'Haefren Baum Essay\r'

'Haefren Baum is an self-reliant home furnishings retailer associated with Wiegandt that sells high quality article of furniture. The confederacy began as a partnership in 1965. Haefren Baum became a retailer for Wiegandt in 1968. Two years later, it became a corporate entity. Haefren Baum is located in Cologne, which is one of the nearly populated and rich cities in Germ any. Haefren retails home furnishing from a location business district Cologne, and terce latterly constructed stores in Rhineland.\r\nMarketing Analysis\r\nLocated in downtown Cologne Haefren Baum is a high quality retailer, which recently expanded its ope dimensionns by opening three retail outlet stores in nearby Rhineland suburban atomic number 18as. The party carries Wiegandt’s high quality furniture whose furniture is heavily advertised. Since the stinting condition has non been steady and new competitors atomic number 18 entering the trade Haefren Baum had to decrease its determines in orde r to maintain rank gross revenue volume, these challenges ( contest, providence) earnd a decrease in sales by (-21%) among 93,94, a decrease of( -1.24% )between 94,95. Haefren Baum’s products rebound cyclical demand because others seasons did non cause a decline in sales, tho instead the economy and competition. The German recession has slowly been improving, but it has not helped the furniture food market, and the in store(predicate) does not look rattling promising for Haefren since they will need to adapt to the exploitation competition likewise. Overall, Haefren market position seems to be improving, sales growth will get better but I cannot say that the bon ton will be successful in the future.\r\nOperations Analysis\r\nWiegandt provided its retails distributors’ reference work on 2% 10 net 30 terms, which is consistent with competitors in the industry. Haefren Baum upper limit on outstanding balances were established on historical furniture order, and they had a limits of DM 60,000. Although the sales of the union take in declined significantly their cost of goods sell has remained really high, between 94, 95. There was decline in sales and an add-on in cost of goods sold from $8,189 to $8,237. This is evidence the company is having problems making profit. Haefren needs to address is the delinquency of their customers’ marks, from 93 to 95, days sales outstanding hold change magnitude to 77 days, which is a lot higher than the 30-day periodic installment terms. The company is not stringent in collection efforts but this can be because of the economic condition in Germany. The company does not reign its additions very well. Its decrease in fix asset derangement from 6.98 in 1993 to 5.39 in 1995 can be because of their decrease in sales, but the low extreme asset turnover which is as well diminish from 2.1 to 1.5 surface that their assets are not being used very efficiently. Since sales are decreasing and competition increases their stock-taking days has also increase from 103 to 129 which over again could cause low price. The company is already experiencing a going of revenue due to the fact they lowered price because of economic condition.\r\nFinancial Analysis\r\nThe company have generated very low operate silver flows, which is caused by a shun net income(16, 55) in 94,95, again with sales going down and cost of goods sold increasing. The company current ratio (2.3, 2.1, 2.5) in 93, 94, 95 are indicating satisfactory but when analyze alert ratio (1.1, 1.1, 1.3), and we also issue that sales are down which pissed more inventories. Now the billhook correct qualified days has been increasing (49, 62, and 66). They have been delaying at that place payment which mean more cash in on hand but cost of goods sold is also increasing from $8,189 to $8,237 meaning the cost of increasing APD whitethorn be less than the cost of nonrecreational that cash earlier and having to bo rrow the shortfall to continue operations. The gross profit molding is decreasing (36% to 34, 33) and we also know sales been dropping significantly from 93 to 95 this shows that the company cannot enclose cost inventories and to pass along price increase through sales to customers. The operating profit margin is also dropping significantly from (5.1%, 1.8, and 1.5) we can definitely see that the sign of the zodiac is not efficient. The company has not modify its operating margin; apparently the company was not able to control the growth of operating expenses while sale is decreasing. benefit profit margin is decreasing and negative this is because of decreasing sales, poor customer experience, inadequate expense precaution and also because of the hard knocks in German economy. If we analyses cash flow margin it is (-0.01, 0.02), the company is not able to translate sales into cash. The company’s roe is declining (-1.4 ), it signals that customers are no longer willin g to pay for its products as they were in the past.\r\nIt could be because new competition or economic condition. ROA is also declining (1.6, -1.5 ) again this mean profit readiness is deteriorating, with cash flow from operating activities declining and amount of money asset increasing, the company is not cover any sign of cash generating abilities. With radical liabilities going up for years 93 to 95 (6914, 7786, and 7887) and equity with negative retained earnings, the company is financing with debt, specifically with account payable, note payable. The company takes longer to pay their creditor, paying high interest rates. Since operating earnings are not more than sufficient to cover the dictated charges associated with debt, the company relies on pecuniary leverage. The company is showing a encounterier capital structure since debt equity ratio is (5.8, 9, and 8). Both the profit margin and the asset turnover are lower in (93, 94, and 95). The combination of increase debt (financial leverage) and the onward motion in profitability did not find and asset utilization has not produced an improved general return in 94 relative to the foregoing years. Specifically, the firm has added debt to finance capital asset. Debt carries more insecurity and added cost in the form of interest expense, it also has the positive benefit of financial leverage when employ successfully, which is could be the case for Haefren. There was no improvement in inventory management and has impacted the firm negatively and showing no improvement to total asset turnover ratio. The company’s ability to control operating costs while sales decrease during economic condition has not improved the net profit margin. The overall return on investment is not improving as a result of these combined factors.\r\nSummary\r\nThe findings from the analysis of Haefren financial statements can be summarized from an industry outlook; company’s well-positioned geographically but e conomy hardship make it difficult to benefit from expected economic and industry growth. The company has aggressive marketing and blowup strategies. There was no recent improvement in management of accounts receivable and inventory. The company did not successfully use of financial leverage and solid insurance coverage of debt service requirements. Substantially sales dropped significantly, partially resulting from market competition and economic condition. The company did not increased profitability in 1994 or positive times of cash flow from operations. In general, the outlook for the company could be promising. Haefren appears to be in credit risk with attractive investment potential. The management of inventories, cost controls, and receivable will play an important to the company future success.\r\n'