Q. Case 09 Study Questions

Horniman Horticulture

1. Illustrate what is your assessment of the financial performance of Horniman Horticulture? (Examine the financial statements in Exhibit 1 and the financial ratios in Exhibit 2)

Illustrate what is going right with this business?

Illustrate what concerns you?

2. Illustrate what explains the erosion of the cash balance -- i.e., where is the cash going?

3. Will strong business performance in 2006 improve the cash position? Extend the financial statements through 2006, assuming that Bob Brown grows revenue by 30%. Simplest way to make the balance sheet balance, define cash as equal to (Curr liab + Net worth) - (Accounts receivable + Inventory + Other Current Assets + Net fixed assets).

4. Do you agree with Maggie Brown's accounts receivable policy?

5. Illustrate what are the alternatives for solving the business's cash problem?

6. Illustrate what is the underlying cause of Horniman Horticulture's cash problem?