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Lecture 1

AFM 211 Lecture 1: 211-Courier-Case

5 Pages
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Department
Accounting & Financial Management
Course Code
AFM211
Professor
Nancy Vanden Bosch

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Description
Assess the Situation  Role: Geoffrey Taylor, owner and manager of BCC  Request: Wants to understand negative cash & a plan of action Size up the business – What matters?  April 7 1997 – specific date and end of the first quarter, partway through the fiscal year o Pay his drivers in the next few days (not sure if he has enough cash to make payroll)  Revenue streams through delivery for its customers o Main clients are service organizations  wholesalers, retailers, law offices, consultants & financial institution  Channels: sales people (building a relationship beforehand)  Value proposition: on time delivery, reliable, competitive pricing, quick delivery, delivery confirmation, quick responses (get there fast and you deliver fast)  Activities: hire drivers to deliver packages  Key resources are the drivers  are they employees? Drivers are more like contractors (independent)  Cost structure: commissions to the drivers, 65%  the commission is more variable o Fixed costs: rent, salaries  Have to deliver a lot of packages to cover fixed costs o (could have calculated a break-even cost analysis)  Why does the business exists? o GOALS  cash in bank, enough money to hire another salesperson (Growth),  Etobicoke  Only 2 years old and has been growing in the GROWTH PHASE o Not an unusually position for these kinds of company  Growth requires cash Key Stakeholder/user  Drivers want to be paid on time, which is every two weeks  Customers  value proposition  Geoffrey wants the customers want to pay on time o Bills them every two weeks  Bargaining power  Geoffrey with the drivers, the drivers could have more power because they can leave and work for someone else o Customers have power because they don’t care who delivers their package, b/c it’s a pretty standard service  Bank provided an overdraft and it is now close to the limit o You can run a negative balance o You pay interest on overdraft – a high cost similar to interest rates for credit cards Determine what is required  Illustrating a case where they are hinting where the problems may lie but there is no factual or definite proof for it o (a) find the problem for negative cash flow and o (b) he wants a plan of action – so to develop a solution Case Plan > 90 mins 1. “collect data” (ex.) in Excel 2. Prepare a cash flow statement a. Make it for the first quarter, monthly 3. Calculate Ratios – A/R turnover, look at profit margin, revenue growth, A/R cash conversion cycle 4. Summarize issues (cause) 5. Propose solutions a. Think b. Write c. If time, sensitivity analysis (quantitative) d. you can do qualitative 6. analyze pros/cons of options 7. make recommendations (pick one) a. writ
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