Stone Containers Harvard Case Solution & Analysis

Answer 2

Management Strategy with Predecessors

The general management of company follows the policy of run together which means that company acquires many companies and together with their best effort of learning and handling all the complex things which comes under the all the procedure of the company, those small companies will help the parent company to be stabilized.

Further the company`s management has been involved in the procedure of the enhancement within the form of teams which discuss the options to be selected after deep analysis regarding the finances of the company.

Answer 3

Sensitivity of the earnings and cash flow with increase of the price

The sensitivity of the earnings and the cash flow of the company would similarly be affected because of the interest factors which are commonly used in the profit and in the cash of the company. For the analysis of the sensitivity it has been calculated in the forecasted year of 1993 with given assumptions of the question in which detailed financial statements were prepared according to the standard formats which are given by the respective accounting body and their respective members. The sensitivity is depicted in the excel sheet with the names of financial analysis. In this excel sheet both aspects are covered and also presented in the appendices of this report. Please go through excel sheet for the understanding of the finances. .

Answer 4

Effect of the increase of $100 per ton

The effect of increase by $100 per ton, is the increase in profitability of the company with respect to the handling of interest cost. The interest coverage ratio will be increased by the means that EBIT now has more power to cover the interest cost. This would be the basic reason of increasing the price per ton. This would beneficial for the finance of the company but not good in respect to the consumer point of view. In the part of decision making, the financial and non-financial aspects should be covered. These all shown in the excel sheet and appendices please follow it.

Answer 5

Pricing Scenarios under which Production and Sales increases to Full Capacity:

If the capacity of the production has been full and the company has increase the price then this effect will move towards the economy. If the economy and the market conditions are better than company have favorable position in all the aspects. If the profitability is increase and covering all the debt position,then it helps in maintaining the company's structure of the capital which is more relevant with respect to the changes of the circumstances. On the other hand, if the economic condition is not well then it would reverse the effect of the changes which could befavorable for the company.

Answer 6

Financial Priorities of the year 1993

The priorities of the financial year 1993; are the basic criteria for the stability of the company's financial position. It must be completed with dedication of the management, commitment and the economics changes with respect to the area of debt environment and their interbank rate. One more feasibility aspect that have to be followed in the analysis of the year 1993, was the financial background of the sister concern companyto look after for the changes in aspects of the financial position. The assumption followedin the 1993 was that three year based revenue rate was used. Selling and admin expenses follow the previous year rate, depreciation also follow the same rate of the selling, and the taxes would be the 35%. Apart from that, the company has to pay the interest with debt principle to overcome the capital structure problem in the year 1993. New capital expenditure will face the problems of losses in between $400-$500 billion. These all shown in the excel sheet and appendices please follow it.

Answer 7

Debt alternative feasibility

According to the case scenario the best suitable alternative for the company in dealing with debt is negotiating the maturities days with indulging the new policy with respect to the section of the capital structure of the company. The cost of capital will move to declining side and their all settlement would be done with respect to the changes of the financials. Although, junk bond will more reduce the worth of the company, apart from the company negotiated with bank in swapping the interest with respect to the debt rating of the company. In this situation company can minimize the expense of the interest cost and handle the high-yield debt securities. The high-yield bond is best in the period of short term but the company’s position is giving the signal for the long term. So that’s why organization follows the interest of the bank creditors instead of high yield debts...........................

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