From: Dev Das, CMA
Subject: Business Case Analysis on Livoria Sandwiches
Date: September 30, 2013
Introduction
Livoria Sandwiches Inc. provides exceptional quality sandwiches at a great price. Livoria has been able to maintain profitability since inception and has continued to grow its business and revenues. Recent unforeseen external events have caused significant cash flow issues and shook the family business. Livoria is hoping to see annual net income of $1.1 million by 2015. This report will provide alternatives and the pros and cons of initiating these alternatives. A recommendation of one of the alternatives as well as an implementation plan will be provided to assist in obtaining the goal, maintaining profitable and alleviating the cash flow issue.
Current Situation
Livoria is facing an unforeseen legal obligation that impacts its current earnings and cash flows. Livoria however is in a good position to take advantage of a growing demand and changing customer demographic in the City of Dawkins. Exhibit 1, SWOT analysis, further describes the current situation at Livoria.
Key Success factor – High quality unique product and faithful customer base
Financial Assessment
The current financial situation does not look great. However if the onetime extraordinary allowance for a legal action is removed, Livoria shines. Livoria would have achieved a profit margin of 24% in 2012; this is the best in the industry. Livoria obtains the highest contribution margin at 53% as well as best sales growth at 5.4%. (Appendix B Livoria Sandwiches Inc)
Looking forward we see that our demand is coming in very strong, too strong in fact for our current capacity. Pro-forma financial statements have been generated showing what our realistic potential is for the next 3 years in Exhibit 3. Current capacity constraints will decrease production on our lowest Contribution margin items, meat ball and veal. With this happening we will not meet our