SureCut Shears‚ Inc. is a manufacturer of household scissors and industrial shears. Because of a policy of level production and a seasonal sales pattern‚ the company has to borrow funds under a line of credit to cover its seasonal buildup in inventory and receivables. During 1995-96‚ sales began to fall from projected levels due to a retailing downturn. However‚ the company may have been slow to react resulting in an accumulation of excess inventory and related inability to repay its bank loan prior
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SureCutShears manufactures a complete line of household scissors and industrial shears. The company has been profitable since 1958 and is considered to be healthy‚ with ROE at 14%‚ Gross Profit Margin at 28% and Current Ration at 10.9% for 1995. David Fischer‚ Treasurer arranged for a line of credit of $3.5million with the Hudson Bank and presented the bank with projected statements. The first assumption made Mr. Fischer when he prepared the projection financial statements The first assumption
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Case # 2 SureCut Shears‚ Inc. Applied Corporate Finance 1. In his predictions‚ Mr. Fisher assumed that growth of sales in the year (July 95 till June 96) would be -0.4% – which in the case of a company that has shown sustainable growing profits since 1958 should reflect some negative economic expectations that would be confirmed by the retail industry downturn – with monthly values for 1996 similar to homologues registered in 1995; production would
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retailing downturn. Higher-than-expected inventory was being carried through the peak season as well. This was their peak sales period and it was hoped that proceeds from this season would pay off the seasonal loan for the capital expenditure. SureCut Shears now faced a credit problem because they no longer expected to be able to pay off the seasonal loan. INTERPRETATION OF EXHIBITS Due in part to a slackening of sales‚ inventory at the end of March 1996‚ the amount of additional money tied up in
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Company: Fischer is both treasurer and president • Stewart did approve the 2‚5mill loan extension • House hold scissors and industrial shears • Severe competition from foreign companies • Made profits every year since 1958 • Short term borrowing were normally between july and December‚ additional capital neeede to support sales peak • Produce at an even rate throughout the year – contributed to the need of seasonal funds • June 1995 • 3‚5 mill loan- anticipated to pay it of in decemebr
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Intro notes: • Seasonal business with some 60% of annual sales occurring from Aug-Dec • Original pro forma figures are a no growth scenario including the seasonal sales pattern (might be a first pessimistic stance of the management as SureCut grew steadily during the past) • Short-term financing usually for seasonal inventory built up from July – Nov • Due to investment in plant modernization (USD 2.99mn capex planned in July+Aug 1995) company needs ST borrowings for financing gap of USD 1.16mn
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What assumptions did Mr. Fischer make when he prepared the forecasts shown in case Exhibits 1 and 2? Were these assumptions reasonable? General Assumptions 1. The company has seasonality in sales This assumption is reasonable as the business has been shown to have different rates of sales in different months. Assumptions (Income Statement) 1. Sales for the year will be consistent with the previous year (only a small decrease) This assumption is reasonable since a decline in sales was not
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SureCut Shears Case Write-up The issues presented in this case are mainly due to incorrect assumptions about the market for sales in 1995 and the subsequent retail downturn that followed. More specifically‚ Mr. Fischer (CEO of SureCut Shears) assumed sales and demand in 1996 would be consistent with the prior year. However‚ as noted in the actual financial statements for 1996‚ inventories grew‚ reflecting that demand for its products was not as anticipated beforehand. In addition‚ sales declined
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1. (a) A glued lap splice is to be made in a 10 × 20 mm rectangular member at α =20°‚ as shown in Fig.1. Assuming that‚ the shear strength of the glued joint controls the design‚ what axial force P is to be applied to the member to get separated to 2 parts? Assume the shear strength of the glued joint to be 10MPa. Fig: 1 (b) An exploded view of a bolted connection is as shown in Fig 2(b). The width of the plate is 60mm; their thicknesses are t1 =10mm. The snugly fitting bolt is 20mm in diameter
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How to Shear a Sheep in Five Steps by CAROLINE on MARCH 28‚ 2012 If you’ve ever met Emily Chamelin‚ our shearer‚ you’re probably as much in love with her as I am. Every single time I watch her shear‚ I’m astonished by her strength‚ skill‚ and conscientious respect of the animal she’s working with. I sort of can’t decide whether I want her to be my older sister‚ or whether I’d just like to be her when I grow up. Suffice it to say that‚ if I can ever become as much of a badass as Emily‚ I’ll
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