A Financial Review of Two Companies
After reviewing the three case study’s for two different businesses, it was interesting to compare their financial approaches.
Market, Competitive, Operating Characteristics, Financial Strategy and Risk
SureCut Shears SureCut Shears manufactures a complete line of household scissors and industrial shears. They have been in business and profitable since 1958. In 1995, SureCut arranged a line of credit of $3.5 million with the Hudson National Bank to cover requirements for the Fall. They projected a repayment of the loan over the coming 12-month period. However, in September of 1995, the company required an additional $500,000 more than had been additionally requested. In January of 1996, the company noted slackened sales as the reason they would be unable to repay the debt. In April of 1996, SureCut noted a further sales decline that would not allow them to be able to repay the remaining $1.25 million loan before the season upturn in funds requirements in June. While the bank is working with them on the debt, they have requested a meeting on April 29, 1996 to discuss the company’s recent progress. The competition for SureCut Shears is severe, particularly from overseas companies. They distribute their shears and scissors through wholesalers to specialty, hardware, and department stores. They also sell cheaper products directly to large variety chains. SureCut Shears is working to modernize their production program and it is costing more than originally anticipated. Sales have also declined due to a retailing recession. A review of SureCut’s liquidity ratios show:
• Current ratio=Current Assets/Current Liabilities ($11,839/$1,507=7.86)
• Quick Ratio=Current Assets-inventory/Current liabilities ($11,839-$7,243/$1,507=3.05)
The risk that this company is taking is that they are not keeping up with the new debt. Their industry may have changed and unless they change their model, eventually, they will no longer be viable.
Toy World
Market, Competitive, Operating Characteristics, Financial Strategy and Risk
SureCut Shears SureCut Shears manufactures a complete line of household scissors and industrial shears. They have been in business and profitable since 1958. In 1995, SureCut arranged a line of credit of $3.5 million with the Hudson National Bank to cover requirements for the Fall. They projected a repayment of the loan over the coming 12-month period. However, in September of 1995, the company required an additional $500,000 more than had been additionally requested. In January of 1996, the company noted slackened sales as the reason they would be unable to repay the debt. In April of 1996, SureCut noted a further sales decline that would not allow them to be able to repay the remaining $1.25 million loan before the season upturn in funds requirements in June. While the bank is working with them on the debt, they have requested a meeting on April 29, 1996 to discuss the company’s recent progress. The competition for SureCut Shears is severe, particularly from overseas companies. They distribute their shears and scissors through wholesalers to specialty, hardware, and department stores. They also sell cheaper products directly to large variety chains. SureCut Shears is working to modernize their production program and it is costing more than originally anticipated. Sales have also declined due to a retailing recession. A review of SureCut’s liquidity ratios show:
• Current ratio=Current Assets/Current Liabilities ($11,839/$1,507=7.86)
• Quick Ratio=Current Assets-inventory/Current liabilities ($11,839-$7,243/$1,507=3.05)
The risk that this company is taking is that they are not keeping up with the new debt. Their industry may have changed and unless they change their model, eventually, they will no longer be viable.
Toy World
References: Clarkson Lumber Company. (1996). Harvard Business School. HBSP Case Number: 9-297-028 Surecut Shears, Inc. (1999). Harvard Business School. HBSP Case Number: 9-297-013. Target Corporation. (2010). Darden School of Business. HBSP Case Number: UV1057. Toy World, Inc. (1996). Harvard Business School. HBSP Case Number: 9-295-073.