering our quality has not changed and our advertising will not increase the sales dramatically. Although we had the choice to produce as much as 30,000 units, we felt as though we did not have sufficient money to increase production. We were interested in allocating the money towards marketing as opposed to production. We realized that without awareness, no matter how many units we make, sales would be inefficient.

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.

The problem that Deere faces is how they can successfully move to the middle of the perceptual map to be respected as a manufacturer of both small tractors and large tractors. There are several observations that can be made regarding the positioning of the competitors. The first observation is both International Harvester and Case are competing in both the large and small tractor market. It is evident that International Harvester experience financial difficulties perhaps as a result of not having a singular focus. Another observation is that Caterpillar’s decision to “reposition” itself from a small manufacturer to a large manufacturer could easily be explained by Paretti’s 80/20 rule. Caterpillar enjoyed an extensive dealer network, and their dealer sales ranged from $12 million to $70 million, versus Deere’s $1 million to $16 million in sales per dealer. By tapping into Paretti’s 80/20 principle, Deere could enjoy increased margins from the sale of parts alone.

This bank loan helped finance the increase in property and other related assets. The sponaneous assets that were increased as a result of an increase in sales were financed by an increase in sponaneous liabilities. Spontaneous liabilities have grown by 35%, which supports the claim that they finance the increase in accounts receivable and inventories. In the period between 1993-1995, the financial strength of Clarkson Lumber has deteriorated significantly. As seen from the financial ratios excel spreadsheet attached, the current and quick ratios have been gone down substantially. This means that the company’s ability to meet its short term obligations has deteriorated. Furthermore, the return on sales and return on assets have also gone down, which means that their increase in net income has not stayed consistent with the increase in sales and increase in assets to finance these sales. Their falling inventory turnover ratio means that even though their sales are increasing, they are not moving inventory at the same pace they had before. Their low accounts receivable turnover ratio and high dales sales outstanding indicates that there’s a large amount of money tied in this account.

Tootsie Roll Industries is one of America’s most recognized confectionary companies and has been in business for more than 111 years, manufacturing and selling some of the most popular candies in the world. Tootsie Roll wants to secure a loan that will help increase the company’s total liabilities by 10% in the tune of $2.5 million. This loan package is attached to an updated business plan that provides the lender with the company’s history, a vision statement, its market, products, services, management, how the loan will impact the business, and the method of repayment. This paper will detail different ratio analyses, loan justification, and how the company plans to use the proceeds.

The company is weakened mainly by its lack of technological advancement in every area of production. For example, if the company chose to modify their equipment to produce their “Atherley” model as well, it would be able to lower production costs of this model, in turn increasing the profits of this model further. In addition, the Atherley Furniture Company greatest threat is the decreased market for their “Parkdale” model. The “Parkdale” model has the most time consuming and costly production. With lack of a market for this model, the company stands to continue to lose profits. In conclusion, if the company wishes to continue to operate their chair division profitably as well as efficiently, the above issues need to be addressed and corrected.

As mentioned in the introduction of the mini case, Hobby Horse Company, Inc. (HH) experienced a tough year in 2011. HH opened up a number of new stores but experienced a poor Christmas season. Christmas season is the biggest sale period for retail stores. As a result, bad Christmas sales performance played a big part of HH’s loss for year 2011. As we computed the financial ratios for HH, we can see the effects from new stores openings and poor sales performance.

In week three, Learning Team E presents a loan package for public held company, Tootsie Roll Industries, Inc., in business for over 100 years. Tootsie Roll is a manufacturer of confectionery products. In addition to sales in the United States, Tootsie Roll’s profits grew in Mexico, Canada, Europe, Asia, South and Central America. This loan package consists of three sections: Financial Ratios, Corporate Strategy-2008 Project: Capital Expenditure, and Loan Approval’s Effect on Tootsie Roll Industry, Inc. Financials.

Based on our projections for the years 2002-2004, the biggest driver that effects debt is the company’s operating expenses. Based on the history of the upward trend of operating expenses, our recommendation is that The Body Shop needs to concentrate on lowering the operating expenses, and keeping those expenses around 45% or lower in order to avoid borrowing money. Our 45% recommendation includes a safety net which will prevent having The Body Shop borrowing cash if sale do not continue to climb at a significant rate.

The liquidity, profitability, and solvency ratios reveal some interesting points about Kudler Fine Food’s financial position. The liquidity ratios revealed that during 2002 and 2003, Kudler was having no trouble paying short-term debt. However, the current and acid-test (quick) ratios showed that during 2003 Kudler had an excess amount of cash that they were not investing properly. These ratios also showed that Kudler was collecting receivables and selling average inventory very quickly. The profitability ratios revealed that during 2002 and 2003, Kudler was using assets efficiently and making a decent profit. The profit margin ratio

Cartwright is a retail distributor of lumber products. It built its competitive edge based on pricing and having a careful control over its operations. The company reported an operating income of $86,000 and $111,000 in 2003 and 2004, respectively. This is a 29% increase in operating income in one year, which shows the firm’s strong ability to generate cash. The firm’s account receivables and inventory are increasing from year to year which is a good sign of a growing business. Cartwright is not an asset intensive company. It does not have to have huge fixed assets; most of its assets are cash, accounts receivable and inventory which all depend on future sales. Sourcing of materials is managed very well, purchased at discounts most of the time and contribute to having lower prices.

|250000 indirect employees & 9000 vehicle for distribution). |position in profitability due to drop in prices by nearly 30% since 1950’s. |

Each one of these lenders having debt covenants of their own with the arrangement that if one of these covenants were to be broken all of Massey Ferguson's debt becomes callable. These types of restrictions can impede company financial options during down times (as they did when Massey Ferguson attempted an equity issuance in 1978). The emphasis on short term credit lines was also a questionable choice of finance structuring. Expansionary/market penetrating strategies typically pan out by taking losses in the short term in order to realize larger gains in the long term. Along with an expansionary strategy, Massey Ferguson was also increasing spending in R&D for production of higher horsepower tractors to market in North America and for diesel engine production.

The company’s creams inventory remains constant because it does not follow a trend in innovation and changes so often as the other products. The surplus in inventory is a big disadvantage since; last year’s products may not be in style this year in addition to the cost of storage. For all these reasons their cash flow is less in comparison with previous years causing that Luxor Cosmetics keeps increasing their bank loans, creating more debt, making it harder to pay out as 2011. In this particular situation the company could have either decrease its budgeted sales (productions) or increase its actual sales by improving more effective marketing strategy and research and development of its products in the markets. This way their inventory would decrease and their cash flow would increase. (Hopkins, 2009)