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Transcript of Horniman Horticulture
Do you agree with Maggie Brown's accounts payable policy?
Expected revenue hitting 30% growth rate
Expected 12 acre parcel closing
Accounts payable policy
Goal of 8%
What Explains the Erosion of the Cash Balance?
Suppliers provide 30 day payment terms
Discount for payments received in 10 days
Risk averse due to inventory loss concern
Detrimental weather may lead to defaulting
Interest rate risk affecting demand
Weather changes leading to loss of inventory
Becoming illiquid in the near term
Increasing revenue, net profit, total assets, & returns on equity
Increase in demand by 40%
Good public relations
Stable depreciation expense
Debt does not exist
Not attaining 8% cash margin on revenue
Increasing number of Receivable days
Increasing Inventory Days
Unsustainable growth rate
Identify types of Analysis
Between the lines
Payable Days 9.9 26.9
Receivable Days 50.9 21.8
Inventory Days 476.3 386.3
-$75,000 for farmland in Cash
What do you expect the financial position of the business to be in 2006?
Valuation Analysis and Free Cash Flow
Sales as key driver
30% revenue growth
Profit Margin Increase
Depreciation Expense slowly rising
Free Cash Flow
Non Cash Items
Changes in WC
30 year Treasuries
Market risk premium
Cash management issues