Hanson Ski Products Harvard Case Solution & Analysis

Hanson Ski Products Case Solution 

Strength of the company

Q1

Hanson Ski Products’ Balance sheet is not showing good strength of the company, however the company needs to come up with some various ideas to get accounts receivable from customers to maintain the strength of the company.The company is earning sufficient amount  per dollar of investment as calculated by net income divided by total assets, which is equal to 0.08, this indicates that the company is earning 8% per dollar.

On the other hand, Hanson Ski Products has the advantage to create liquidity in case of need, and it has a good quick ratio of 2.0.Apart from that, the company has the current ratio of 2.15, which indicates a that the company is highly dependent on inventory, but it is not at all an alarming situation for the company.

The company needs to project customers’ ages properly, which could tell when an amount of accounts receivable will be collected, or when the company should give discounts to the customers to collect the receivables as early as possible.

Line of Credit

Q2.

Hanson Ski Products can maintain the line of credit because it has the strength to pay off its liabilities. The company has good growth rate in the international market, however it needs some time to reap the benefits from outside the country, as it is growing at the rate of 10% per year, and its international revenues contribute 30% of its total revenues. Moreover, the company does have the potential to carry out its interest expenses.

Collateral

The company has the strength in its financial standing. Moreover, if we talk about its assets, as discussed above, Hanson has assets including long-term, and short-term i.e. Machine, Plant, Equipment, Inventories, and Receivables. Yes, Hanson’s assets justify the loan, and the as sets can be used as collateral against the loan. Furthermore, the company needs working capital to work in such situations when customers do not pay their dues on time. Hanson can get the loan form other financial institutions, however they charge higher interest, and they frequently conduct the company’s audit.

 There will be no problem in paying off debts to the stockholders, because at end of 3rd quarter 1987, Hanson will have sufficient funds to carry out the business, and would be able to payoff to the stockholders while continuing the business operations.

Mr. Hanson can pay off the loan to the stockholders on time. Furthermore, there will be sufficient amount of money to pay the stockholders and to carryout the business. Otherwise if there is a delay in paying off the debt, then company will have more opportunity to make maximum efforts to add value to the shareholders, and then pay the stockholder, as a result it would enhance the company’s operations, and can lead towards significant change, as the company will have good amount of cash as working capital, and it will be able to produce more products and can, as a result, increase its sales. It will also enable the company to expand its operations, and collect receivables as fast as possible........................

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