Casa de Diseno case study
In January 2007, Teresa Leal was named treasurer of Casa de DiseÃ±o. She decided that she could best orient herself by systematically examining each area of the company's financial
operations. She began by studying the firm's short-term financial activities.
Casa de DiseÃ±o is located in southern California and specializes in a furniture line called "Ligne Moderna." Of high quality and contemporary design, the furniture appeals to the customer who wants something unique for his or her home or apartment. Most Ligne Moderna furniture is built by special order, because a wide variety of upholstery, accent trimming, and colors are available. The ...view middle of the document...
Most suppliers do not offer cash discounts, and Casa de DiseÃ±o usually receives credit terms of net 30. An analysis of Casa de DiseÃ±o's accounts payable showed
that its average payment period is 30 days. Leal consulted industry data and found that the industry average payment period was 39 days. Investigation of six California furniture manufacturers revealed that their average payment period was also 39 days.
Next, Leal studied the production cycle and inventory policies. Casa de DiseÃ±o tries not to hold any more inventory than necessary in either raw materials or finished goods. The average
inventory age was 110 days. Leal determined that the industry standard, as reported in a survey done by Furniture Age, the trade association journal, was 83 days.
Casa de DiseÃ±o sells to all of its customers on a net-60 basis, in line with the industry trend to grant such credit terms on specialty furniture. Leal discovered, by aging the accounts receivable, that the average collection period for the firm was 75 days. Investigation...