Paper Topic:

Case Study Question and Answer

Blue Whale Company

Question : How does finances lead to major changes for the future of the company , when the company is losing money , and do you have recommendations about what the company should do

The first situation that exists within the data submitted is that between 1990 and 1991 there is an increase of 2 in operating expenses while revenue only increased 1 .51 . Between 1991 and 1992 , operating expenses increased by 13 .22 and revenue only increased 1 .88 . Between 1992 and 1993 there was an increase of 1 .73 in

operating expenses and only an increase of 1 .49 in revenue

There is also a real problem between what they are bringing into the company in sales and what they are paying out in refunds or discounts There was an increase between 1992 and 1993 of 14 .7 in these refunds /discounts while there was only a general increase of 1 .59 in gross profit between both these years . Operating a business at these levels will continue to drift the company into continual losses . There also seems to be a large increase in both current and long-term liabilities between 1992 and 1993 , 3 .87 and 5 .32 respectively . Not knowing what these liabilities were a reflection of leaves it hard to discern if this is one of the problems the company faces for future expansion

In answer to the question as to how finances lead to major changes is evident in that the company needs to get a firm grasp on many things including the following suggestions

Reduce the current amount of money going towards refunds and discounts and put a cap on the allocation of this budget amount . Put a ceiling on what is allowed to be discounted and if there are a great deal of refunds being presented to clients find out the reason why there has been an increase of 14 .7 between 1992 and 1993

Reduce the long-term liabilities by looking at if debt is a large portion of the company 's capital structure , perhaps it would be wise to look at conversion features and bond covenants and perhaps treat operating leases as balance sheet liabilities

It would be assumed that the reason for the consistent decrease in net earnings from 1990 to 1992 ending in the loss in 1993 would be for the rapid expansion of not only the office personnel but also the increase in staff overall . Therefore , it would be an improvement to the bottom line for operating expenses would be to streamline the business hierarchy and review where the fat ' in the company is and eliminate those processes

It would also be a wise move to look at bonding the movers to eliminate the refunds (which may be disguised as discounts ) processed...

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