Bart Furniture (BF)

Bart Furniture (BF) is a wholesaler that stocks furniture. In 2015, BF purchased more stock than usual in order to take advantage of discounts that several furniture manufacturers were offering. However, much of this new stock did not sell.

Table 1: Financial information, for BF, for 2015 and 2016

	$\mathbf{2 0 1 5}$	$\mathbf{2 0 1 6}$
Acid-test/quick ratio	2.21	2.84
Cash	$2000	$500
Cost of goods sold	$12166	$12500
Creditors	$1000	$1438
Current ratio	$\mathbf{A}$	5.47
Debtor days	30 days	$\mathbf{Y}$
Debtors	$1973	$6134
Long-term debt	$14000	$13700
Sales revenue	$24000	$26000
Short-term debt	$800	$900
Stock	$4000	$6164
Stock turnover in days	$\mathbf{X}$	180

Sharon’s Super Lunches (SSL)

Sharon’s Super Lunches (SSL) is a cooperative that provides healthy school lunches. The lunches are delivered daily to students, who order them online. SSL aims for a minimum order size of 50 lunches to deliver to a school.

Table 2: Sales and other financial information for SSL for one week

$$\begin{array}{|l|r|} \hline \text { Forecasted sales of lunches } & 3200 \\ \hline \text { Maximum sales of lunches } & 4000 \\ \hline \text { Price of lunches } & \$ 10.20 \\ \hline \text { Variable costs per lunch } & \$ 6.40 \\ \hline \text { Fixed costs for SSL } & \$ 7980 \\ \hline \end{array}$$

SSL is considering a new promotional strategy for healthy school lunches: they will donate a free school lunch to a student in a lower-income area for each lunch purchased in a higher-income area.

Sotatsu Electronics (SE)

Sotatsu Electronics (SE) manufactures electronic products and is famous for its innovativetelevisions. In late 2015, SE introduced a new high-definition television with twice the quality ofthe best-selling television of its chief competitor. Determining that it would be two years before itscompetitors could have a similar product, SE adopted a price skimming strategy.

Table 1: Select financial information for SE for 2015 and 2016.
Figures in $000 000.

	$\mathbf{2 0 1 5}$	$\mathbf{2 0 1 6}$
Cash	300	250
Cost of goods sold	2100	2300
Creditors	180	230
Expenses	1200	1300
Fixed assets	1075	1275
Gross profit	$\mathbf{X}$	2800
Net profit before interest and tax	1000	$\mathbf{Y}$
Sales revenue	4300	5100
Total current assets	650	700
Total current liabilities	275	300

Red Squirrel Apple Juice (RS)

Red Squirrel Apple Juice (RS) is a cooperative of apple farmers. _RS_was named after the red squirrel, whose population is declining because of growing numbers of grey squirrels. Originally from North America, grey squirrels are aggressive and take over red squirrels’ habitats. RS’s founders thought that the red squirrel would be a good symbol to reverse the declining popularity of traditional apple juice due to consumer preference for high-sugar American-style beverages. With the symbol, RS aimed to appeal to environmentally aware and health-conscious consumers.

Originally, RS only sold apple juice in bulk to beverage companies. These companies bottle the juice and sell it under their own labels. RS requires these companies to place RS’s logo of a red squirrel on their labels. Although RS only sells to a small number of beverage companies, its logo is on juice bottles in stores across the country.

Awareness of the RS brand grew. The cooperative’s managers recently opened another channel of distribution: direct sales of bottled juice to consumers at the cooperative’s processing plant. RS charges lower prices than stores. The new channel of distribution required capital expenditure for bottling equipment and additional revenue expenditure. _RS_experienced increased labour and promotion costs, which some farmers complained about.

In recent decades, RS’s home country has experienced rising anti-immigrant sentiment. Some politically motivated organizations have begun to use images of red squirrels to symbolize this sentiment, so some beverage companies no longer want to use RS’s logo on their labels.

Some of RS’s stakeholders are concerned.

Pelican Pies (PP)

Pelican Pies (PP) produces high-quality pies that have limited brand loyalty outside of their local market. The prices of the pies are higher than those of PP’s competitors.

Table 1: Selected financial information for PP for the year ending 30 April 2017.

$$\begin{array}{|l|c|} \hline \text { Number of pies sold } & 8000 \\ \hline \text { Price of each pie sold } & \$ 4.00 \\ \hline \text { Cost of goods sold per pie } & \$ 1.75 \\ \hline \text { Expenses } & \\ \hline \text { - Electricity per month } & \$ 200 \\ \hline \text { - Rent of premises per quarter } & \$ 1000 \\ \hline \text { - Promotional expenses per year } & \$ 1000 \\ \hline 8 \% \text { interest per year paid on a loan of } & \$ 40 \text { p00 } \\ \hline \text { Tax } & 25 \% \text { of profits } \\ \hline \end{array}$$

For 2018, PP’s owner, Austin, is looking to increase sales beyond the local market by lowering prices and spending a greater proportion of PP’s promotional budget on above-the-line methods such as regional newspaper advertisements. To finance this type of promotion, Austin will have to increase his loan amount by $10 000.

Table 2: Selected financial information for the year ending 30 April 2018.

$$\begin{array}{|l|c|} \hline \text { Number of pies sold } & 20 \% \text { increase on } 2017 \text { figure } \\ \hline \text { Price of each pie sold } & 30 \% \text { decrease on } 2017 \text { figure } \\ \hline \text { Cost of goods sold per pie } & \$ 1.75 \\ \hline \text { Expenses } & \\ \hline \text { - Electricity per month } & \$ 200 \\ \hline \text { - Rent of premises per quarter } & \$ 1000 \\ \hline \text { - Promotional expenses per year } & 200 \% \text { increase on } 2017 \text { figure } \\ \hline 8 \% \text { interest per year paid on a loan of } & \$ 50000 \\ \hline \text { Tax } & 25 \% \text { of profits } \\ \hline \end{array}$$

Cool Meals (CM)

Cool Meals (CM) produces frozen organic ready-made meals that are sold to food retailers throughout the country.

CM buys large quantities of organic ingredients from local farmers for its just-in-case (JIC) stock control management. It uses a cost-plus (mark-up) pricing strategy.

CM is known for its:

• good-quality organic frozen meals, which are perceived as good value for money
• flexibility with retailers in terms of quantity of meals supplied, credit given and efficient delivery at pre-arranged dates
• corporate social responsibility (CSR) based on a long-term commitment made to farmers to purchase large quantities of organic ingredients every four months and pay a fair price promptly
• CM has an excellent working relationship with farmers, who always prioritize CM’s requests in terms of quantity and delivery.

Recently, an economic downturn and increased competition, especially from non-organic frozen meal suppliers, has decreased demand for frozen organic meals.

The finance manager of CM, Kayleigh, provided the following financial information.

Table 1: Selected financial information for CM

	$\mathbf{2 0 1 7}$	$\mathbf{2 0 1 8}$
Total revenue	$6000000	$3500000
Gross profit margin	$16 \%$	$14 \%$
Net profit margin	$6 \%$	$3 \%$
Creditor days	10	5
Debtor days	50	70
Stock turnover days	20	40
Current ratio	2.1	2.4
Acid test (quick) ratio	0.8	0.6

Kayleigh is worried about the cash flow of CM and suggested the company changes the stock control method from just-in-case (JIC) to just-in-time (JIT). She is also looking at other strategies to improve CM’s financial position.

KapTan

KapTan (KT ), which manufactures rechargeable batteries for cordless consumer products like vacuum cleaners, began five years ago as a business with a product orientation. It sells business to business (B2B). Multinational companies dominate the rechargeable battery industry, and KT suffered from cash-flow problems in its first year of trading. Its profits are small and, in the last two years, have fallen.

KT has now developed an innovative battery that is small and lightweight. This battery is an emergency power source allowing electric cars to reach a charging station. However, the battery can only be used ten times before it runs out. KT has insufficient finance to create a battery that can be recharged an unlimited number of times.

Through market research, KT has discovered that:

• no other emergency batteries for electric cars exist
• owners of electric cars fear running out of power
• KT ’s new battery could be obsolete in five years.

KT has the capacity to produce 90 000 of these new batteries each year. The average cost is $200 per unit. KT has insufficient funds to invest in additional capacity.

KT is considering two options:

Option 1: Market and sell directly to existing car owners through business to consumer (B2C) at a retail price of $400. KT will need to borrow significant capital to finance this option.

Option 2: Accept an offer of a five-year strategic alliance with a manufacturer of electric cars. KT would provide its product exclusively at $250 per unit. Sales are guaranteed.

Table 2: KT’s forecasted and guaranteed worldwide unit sales (in 000s) for the two options

Year	Option 1 forecasted sales	Option 2 guaranteed sales
1	50	40
2	60	50
3	100	85
4	110	80
5	90	60
Total sales	410	315

Dana’s Handbags (DH)

Dana’s Handbags (DH ) is a small manufacturer of women’s handbags. DH sells directly to large retail chains in Europe. The company is privately owned and has fifteen shareholders.

Table 1: Selected financial data for DH for 2016 and 2017 (figures in $000s)

	2016	2017
Sales revenue	28000	29000
Cost of goods sold	14000	15000
Gross profit	14000	14000
Net profit after interest and tax	1370	1300
Total current assets (at year end)	5000	5200
Total current liabilities (at year end)	3000	3500
Stock (inventory)	3000	3200
Cash	1000	900

Beginning in 2017, DH adopted a programme of corporate social responsibility (CSR) by:

• donating money to charities
• encouraging employees to do three paid hours per week of community service during work hours
• using only biodegradable materials in its handbags.

This programme was expensive.

DH’s management thought that a programme of corporate social responsibility (CSR) would strengthen DH’s brand. During the first year of the corporate social responsibility (CSR) programme, employee morale improved and DH received favourable media attention.

However, at the annual general meeting in January 2018, financial results from 2017 revealed that sales growth had not improved. Several influential shareholders complained about the high cost of the corporate social responsibility (CSR) programme. Other shareholders suggested that DH should develop consumer awareness that it is a socially responsible company.

KPJ

KPJ operates a cinema in a small town. It uses a price discrimination strategy for cinema tickets.

Table 2: Selected financial information for KPJ for year ending
31 December 2019 at 31 Dec 2019 (all figures in $)

$$\begin{array}{|l|r|} \hline \text { Cost of goods sold } & 122000 \\ \hline \text { Long-term liabilities (debt) } & 2800 \\ \hline \text { Interest and tax } & 9500 \\ \hline \text { Gross profit } & \mathbf{X} \\ \hline \text { Total current assets } & 8330 \\ \hline \text { Sales revenue } & 175000 \\ \hline \text { Net fixed assets } & 63000 \\ \hline \text { Expenses } & 81000 \\ \hline \text { Total current liabilities } & 6800 \\ \hline \text { Share capital } & 60000 \\ \hline \text { Accumulated retained profit } & 1730 \\ \hline \end{array}$$

The Pie Store (TPS)

The Pie Store (TPS) bakes pies and sells them in its three retail stores. When developing its brand, TPS used the mathematical symbol pi (π). In 2020, each store made a profit.

Table 1: Financial information for TPS’ three retail stores for 2020 (all figures in $)

	Store 1	Store 2	Store 3
Sales	180000	223000	170000
Cost of goods sold	90000	120000	85000
Gross profit	90000	103000	85000
Expenses	66000	76000	67000
Net profit before interest and tax	$\mathbf{X}$	$\mathbf{Y}$	$\mathbf{Z}$

At the end of 2020, the balance sheet for TPS (the three stores combined) showed $200 000 in assets and$120 000 in liabilities. $50 000 of the liabilities was long-term debt.