Synopsis and Objectives
This case captures the problems concerning interchange rate of fly the coop and working-capital precaution typical of small, growing businesses. At the end of 2005, bobber and Maggie Brown have completed their third year of operational Horniman Horticulture, a $1-million-revenue woody-shrub nursery in central Virginia. While experiencing booming demand and improving perimeters, the Browns are puzzled by their plummeting cash balance. The case highlights the difference between cash flow and report profits, as well as the common negative personal effects of growth on cash flow. It also provides a gathering for instilling appreciation for the relevance of free cash flow to business owners and managers, introducing pecuniary-ratio analysis, developing the concept of the cash cycle and working-capital management, and propel the use of financial models.
1.What is your assessment of the financial performance of Horniman Horticulture? (Examine the financial statements in march 1 and the financial ratios in Exhibit 2)
* What is going right with this business?
In the view of the promise dimensions of the business, it enjoyed a constant growth over the past 3 years in revenue, profits and size under tails welcomed leading and management.
Moreover, Bobs personality and management style were welcomed by his staff, which contributed to the continuous boom of the business. In appurtenance to these, the increasing demand for the businesss products could be ensured by the future promising local economy (Bruner & Eades & Schill 2008).
Particularly, its growth rate can be seen from Exhibit 2: the gross margin change magnitude from 48.9% to 52% in 2005, operating margin increased from 6.4% to 9.5% in 2005, and net profit margin increased from 4.1% to 5.8% in 2005. These could indicate that the business was profitable and was growing fast. Both the returns on assets and on capital had grown above the given benchmark.
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