Surecut Shears Inc.

Company Fischer is both treasurer and president Stewart did approve the 2,5mill loan source House hold scissors and industrial shears Severe disceptation from foreign companies Made profits every course of study since 1958 Short consideration borrowing were normally between july and December, additional capital neeede to support gross revenue peak Produce at an even rate through divulge the year contributed to the need of seasonal funds June 1995 3,5 mill loan- anticipated to pay it of in decemebr 95 need for a nonher 1. 2mill in june 1996 because of a plant modernisation program Program need 6mil, half completed- finised by august 1995 anticipate to save 900 per year in manufacturing costs. Sept 95 Neede 500K more to dole out peak season January 1996 Sales came down- retailing downturn- Need for more niggling full term borrowing- higher expenditures for modernisation project. Funds needed unitl adjuntsing to economic conditions Estimated it would not occur until april 96 A pril 1996 Not able to pay 1. 25mill before seasonal upturn in june Further slaes decline, retail recesiion Why was confident(predicate)Cut Shears unable to fix its bank loan by December 1995 as originally calculate Major sources Net income Bnak loans minify in inventories Decrease in coin Major use Increase in account receivalbes Increase in fixed assets Sources and uses July December Sources Uses Net income2221 AR 3,489 depreciation Bank Loans2,279 AP 177 great term debt 299 Dividends 600Fixed assets 3,321 Inventories1,604 Tax pre payable303 miseclanoues 1 Decrease in cash1,480 78877887 Decrease in liquidity collectable to increase in AR CCC is sawed-off because of higher payment blockage and lower payable period Decrease in sales growth, therefore less revenues be generated to potencially be born-again into cash Build up in inventory from august due to increased sales. Lower real sales than expected in work out ii) Why SureCut required $500K more than initially request ed? Payment period increased by 10 days from august to September decrease in payable period= negative cash conversion cycle, Sure cut in need of cash COnitnous expenditure on modernization project, was suppose to be only 2990 in proforma, but turned out to be 294k more up to September Operating and investing activites are the major USES OF CASH, although the analisis shows that the cumulative cash is in excess of the proforma, it is because of the short term borrowing that has taken place.