Carl Kester and Emily R. McComb In earlyHCA Holdings, an investor-owned hospital management company, faced a strategically important capital allocation decision.
Fischer make when he prepared the forecasts shown in case Exhibits 1 and 2? Were these assumptions reasonable? Fischer made assumptions Surecut case both the income statement and the balance sheet. Income statement We calculate the percentage of variation from one month to another in terms of sales and gross profit.
We will write a custom essay sample on Surecut Case specifically for you ORDER NOW Fischer prepared the forecast of his income statement he assumed that sales were going to be higher during the months of the seasonal peak July — December.
Assuming this increase in sales, he forecasted that additional working capital materials and labor was going to be needed to be able to support this increase in this period.
However he considered overhead costs including straight line depreciation as an average over the twelve months without considering seasonal conditions. As gross profit changes with sales, Surecut case view of his prediction of an increase in sales in the seasonal peak, gross profit will therefore increase too.
Fischer fixed a quarterly dividend through the year, except for the last quarter where it is doubled. Common stock and mortgage: Accounts payables and expenses cant be the same every month.
Expenses have to increase with the new modernization. Assets of raw materials, work in process additional raw materials and laborsand work in process additions are averaged over an annual rate.
But ridiculous considering change in seasonal sales.
Not paying the bank from December to May?? Why was SureCut unable to repay its bank loan by December 31, as originally forecasted? Furthermore, while sales were falling, costs remained practically the same. In fact, the only attempt of Mr.
This forecast was also proved wrong as later in the same year additional funds were required in order to finish the modernization program that would enable the company to decrease its manufacturing costs. Also, SureCut did not have the budget required to cover its inventories, which led the company to increase its payables.
When firms take this kind of decisions it only makes it more difficult to liquidate the accumulated loans. Stewart any great concern? But because what we have in reality is different from Mr. Fischer assumptions, we want to analyze some profitability and liquidity ratios.
There is no concern about profitability; even if the sales are not as good as expected Mr. The turnover ratio shows that the receivables are collected at a good rate.
The main concern is the cash ratio. Fischer made too optimistic assumptions about his future cash-flows and has now a really low cash ratio which can indicate financial distress.
So the risk of financial distress is getting higher. Fischer keeps asking for more money to the bank but has no cash to back it up.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.
SureCut Shears Case Write-up The issues presented in this case are mainly due to incorrect assumptions about the market for sales in and the subsequent retail downturn that followed.
PRIMARY PROBLEM Mr. Fischer forecasted NOF of $4,, but actually ended up being $3,, due to a retailing downturn. Higher-than-expected inventory . Documents Similar To SureCut Shears, alphabetnyc.com Skip carousel.
carousel previous carousel next. Sure Cut. uploaded by. shravan Eskimo Pie. uploaded by. SureCut Exhibits and Questions. uploaded by.
sergej. Continental Carriers Case Analysis. uploaded by. Toy World Inc Case Solution. uploaded by. Aju Savin Ajan. More From Zhieh.
Surecut Case. Topics: Balance sheet CASE STUDY WORKSHEET This form can be used to organize your thoughts about a case. As you perform your analysis remain open to the fact that your interpretation of the facts may change and therefore you should constantly revisit your answers.
essay sample on Surecut Case specifically for you ORDER NOW Fischer prepared the forecast of his income statement he assumed that sales were going to be higher during the months of the seasonal peak (July – December).