Sales volume had been built up largely on the basis of successful price competition made through control of operating expenses and quantity purchase of materials at substantial discounts. Most of the moldings and door products, which constitutes significant items of sales, were used for repair works. Quantity discounts and credit terms of net 30 days on open account were usually offered to customers. Clarkson Lumber sales growth are expected to continue over the foreseeable future and future sales are protected to some degree from fluctuations in new housing construction industry because of the fact that high proportion of the company market is directed to repair business. Mr. Clarkson was an energetic and hard working man, has personal control over every feature of his business and he possesses sound judgment about his business issues.
Case Write-Up 1 Clarkson Lumber Company Murat ÖZTAŞ Overview Clarkson Lumber is a company that has been experiencing rapid growth in sales; thus facing a problem of cash shortage to continue its expected growth. Even though Mr. Clarkson was able to manage to have low operating expenses while running the business, the cash flow crisis is coming. Besides the urgent need for cash to recover the liquidity of the company, the owner, Mr. Clarkson has to pay back the note payable (with %11 interest) his former partner’s interest, which he bought out for $200.000 in 1994. Clarkson Company is not generating enough profit to pay off its debt in required amount of time. The financial statements and analysis ratios both indicate that the company is doing well.
But in the meanwhile smaller competitors started to quickly erode market share with prices cut. In 1997, instead of cutting prices, UST reacted to the growth of this value players with the introduction of premiumRed Seal but it was late considering that other brands were already successful in this segment. Moreover, UST is over dependent on smokeless tobacco business that contributed in 1998 for about 97% of
(See attachments). Firm is currently facing cash flow problems due to several factors. Working capital increased substantially due to increase in sales and inefficient operational management resulting in high collection period and low inventory turnover. Cash outgo for payment to Mr. Holtz compounded the problem. Capital expenditure of $155,000 was incurred during last 2 years.
The current ratio was 3.6 on February 29, 1988which mean that it has plenty of cash to cover any of its current liabilities. Moreover, Interco’s capitalized leases were 19.3%. The company was financially “overcapitalized”. When looking at the company collectively, Interco also looks healthy, with sales increasing 4.04% in 1987 and 13.4% in 1988.Growth in earnings moved Interco further toward its goal of a 14-15% return on equity: 1988’s ROE of 11.7% was up from 9.7% in fiscal 1987. However, if closer examination is undertaken, it is clear to see that the general retail and apparel businesses are struggling while footwear and furniture have been flourishing.
The financial institutions’ capital erodes and, at the same time, lending standards and margins tighten. Both effects cause fire-sales, pushing down prices and tightening funding even further (Brunnermeier and Pedersen, 2005). Notwithstanding the fact that Northern Rock was initially set up as a regionally based institution, the Bank had experienced a rapid growth during the decade before its crisis mid 2007. Northern Rock’s total assets had grown from 17.4 billion pounds to 113.5 billion pounds by June 2007, making it the 5th largest bank in the UK by mortgage assets. The funding of these assets caused a dramatic change in the composition of Northern Rock’s liabilities.
The income statement’s total revenues doubled in two years due to their unusual growth. The problem to behind income statement and balance sheets stems from their company owned and franchised factories; instead of selling the donuts, the company sold machinery to make their products. The goodwill and required franchise rights doubled each year until 2004 which raised questions and concerns as to whether Krispy Kreme improperly implemented accounting treatments. Compared to the industry, Krispy Kreme was apparently a very high performing company, but we questioned the performance data. First problem we encountered were the current and quick ratios were unusually high due to the amount of cash, receivables and short term investments that Krispy Kreme held.
Case question 1 During the recent years, Robertson Tool has been underperforming. Poor profit and sales performance reflects potential profits to be achieved from an acquisition with Robertson. At Robertson, key line items such as sales income, cost of sales and administrative expenses are much likely to be improved. Despite the fact that Robertson’s distribution system has a great range with wholesalers selling to over 15,000 retailers in 137 countries, the company’s sales growth (2%) falls behind the industrial sales growth by 4 per cent (6%). Poor sales performance and relatively high cost of sales have contributed to the profit margins to slip to one third of other hand tool manufacturers.
This analysis of the situation will determine a way to turn the company around and get back to the status they once held in the industry. This proposal will provide recommendations on how to increase revenue, achieve higher production levels, suggest a mix of pricing and non-pricing strategies, show how variable and fixed costs can be adjusted to maximize profits, and create barriers to future entry into the market if possible. Ways that the company can also increase product differentiation and minimizing costs will also be a focus of this proposal. Increasing Revenue The data form
Problems The first actionable problem is the increase in pricing for the service that we provide here at Netflix. Netflix has dropped 15% in heavy trading stock and has also lost over 2.5 million subscribers and projected to lose another 6.5 million due to the immense price jump. As you can see by reading the symptoms the problem in pricing is the major reason why revenue has dropped in the last year and is continue to fall. The price increase has caused customers to rethink their subscription to the company as most customers believe that watching movies is a pass time and not a necessity. Another problem the company is facing is the decline in market share.