FIN3CSF
CASE STUDY IN FINANCE
Case study two
Setting some themes
Lecturer: Judy Taylor
Yijing Tu 17352944
Pengfei Xu 17353346
Case 9: Horniman Horticulture
1.Analyse the strengths and weaknesses of the company Horniman Horticulture.
The Horniman Horticulture has a large number of strengths and weaknesses.
Strengths: The management of this company is well done. Bob Brown, the co-owner of this company, has a strong work ethic. The Bob was skilled in company and was extraordinary respected by staffs. Some people described Bob as a “ people person”. His personality is warm and enjoyed by customers and employees. Because of good controlling of Horniman Horticulture. The revenue of company growth constantly from 2002 to 2005.
…show more content…
The company need to use cash to pay suppliers early enough to catch any trade discount. Although it took a long time for Bob Brown to sell the inventory, Bob was still optimistic about coming year. The company bought 12-acres which was expected capital expenditure of 75,000 dollar in 2006 in order to extend its property. A large number of cash was detained in inventory.
3.Extend the financial statements (i.e. balance sheet and profit and loss statements) through to 2006, assuming that Bob Brown grows revenue by 20%. Note: to make the balance sheet balance, define cash as equal to (current liabilities + net worth) – (accounts receivable + Inventory + other current assets + net fixed assets). Assess the financial position and need of the business in 2006.
Cash = (current liabilities + net worth ) - (accounts receivable + Inventory + other current assets+ net fixed assets)
Purchase 2006 = purchase 2005/COGS 2005* COGS 2006
Put depreciation for 2006 = 46 and capital expenditure = 75
Net working capital = current asset- current liability
Although the revenue grows up by 20% as the Bob Brown’s idea, the cash level is still very low witch will make in to a negative position. As a result of this,
Short Term Investments – totaled $220,000.00 in year 6, a gain of $21,500.00 or +10.8%.
In accounting there is much to be learned, about the financial aspects of a business. In the past five weeks I have learned the importance of financial reports and how they relate to the success of an establishment. These reports may include balance sheets and income statements, which help accountants and the public grasp the overall financial condition of a company. The information in these reports is really significant to, managers, owners, employees, and investors. Managers of a business can take and deduce financial
Operating cash flow was not enough to cover capital investments (this firm does not to appear to pay dividends as it does not show in the prior 3 years). The firm is financing it operations from the issuance of common stock. $23,082 was raised during the period, which is covering its investments in capital expenditures.
The cash account is a balance sheet account and is in the liquid funds accounts It is important for the system be able to discriminate between balance sheet accounts (real accounts) and income statement accounts (nominal accounts). This classification is important for closing purposes and also for developing the financial statements. The account classification (liquid funds) is also important for the system when developing the financial statements.
BALANCE SHEET |Dec 1990 |Jan |Feb |Mar |Apr |May |June |July |Aug |Sept |Oct |Nov |Dec | |Cash |175 |556 |724 |175 |175 |175 |175 |175 |175 |175 |175 |175 |175 | |Accts receivable |2,628 |958 |234 |271 |270 |250 |250 |270 |1,603 |3,113 |3,580 |3,982 |3.063 | |Inventory |530 |948 |1,355 |1,749 |2,157 |2,564 |2,971 |3,365 |2,904 |2.314 |1,549 |697 |530 | |Net P/E |1,070 |1,070 |1,070 |1,070 |1,070 |1,070 |1,070 |1,070 |1,070 |1,070 |1,070 |1,070 |1,070 | |Total Assets |4,403 |3,533 |3,383 |3,265 |3,672 |4,059 |4,466
Prior to my employment at Perry Dental, I was the co-owner of Timm Lawn Care where our company serviced over 80 customers on a weekly basis. Being a business owner for over ten years has helped me excel in my organizational, accounting and customer service skills that have made me a very self-motivated and efficient employee.
The accounting equation: Assets = Liabilities + Owner’s Equity. Assets are the resources of the company. Examples include cash, land, buildings, and equipment. Liabilities are “outsider claims”, the company’s obligations to creditors. Examples include accounts payable, notes payable, and income taxes payable. Owner’s Equity represents “insider claims” of the company or the owner’s share of the assets. If a business is keeping accurate records this equation should always be in balance.
Complete an income statement, balance sheet and statement of cash flows for 2011. Please provide information on any assumptions you make not already stated in the case.
Note: To make the balance sheet balance, define cash as equal to (Current liabilities + Net worth) – (Accounts receivable + Inventory + Other current assets + Net fixed assets).
Inventory: Inventory equals COGS divided by number of days in a calendar year (360) times number of days of inventory (20). The cash flow equals the change in inventory level each year until year 10, when the inventory level is recovered.
Moving onto the balance sheet, it is safe to assume that the cash position in the firm will increase the rate of the sales growth going forward. In actuality, cash has historically increased faster than the growth of revenue with 2004 being an exception. To calculate the assumption for accounts receivable, inventory, and accounts payable, we averaged the four years worth of data
The internal sales data showed that the business would need $45,000 in monthly revenue to break even. The sales forecast which have been prepared keep in mind a 65% gross margin, however, based on actual figure for 2009, this target has not been reached, and the forecasted sales have fallen.
For our balance sheet, we began by adding together all of The Body Shop’s assets. This included Cash, Accounts Receivable, Inventories, Other Current Assets, Other Assets and Net Fixed Assets. All Current and Fixed Assets were calculated with percentage-of-sales forecasting. For Liabilities and Shareholders’ Equity,
Furthermore, if an organisation does not have enough cash resources in order to settle its current liabilities, this will highlight great inefficiency with stock turnover not being sold. A good company such as Sainsbury’s we see is healthy because revenue is recognised from inventories sold – this revenue allows cash to flow in order to pay for short term and long-term liabilities. It is evident that there are insufficient cash flowing into the company from investing activities and financing activities, which are shown by the brackets.
| Below is an excerpt from the cash flow statement of a firm for fiscal year 2003: Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Amortization of software Tax benefits of employee stock plans Special charges (Gains)/losses on investments Change in operating assets and liabilities: Receivables Inventories Pension assets Other assets Accounts payable Pension liabilities Other liabilities Net cash provided by operating activities Cash flows from investing activities: Payments for plant and other property Proceeds from disposition of plant and other property Investment in software