Over the years, it has expanded its operations with its noncompeting lines of electrical appliances, records, compact discs, and cassettes and through importing from and distributing to Taiwan and Japan. However, Merrill is faced with steadily severe declining margins in the electrical distribution business in recent years.
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Which internal financial methods can be used to decrease your accounts receivables and make a cash inflow so you Merill electronics case fund your operations more easily. Furthermore, what will be your decision on external financing in the future in order to fund your expansion.
Everything written above is described as a problem in the case study attached to this paper. The case study It is in pdf format so I uploaded it.
Here is the link: Conclude by a maximum of two sentences Map the liquidity problem of Merrill by a cash budget forecast: Forecast for each month in the annual period July — June the balance sheet to explain the financing policy Discuss possible options for improvement to solve the financing problem with the bank The solution Merrill Electronics was a distributor of personal computers, related equipment and software, and various other consumer electronics and domestic appliances.
After the change of new general manager in Julythe sale turnover and profits had improved. However, the company was facing financing problem because the increase of the sales. Low inventory turnover and long collection period resulted as the liquidity problem of the firm and the bank refused the increase of the credit line for the firm.
Company needs alternatives to finance its operations. Liquidity Problem by forecasting cash flow statement and Pro-forma Balance sheet Merrill Electronics had promising sales forecast, whereas relatively low cash management ability.
The forecast cash flow statement of annual period July — June is made based on forecast income statement and forecast balance sheet. Percentage of sales method is used for generate those financial statements. Our forecast cash flow statement indicates that in only four months during this period has a positive change in cash.
Short term loans obligations are needed to be covered till the 30th of December Internal financing method Internal financing method could be considered as reducing account receivable or inventory to generate sufficient cash for operation.
We will focus on internal financing decisions of the company which should be implemented in the way to decrease accounts receivables, meaning that the company needs to receive the money from the customers in shorter time to be able to fund its operations. The best way to do it is by factoring financing, which could provide the company with the immediate cash inflow from the goods sale, without the collection period.
Balance sheet has seen changes in the asset part only, because factoring has only affected accounts receivables. Cash in bank has seen an increase because of the cash inflow that resulted from the decrease of accounts receivables and funds provided by the factoring company.
The increase of cash could be used for compensating the need of Net New Financing, such as retiring Account payable value or short-term loans or investing in new sale program.kaja-net.com: The Witch's Daughter (The Blair Witch Files, Case File 1) (): Cade Merrill, Carol Ellis: Books.
The key/core problem of Merrill electronics is the constant decrease of the liquidity ratio’s. the increase in sales the debt level can be adjusted to match the new sales level and it’s required investment. Merrill Electronics was a tool sized supplier of individual computer systems, associated peripheral devices and software application, and different other customer electronics and domestic devices.
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