Om Scott&Sons

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A Case Study on O.M. Scott and Sons Company CASE CONTEXT The company is facing a good economy as evidenced by the increase in sales. Industry is investing in research and development of products. Competitors are slowly entering the market. O.M. Scott and Sons Company is a business in the lawn care and garden product industry. Currently, the company is reviewing the results of 1961 and preparing plans for the 1962 selling season. Sales were increasing and so is net income except for the year 1960 to 1961. Presently, the company is using a combination of traditional seasonal dating plan and trust receipt plan to encourage and enable as many dealers as possible to be well stocked in advance of seasonal sales peaks. Also, this combination was used to retain security interest in merchandise shipped. PROBLEM DEFINITION With the current internal complications, what must O.M. Scott and Sons Company do to be able to decrease cost of sales and operating expenses? How will the company keep up with its goal of a 25% annual growth rate in sales and profit considering the current policies? How should the company finance its current policy of combination of seasonal dating and trust receipt plan? FRAMEWORK FOR ANALYSIS ➢ To assess the current financial position of O.M Scott & Sons Company, key ratios are computed and a Dupont analysis is prepared. ➢ A proforma income statement is prepared to project the company’s target sales that will conform to the company’s 25% annual growth rate goal. ➢ A further analysis of the financial statements and the notes is made to evaluate the company’s condition and the needed financing for the current policies of seasonal dating and trust receipt plan. ANALYSIS Financial Ratio Analysis Liquidity The overall liquidity of the company seems to exhibit an inconsistent trend. The company’s liquidity seems to be okay since the recent ratios

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