The Farm Winery Case Solution
As far as asset utilization ratios are concerned, it can be seen that due to the seasonal nature of the business, the assets are not easily resulting in more revenues in the year 2011 which resulted in the lower ratio. However, as we move further an upward movement can be seen which shows that the company is efficiently making use of its assets in order to generate revenues. In addition to this, the fixed asset turnover ratio also represents the similar position.
From the debtorâ€™s turnover ratio, it can be seen that the first two fiscal years given in the case are not generating any receivables because the products are actually available for sale in a later period. Therefore, in year 2013 the debtorâ€™s turnover ratio is 15.49 which mean that the company is selling its products in the efficient credit terms which could help in meeting the short term obligations of the company.
Overall, it can be concluded that the company is financially strong in terms of efficiently utilizing its resources to generate revenues which in turn with the help of optimal cost cutting measures could be transferred to the profit for that fiscal years. On the other hand, from the financing mix, it can be concluded that company has made an optimal use of mix which significantly reduces the threat of going bankrupt.
Financing Needs of the Company
It can be seen that the company is looking for the opportunities of expansion which requires an initial expenditure of $ 80,000 in the last quarter of 2014 whose benefits could be generated in the year 2023. From the seasonal nature of the business, it can be seen that about 43% of the overall revenues are generated in the last quarter of each year and remaining in the other quarters. In addition to this, the other expenses required by the company are in relation to the capital expenditure which is approximately $ 30,000 for the additional fermentation tank in the fourth quarter and Barrels of about $ 20,000 in the third quarter. From the data provided in Exhibit 4 of the case, it can be seen that a favorable results could be attained in each of its four quarters. The company would be having enough amounts of its resources to pay for its short term obligations as well as can conduct its expansion program easily. From each of its four quarters, the cash needs of the firm are $ 58,815, $ 34,000, $ 54,000 and $ 250,000 respectively and these needs are met with the help of an optimal use of its current assets as well as the cash acquired from its customers. The management has made use of an optimal credit structure which helped strongly in acquiring the cash in the timelier manner. It can be seen that company would obviously be not required to liquidate its inventory in order to meet its short term obligation because of the significant higher liquidity position of the company.
Forecasting the Financial Statements of the Company
In order to forecast the income statement of the company, the percentages as given in the case are utilized. For the year 2014, the revenues are expected to grow by 31% then in the subsequent years, the percentage increase would be 25% which conclude the revenues to about half a million dollars in the year 2018. All the remaining elements of the income statements are derived by taking revenues figure as the basis. The net profit is generated as shown in the below given exhibit…………….
This is just a sample partial work. Please place the order on the website to get your own originally done case solution