Accounts payables and expenses cant be the same every month. The main concern is the cash ratio. But ridiculous considering change in seasonal sales.
There is no concern about profitability; even if the sales are not as good as expected Mr. Income statement We calculate the percentage of variation from one month to another in terms of sales and gross profit.
Fischer assumptions, we want to analyze some profitability and liquidity ratios. Assuming this increase in sales, he forecasted that additional working capital materials and labor was going to be needed to be able to support this increase in this period.
However he considered overhead costs including straight line depreciation as an average over the twelve months without considering seasonal conditions.
In fact, the only attempt of Mr. Fischer fixed a quarterly dividend through the year, except for the last quarter where it is doubled. Not paying the bank from December to May?? Fischer keeps asking for more money to the bank but has no cash to back it up. Furthermore, while sales were falling, costs remained practically the same.
Why was SureCut unable to repay its bank loan by December 31, as originally forecasted?
As gross profit changes with sales, in view of his prediction of an increase in sales in the seasonal peak, gross profit will therefore increase too. Were these assumptions reasonable? This forecast was also proved wrong as later in the same year additional funds were required in order to finish the modernization program that would enable the company to decrease its manufacturing costs.
Stewart any great concern? Assets of raw materials, work in process additional raw materials and laborsand work in process additions are averaged over an annual rate. Fischer make when he prepared the forecasts shown in case Exhibits 1 and 2?
The turnover ratio shows that the receivables are collected at a good rate. Common stock and mortgage: So the risk of financial distress is getting higher. Also, SureCut did not have the budget required to cover its inventories, which led the company to increase its payables.
Expenses have to increase with the new modernization. We will write a custom essay sample on Surecut Case specifically for you ORDER NOW Fischer prepared the forecast of his income statement he assumed that sales were going to be higher during the months of the seasonal peak July — December.
Fischer made assumptions for both the income statement and the balance sheet. When firms take this kind of decisions it only makes it more difficult to liquidate the accumulated loans. But because what we have in reality is different from Mr.SureCut Shears SureCut Shears Profitable business with great track record Increasing Sales Trustworthiness Cause Inaccurate Forecast Modernization of plant.
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Free Essay: SURECUT SHEARS 1. What assumptions did Mr. Fischer make when he prepared the forecasts shown in case Exhibits 1 and 2? Were these assumptions. EmpresaSureCut Shears (SCS) es una empresa que se encarga de manufacturar tijeras para el hogar y de uso industrial, que eran comercializadas por.
Additionally the current cash management might case problems, as Surecut is paying its suppliers faster than it gets paid by its clients. This does not put Suecut in a preferable situation as there is 15 days difference between payables an receivables.Download