The Body Shop Case#8

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The Body Shop
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.

Sales
For sales from 2001 to 2002, we are projecting a 13% increase because we want to base the same revenue growth as the previous fiscal year. It will take some time for the company to do better like
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This amount was also used for dividends in the previous three years. Because this amount was correct in projections used for the previous three years, we will again use it for the next three years. This decision is based on past accurateness and the consistency of the company.

Current Assets
For current assets for each of the following three years, we are projecting the same percentage of 32% of sales. Assets that are constantly flowing in and out of a organization in the normal course of its business as cash converted into goods and then back into cash show small growth if any, in periods of time. The assets that are expected to last or be in use for less than one year will also show the small growth if any due their usage life expectancy. Because of these facts of our current assets, we will continue to use the projected 32% of sales as in previous years. Because this projection served correctly in previous years, we will again use it for the next three years. This decision is based on past accurateness and the consistency of the company.

Current

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