SureCut Shears, Inc a manufacturer of household scissors and industrial shears has made profits in every year since 1958. Sales and profits had grown fairly steadily, if not dramatically, throughout the period. The company had sufficient capital to cover its permanent requirements over to immediate future. Its short term borrowing from banks was typically confined to the period of July-December of each year, when additional working capital was needed to support a seasonal sales peak.
In June of 1995, David Fischer, treasurer of SureCut Shears, Inc, arranged for a line of credit of 3.5 million with the Hudson National Bank of New York. At that time, Mr. Fisher anticipated that ...view middle of the document...
Sales were not keeping up with what was forecasted thus the remaining inventory accumulated along with new inventory.
• It is not known if the capital project was on track or behind schedule, which would have been helpful to know for operational or financial reasons. Knowing this information could have helped management make decisions around a possible savings strategy, to offset declining sales and proceeds during the company’s peak season.
• Tighter internal financial and management control strategies would have helped alert management sooner than later of the causes relating to the company’s inability to repay the bank loan. The company suffered financially because of a retailing downturn and was slow to react to the financial impacts it had on the company.
• If Mr. Fisher used a team of analyzers to construct the pro forma financial reports, perhaps the wrong assumptions about steady sales and other factors would not have been made. Doesn’t seem as if there were appropriate financial “checks and balances” in place. Which is concerning given the financial scrutiny company’s face from the public and Government.
• Thinking through and drafting a mixture of strategies for managing various anticipated “risks” associated with repaying this line...