Mark X Company Case
The Mark X Company (A)
Case 1
We must analyze past data and provide expected data for the next two years to assess Mark X Company's financial position. Upon reviewing the data, we will make recommendations for both Mark X Company as well as Karen Dennison of Wells Fargo Bank. Senior management needs compelling evidence that shows the current difficulties faced by the company are not permanent.. It must also be accessed if Mark X can retire all of its outstanding loans by the end of 1993. A sensitivity analysis should also be conducted since the future of this company is very dependent on its performance in 1993 and 1994.
Mark X Company is a manufacturer of farm and specialty tailors. Over 85% of sales come from the western part of the United States; however there is a growing market both nationally and internationally. Steve, the president of Mark X, just received word of a deficiency report filed by the bank due to its poor financial position. Important ratios including the current, quick, and debt ratios did not meet limits set by the bank. The Altman Z factor is a measurement of the likelihood of default. Mark X had a factor of 2.97, which is under the minimum of 2.99. Many problems faced by Mark X were caused by the recession in the early 1990's.
Farmers were reluctant to buy new equipment since farm commodity prices remained low. In addition, the 1991 luxury tax caused high quality boat/trailer sales to decline. The Tax Reform Act of 1986 also had negative effects. With the reduction in tax benefits for horse breeding, horse transport van sales decreased. So, to stimulate sales, Mark X reduced its prices. Demand stayed down, and inventories continue to increase. The company then decided to change its credit policy to allow even more flexible credit terms. They loans Mark X received from the bank weren’t enough to pay for the asset expansion, so the company delayed its payments. The company decided to sign a contract for a plant expansion that would need
Case 1
We must analyze past data and provide expected data for the next two years to assess Mark X Company's financial position. Upon reviewing the data, we will make recommendations for both Mark X Company as well as Karen Dennison of Wells Fargo Bank. Senior management needs compelling evidence that shows the current difficulties faced by the company are not permanent.. It must also be accessed if Mark X can retire all of its outstanding loans by the end of 1993. A sensitivity analysis should also be conducted since the future of this company is very dependent on its performance in 1993 and 1994.
Mark X Company is a manufacturer of farm and specialty tailors. Over 85% of sales come from the western part of the United States; however there is a growing market both nationally and internationally. Steve, the president of Mark X, just received word of a deficiency report filed by the bank due to its poor financial position. Important ratios including the current, quick, and debt ratios did not meet limits set by the bank. The Altman Z factor is a measurement of the likelihood of default. Mark X had a factor of 2.97, which is under the minimum of 2.99. Many problems faced by Mark X were caused by the recession in the early 1990's.
Farmers were reluctant to buy new equipment since farm commodity prices remained low. In addition, the 1991 luxury tax caused high quality boat/trailer sales to decline. The Tax Reform Act of 1986 also had negative effects. With the reduction in tax benefits for horse breeding, horse transport van sales decreased. So, to stimulate sales, Mark X reduced its prices. Demand stayed down, and inventories continue to increase. The company then decided to change its credit policy to allow even more flexible credit terms. They loans Mark X received from the bank weren’t enough to pay for the asset expansion, so the company delayed its payments. The company decided to sign a contract for a plant expansion that would need