Finance Case Study: Computron
Finance - Case Study
Situation - Computron (expansion Program) A. Sales have been below forecasted numbers B. cost have been higher than projected C. They suffered a profit loss instead of a gain D. Management, investors and directors are concerned. E. It'd tsking s long time for dvertisement programs to get across all business units, including sales and operations
Problem - Computron is faced with alot of problems that have impacted their business and caused them to suffer financially. Looking at some of their financial ratio will help give understanding to some of their immediate concerns.
Problem 1 - low liquidity (current Ratio)
In 2007, Computron liquidity dropped significantly from the previous year. Their current ratio went from 2.3, which was moderate to 1.5. The company took on a significant amount of debt in 2007 for funding an expansion project. Due to their current liquidity level poised a huge obstacle not only to management, but to existing and potential creditors. Who may be concerned with Computron's ability to pay-off debt in a timely manner. Furthermore, there liquidity is below the industry of 2.7.
Problem 2 - Asset Management
A major concern for Computron is their inability to maximize their assets to generate enormous revenue. Due to the lag in communications, Computron investment in their new facility has not been maximize. They have a facility that may be operating at less than half of its normal capacity. Computron's asset management ratio reflects their struggle in this area.
Inventory turnover - Computron turned over their inventory only 4.5 times this past year compared to the industry standard of 6.1. Failure to turnover inventory at a sufficient rate minimizes cash flow. Which impacts Computron's bottom-line.
Days sales outstanding -
Computron's Day Sales Outstanding is 39 days and projected to be 45 days in 2008. This indicates it taking clonger for Computron to receive payments on completed
Situation - Computron (expansion Program) A. Sales have been below forecasted numbers B. cost have been higher than projected C. They suffered a profit loss instead of a gain D. Management, investors and directors are concerned. E. It'd tsking s long time for dvertisement programs to get across all business units, including sales and operations
Problem - Computron is faced with alot of problems that have impacted their business and caused them to suffer financially. Looking at some of their financial ratio will help give understanding to some of their immediate concerns.
Problem 1 - low liquidity (current Ratio)
In 2007, Computron liquidity dropped significantly from the previous year. Their current ratio went from 2.3, which was moderate to 1.5. The company took on a significant amount of debt in 2007 for funding an expansion project. Due to their current liquidity level poised a huge obstacle not only to management, but to existing and potential creditors. Who may be concerned with Computron's ability to pay-off debt in a timely manner. Furthermore, there liquidity is below the industry of 2.7.
Problem 2 - Asset Management
A major concern for Computron is their inability to maximize their assets to generate enormous revenue. Due to the lag in communications, Computron investment in their new facility has not been maximize. They have a facility that may be operating at less than half of its normal capacity. Computron's asset management ratio reflects their struggle in this area.
Inventory turnover - Computron turned over their inventory only 4.5 times this past year compared to the industry standard of 6.1. Failure to turnover inventory at a sufficient rate minimizes cash flow. Which impacts Computron's bottom-line.
Days sales outstanding -
Computron's Day Sales Outstanding is 39 days and projected to be 45 days in 2008. This indicates it taking clonger for Computron to receive payments on completed