Case on the lookout for: Horniman Garden Case Studies in Financing
Circumstance 9: Horniman Horticulture
1 . Assess the strengths and weaknesses of the organization Horniman Garden.
5. Constantly growing firm with increasing revenue (15. five per cent in 2005), net income, total assets and large returns on equity (5. 1% in 2005) 5. Large merchandise offerings, which has a recent maximize of 40%. Majority of offerings are in high need * Supervision (in relation to Bob Brown) features good jewelry with staff and buyers * Duty expense has not drastically changed (34-39%)
* Stabilized devaluation, only increasing 20% from 2002-2005.
* Massive liquidity difficulty, most money is tied up in products on hand and accounts receivable 5. Not reaching 8% of total income as funds margin
* Will take 51 days on average to receive payments from sales * Cash can be held up to get 517. a few days in 2005, well above the sector average of 381. a couple of days * Inventory requires 2-5 years to mature
* Decreased inventory proceeds ratio
2. Aversion to financing with debt
2. Relaxed collection policy
5. Unsustainable development rate
2 . How is a company using its cash?
* To get more inventory and to expand their property by 12-acres, with an predicted capital expenses of $75, 000 5 years ago. In the past two years Bob Dark brown has also increased their product range by forty percent. * Joe Brown is usually moving the merchandise range to more mature crops, as they are much sought after and are providing for superior prices. For that reason a lot of cash is usually held up in inventory 2. With improvements to their credit rating terms, the Brown's are acting as a bank to customers because they are offering much longer payment times. This is departing cash organized in accounts receivable for an average of fifty-one days. * Paying for purchases within the 12 day period to receive a 2% lower price, this displays that the Browns are making obligations five times quicker than they may be receiving all of them.
3. What do you expect the financial position from the...
References: Bruner, R N, Eades, K M, & Schill, Meters J Circumstance Studies in Finance McGraw-Hill/Irwan, United States