Their account payable days have increased to 66 days. Cash flows from operations are unhealthy and the total cash on hand has declined over the three years in question.
Not only are they holding inventory for a longer period of time, but they are also underutilizing their fixed assets. They are also carrying a great deal of inventory which is consuming their cash.
Total cash flow from operations is positive, however, they appear to be driven by depreciation. Ideally, the addition of these assets outlets should have led to higher revenues for Haefren.
Fixed asset turnover decreased for Haefren from Since then, Haefren Baum has continued to struggle with sales as its debt figures have continued to rise. Therefore, Haefren Baum will eventually run out of capital from the lack of sales, while simultaneously prolonging days on their account payable payments, bringing about the likelihood of bankruptcy in the distant future if this cycle were to spiral out of control.
The interest being paid on the current debt in was 3. The sluggish sales in the furniture industry can account for the increase in inventory days. The account payable ratio that ranges from They also need to handle their inventories and accounts receivable in order to avoid further cash flow problems.
They carry a debt account for notes payables for employees. Competition intensified as other European furniture retailers entered the German market and several larger domestic retailers announced heavy losses.
Investing in long term assets is a good thing. This could potentially come from accrued wages, which would be an even greater issue. Haefren Baum has a good short-term operational outlook, but its long-term projection is negative because of its consistently negative sales growth output from The credit term that Haefren Baum received allowed them to maintain their desired level of personal sales volume while the weak market demand for furniture threatened to over-extend Wiegandt retail credit position.
Their Current ratio also appears to be ok; however, it is being driven by accounts receivables. Although the number of outlets has grown to five times its size within a 2-year span, growth in sale volume remained stagnant. Haefren needs to consider whether these outlets are worth the investments.
Their negative net income net lossis not driving operations cash flow in a positive direction. Although they appear to going in the right direction, it is not a good sign for Haefren. Inventories and receivables are also driving down operating margin. This decision added to the slowing down of their income and to the extension of their account receivable days.
Haefren Baum buys its furniture products from its whole-seller Wiegandt under favorable credit terms, and re-sells them for a profit.
The income statement clearly demonstrates that Haefren Baum has a cash flow problem as its period ending cash balances were in and in However, they invested in those assets at the wrong time. Weak sales led to a negative return on equity and the addition of the three outlets led to a negative net profit margin.
Haefren inventory in stayed on the floor for around days before it was sold. Why are they borrowing from employees. In order for them to drive up net income they need to find a way to decrease their inventories.
The positive cash flow from investments reflects the addition of the three new outlets. During the early months ofthe German furniture market continued to display weaknesses even though the overall economy began to recover. In regards to cash flows, Haefren is performing poorly.
Haefren Baum GmbH Marketing analysis: Haefren Baun GmbH’s primary product is furniture. The company became incorporated inand has been purchasing from the German manufacturing company Wiegandt since then. According to the background case information, in consumer confidence was greatly diminished for the furniture.
Haefren Baum’s business to business, distribution network with Wiegandt includes a 2% 10, net credit term, which is consistent with competitors in the industry.
Haefren Baum’s business to customer relation started to dwindle when consumer confidence and demand slipped due to negative percentage growth of real GDP in Essay Cologne Haefren Baum Case Marketing analysis: Located in downtown Cologne Haefren Baum is a high end retailer, which recently expanded its operations by opening three retail outlet stores in nearby Rhineland suburban areas.
View Homework Help - FI Case 1 from FI at Georgia State University. Richard Combs Haefren Baum Nature of the Business Haefren Baum. Page 1 of 6 SAMPLING OF CASES RE STEVEN BAUM Case Index County/Court Order/Disposition Deutsche Bank v McRae.
Operations analysis: Haefren Baum is a retailer that obtains its products from Wiegandt GmbH Cologne. Being a retail company, they are not asset intensive and this is apparent in their decrease in fixed asset turnover from 6.
8 in to 5. 39 inHaefren baum case