Garry Halper Menswear Limited: A Loan Request for an Export Order Case Solution
Garry Halper Menswear– is a Canada based manufacturer and seller of superior quality men’s suits and jackets,which was founded by Garry Hapler in 1995. The firm has had a vast expansion since its initiation, which has resulted in its boutiques operation throughout Canada. The company has earned a very good reputation in the market, which has only been possible because of the hard work that each and every member associated with the company did, as they were the mind behind the great revolutionary ideas through which the company has been able to sell most of its products to its male clientele or retailers. The price range of the products is between $350 and $600, which is comparatively less costly than high end equality suits priced at $800. The company has captured the attention of the customers in Canada. Garry Halper’s history is much longer, and its product line is more upmarket than the rest of the market competitors.
A very large order is landed by Garry Halper Menswear Company for men’s suit in the United States with Sutton’s. The order would most likely cause double revenues in the company’s financial statement from fiscal 2012. In order to meet the order successfully, the company has contemplated to import partially completed menswear from Liang manufacturing company, located in China,whose shipment would be handled by GHM itself.The idea of importing semi-finished goods as well as adding locally made components shows that the company punitive duties would be minimized, and the company would claim 50 percent Canadian value content. The treasurer of the company needs to assess the financing needs and associated risk that might result from such large increase in company’s sales. At the same time, the present bank of the company is timid towards its response to the needs of firm, due to which the company could seek for another banking relationship.
Causes of Problem
The root cause of the problem is to increase the working capital in order to meet the financial needs as well as to support the operations of the new order. The company has pondered to collect debt from the financial institutions so that the company could be able to meet the additional operations cost required for the completion of the new order. Since, the company is short on cash and unable to meet the cash flow demands of the new order, it hasdecided to request for the loan from the financial institution so that it could commence the project. For the success of the project or new order, the company should understand the foreign market and keep up with anexchange rate fluctuation risk in order to reap benefits from the project.To grow financially, new order has presented the long term market opportunity, but the management is anxious about the approval of bank loan and is also bearing in mind a suitable and appropriate alternative to fund the new order operations in an efficient manner.
Non – Financial Perspective
- The company is highly reputable brand in the eyes of customers.
- The business model of the company is based on focusing on the customer’s need, maintaining the strength of balance sheet and enhancing the market reputation
- The company is proud of itself on its range of offerings and its pledge with customers, which is based on providing high quality products.
- A good financial position and the brand name are among the most notable strengths of the company.
- The company puts its major emphasis on offering generous compensation packages to senior managers in order to make sure that they are motivated and encouraged to achieve the organizational goals and objectives.
- It maintains a strong relationship with its trade creditors, which is because of long-term loyalty.
- The employees working in the organization are highly motivated and are appreciated for their efficient works.
- The company lacks sufficient amount of working capital
- The company requires financial assistance to meet the demands of new order’s cash flows.
- The company could expand the operating plan in order to increase its sales and profitability
- The company could capture and exploit other growth opportunities such as; diversification and expansion
- Garry Halper could expand the sales to Italian retailers to seize the shares in an international market
- The fluctuation in exchange rate could posit a threat to the company’s earnings
- Increasing the debt amount could increase the annual interest payment of the company, hence creating cash flow concerns.
The performance of the company is based on its commitment of providing a high quality product that are in accordance with the customer’s demand and expectations. The owner of the company impulsively navigated away from faddish finishes and colors. The products offered to the customers are resembles to European styled suits more than American styled suits. The target market of the company are white collar males, who seek for high quality product at pocket-friendly price. Additionally, the company has chosen menswear chains and departmental stores to market and sell its products.The customers always respond positively to the company’s line of suits, because of the distinctive European style cuts of the company’s suits, combined with the reasonable price.
Financial Analysis Perspective
Working capital management
The efficient management of the working capital ensures that the company has sufficient cash flows in order to meet operating expenses and short term debt obligations. Whereas, a poor management of working capital leads to liquidity and profitability reduction. The company is seeking debt in order to fund the big order, but the company would be required to make arrangement for paying its long term debt. As compared to the fiscal year 2012, it is expected that the working capital ratio of the company is expected to be 1.38, which could be considered an indication of the operational efficiency, hence showing that the company is running efficiently and could easily cover its debt. With high working capital ratio, the company could survive because of turning its inventory over so quickly, and being able to meet the short term obligations. The company could purchase inventory from suppliers as well as turnaround immediately & sell it at small margin…………
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