The business's business model demands significant investment in fixed assets, inventory, and accounts receivable to support sales. All of its net income is reinvested in the firm and although the business is profitable, the business must utilize considerable quantities of debt to fund the necessary growth in assets to support sales. The bank is concerned about the entire sum of interest-bearing debt on the balance sheet of Pacific and has requested the business to provide a plan to reduce it. Debra Peterson, CEO and president, considers the current four-year fiscal projections are attainable and realistic.
She's also contemplating three chances: sponsoring a cable cooking show, raising new capital by selling shares of common stock, and acquiring a spice company that is independently owned. Pupils need to assess the organization’s projections of finances in order to gauge whether the decrease in debt matches the conditions of the bank. They contemplate their individual and combined impacts on the business's financial position and must also analyze the opportunities. The case exemplifies the interaction between investment and lending choices. This multifaceted case expanded over several sessions or can be taught in one class session and can be used as a final exam for an opening MBA-level Finance course.
Publication Date: 11/17/2011
This is just an excerpt. This case is about Finance
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