Gotham Meals on Wheels Harvard Case Solution & Analysis


The report presents a case about Gotham Meals on Wheels, a non-profit agency that was specialized in preparing and delivering nutritious appetizing meals to homebound peoples. The major customers of the company were elderly people plus individuals with AIDS, who were unable to leave their homes and did not have enough strength to prepare their own meal. The company prepared meal in one month advance and freezed them, which was stored in freezing compartments of client’s refrigerator.

Problem Statement

The management was concerned about the future cash flow projections of the company and also considered whether the company has sufficient financial capability available to finance its projected growth in the volume of activity.


Prepare actual balance sheets, operating statements, and statements of cash flows (SCF) for November through March, and pro forma statements for April through September

Our analysis in Appendices 1 shows that, the company reported a loss in its first two months of operations; this was because the company was unable to generate sufficient contribution to cover its fixed cost but later on, the company enjoyed a steady growth in its operations that tend the company to generate sufficient profits. Further, the company also expects to generate sufficient profits in future, which would benefit the organization to invest in future worthwhile opportunities.

The cash flow position of the company deteriorated from its incorporation and had reported a reduction in surplus from $25,000 in October to $400 in March. Further, the projected cash flow also indicated that the company was going to face a deficit in cash flows, which would threaten the liquidity position of the company and the company would be facing increased difficulty in settling off its debs, so the organization shall take initial steps in order to improve its liquidity position.

What problems, if any, does the organization have? Please be as specific as you can, clearly identifying the cause of any problems you identify.

One of the major problems faced by the organization is that the company is expected to face a liquidity problem in future because our analysis in Appendices 3 shows that the company is expected to face a deficit in cash flows from April. The company faces this problem because there are some office inefficiencies in bill generation and the company does not generate an invoice until a month after the meals had been delivered. Further, the customers also took a month to settle their invoices.

If the company fails to manage its liquidity problem, then it will require the company to finance its debts through loan or over draft facility, which will increase the burden of finance cost to the company. Further, if the company obtains over draft facility to manage its working capital then the company will have to face some drawbacks, i.e.: The interest rate charged on overdraft facility is particularly high as compred to the interest rate charged on long term loans. Additionally, the overdraft facility is repayable on demand, which may raise difficulty for the company, if the financial institution requires the company to repay the loan instantly.

What advice would you give Mr. McCall?

In order to manage the expected liquidity problem, the organization can strengthen its collections department. Currently, the organization adopts a practice to raise an invoice after the meal has been delivered to the customer but the organization shall consider to implement a practice to raise invoices instantly after the goods have been delivered to the customers.

Further, the organization can also give additional discounts to the customers for making early payments but the discounts granted shall not be high enough that it significantly affects the cash flows of the company. Additionally, the company adopts a practice to pay its suppliers and other payables as long as they deliver the goods but the company shall also consider to obtain maximum credit terms from their suppliers.

There is a strong possibility that the suppliers will increase the credit terms because the company is growing and there is an increase in the number of orders to the suppliers, so the suppliers may grant increased credit term to the company. Further, the organization can also negotiate the cost of the supplies with the suppliers and consider to obtain the available possible .........................

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