The Barkan Companies Harvard Case Solution & Analysis

Interview Assignment


In 1964, Mel A. Barkan, established The Barkan Companies in real estate industry headquartered in Boston, MA and branch office in Providence, Hartford and Washington D.C. The Barkan Companies occupied a leading position in the residential real estate sector and the main focus of the company was on providing quality services to its clients. Moreover, it also continued to add portfolio of properties and management experts in order to retain its market position. The Barkan Companies was managing its portfolio of 23,000 properties, which comprised of condominiums and cooperatives, apartments and commercial properties and employed around 550 personnel in order to manage these properties.

The Barkan Companies offers six types of services to real estate sector, which includes: property management, renovation, development, affordable housing compliance and other related services.

The Barkan Companies’ differentiating point is the quality of its services and the expertise of senior staff; which it uses for managing the properties. Moreover, the company has been designated as Accredited Management Organization (AMO®) by the Institute of Real Estate Management (IREM).

The Barkan Companies offers compliance services for completion of housing project within due time and quality and it uses its multi-accredited staff for managing housing projects. In addition, real estate development services offered self-developed commercial along with residential properties and it has undertaken many property development project which were completed successfully within due time while meeting the compliance requirements. (The Barkan Companies)

An interview of Chief Financial Officer (CFO), Mr. James Merski, of The Barkan Companies has been conducted. Merski is a Chartered Public Accountant (CPA) and has been serving at The Barkan Companies since April 2014. He has been in the real estate industry for more than 20 years (Jim Merski).

Q1.) What are the biggest challenges and opportunities that the finance professional faces today?

Since, the economy and industries are changing radically, hence, the finance professional needs to keep themselves up to date with changing regulatory requirements passed to the accounting and finance associations. Moreover, companies always look for cost reduction in order to increase profitability; therefore, they lower down the cost, which is a very challenging task for finance professionals. Additionally, industry innovations introduce new products as well as services and finance professionals face difficulties in negotiating financing for the launching of these services. Meanwhile, the finance professionals get the opportunity to learn the new economic trends and add value to their professional profile.

Q2.) Tell me about a recent high depression situation you were in. How did you manage it?

It was a development project, which was due in a week and I had to manage the cash flows for financing this project. I was very depressed at that time because I was not able to re-organize the existing funding requirement in order to generate financing for this project in a short period of time. However, I arranged a short term revolving loan from the bank in order to complete the project within due time.

Q3.) Is it possible for a bank of America to show positive cash flows but be in grave trouble?

A bank can show positive cash flows by increasing its sales and delaying payments of interest expenses. Moreover, it can delay the capital expenditure in order to improve its cash flows and it can also defer the tax payment by manipulating the accounting records.

Q4.) What effect of increases in accounts receivable a cash reduction on the cash flow statements in real estate business of America?

Increase in accounts receivable will mean that profitability of the company is increasing but the revenues are not being converted into cash, i.e. clients are not paying their debt on time. Therefore, increase in account receivables lower down the cash generated from operations and deteriorate the cash flow statement as a result.

Q5.) What was the worst financial forecast you have made? And what did you learn from it? Which profitability methods for forecasting the real estate use?

It was a housing renovation project for which I made forecast of investments and revenue. My forecast was based on past data of similar project, which was completed few months before. My forecast was around 50% lower than the actual expenditure requirements. My forecast failed due to the recent increase in prices of supplies that were used in renovation and that really embarrassed me, however, from this project I learned that financial forecast must be started from scratch and up dated information helps in preparing reasonable forecast................................

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