Haefren Baum Essay

Haefren Baum is an independent home furnishings retailer associated with Wiegandt that sells high quality furniture. The play along began as a partnership in 1965. Haefren Baum became a retailer for Wiegandt in 1968. Two years later, it became a integrated entity. Haefren Baum is located in Cologne, which is one of the most populated and rich cities in Germany. Haefren retails home furnishing from a location downtown Cologne, and three lately constructed stores in Rhineland.Marketing AnalysisLocated in downtown Cologne Haefren Baum is a high quality retailer, which recently expanded its operations by col three retail outlet stores in nearby Rhineland suburban areas. The caller-out carries Wiegandts high quality furniture whose furniture is heavily advertised. Since the economical condition has not been steady and new competitors are entering the foodstuff place Haefren Baum had to decrement its prices in order to maintain sales volume, these challenges ( contestation, sp aring) caused a light in sales by (-21%) between 93,94, a decrease of( -1.24% )between 94,95. Haefren Baums products reflect cyclical demand because others seasons did not cause a reduction in sales, but instead the economy and competition. The German recession has easy been improving, but it has not helped the furniture market, and the future does not look genuinely promising for Haefren since they will need to adapt to the growing competition also. Overall, Haefren market position seems to be improving, sales growth will get give but I sack upnot say that the ships company will be booming in the future.Operations AnalysisWiegandt provided its retails distributors credit on 2% 10 net 30 terms, which is consistent with competitors in the fabrication. 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 company turn out declined stainificantly their approach of goods sell has remained very(prenominal) high, between 94, 95. There was decline in sales and an increase in exist ofgoods sold from $8,189 to $8,237. This is evidence the company is having problems making profit. Haefren needs to speech is the delinquency of their customers narrations, from 93 to 95, days sales outstanding have increase to 77 days, which is a lot higher than the 30-day monthly 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 manage its assets very well. Its decrease in fix asset turnover from 6.98 in 1993 to 5.39 in 1995 can be because of their decrease in sales, but the funky center asset turnover which is also decreasing from 2.1 to 1.5 prove that their assets are not being used very efficiently. Since sales are decreasing and competition increases their inventory days has also increase from 103 to 129 which again could cause low price. The company is already experiencing a loss of revenue due to the incident they lowered price because of economic condition.Financial AnalysisThe company have generated very low operate bills functions, which is caused by a prejudicious 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 quick ratio (1.1, 1.1, 1.3), and we also make out that sales are down which compressed more inventories. Now the vizor manufactureable days has been increasing (49, 62, and 66). They have been delaying there payment which mean more cash on hand but cost of goods sold is also increasing from $8,189 to $8,237 meaning the cost of increasing APD may be less than the cost of paying that cash earlier and having to borrow the famine to continue operations. The gross profit moulding is decreasing (36% to 34, 33) and we also sleep together sales been dropping significantly from 93 to 95 this shows that the company cannot tell 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 firm is not efficient. The company has not improve its operating margin apparently the company was not able to authorisation the growth of operating outgos while sale is decreasing. Net profit margin is decreasing and negative this is because of decreasing sales, poor customer experience, inadequate expense management and alsobecause of the hardship 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 companys ROE is declining (-1.4 ), it signals that customers are no longer willing to pay for its products as they were in the past.It could be because new competition or economic condition. ROA is also declining (1.6, -1.5 ) again this mean profitability is deteriorati ng, with cash flow from operating activities declining and total asset increasing, the company is not exhibit any sign of cash generating abilities. With total 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 group rates. Since operating earnings are not more than sufficient to contend the fixed charges associated with debt, the company relies on monetary leverage. The company is showing a riskier 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 increased debt (financial leverage) and the melioration in profitability did not occur and asset role has not produced an improved overall return in 94 coitus to the previous years. Specifically, the firm has added debt to finance capital asset. Debt carries more risk and added cost in the form of interest expense, it also has the positive benefit of financial leverage when employed 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 companys 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.SummaryThe findings from the analysis of Haefren financial statements can be summarized from an industry outlook companys well-positioned geographically but economy hardship make it difficult to benefit from expected economic and industry growth. The company has aggressive marketing and expansion strategies. There was no recent improvement in management of accounts due and inventory. The company did not s uccessfully use offinancial leverage and solid coverage of debt service requirements. intimately sales dropped significantly, partially resulting from market competition and economic condition. The company did not increased profitability in 1994 or positive generation 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.