Case2

1.Assess the strengths and weakness of the company Horniman Horticulture.

In the past years, Horniman Horticulture has operated very well under the control of Bob who has a degree in agricultural economics at Virginia Tech. Firstly, there is no debt happened through the management. Secondly, From Exhibit 1 and 2, their equity capital continued enhancing, which resulted from the revenue was $788,500 in 2002, but, it was $1,,800 in 2005 with the revenue improved by 15.5% based on 2004. It is clear that Horniman Horticulture had a overall prospect. In addition, their gross profits, operating profits and net profits was increasing from year 2003 to 2005 as well as some changes in their gross margin, operating margin and net profit margin. Generally, Horniman Horticulture managed well and had a hopeful future.But there are still many weaknesses facing the company. The most obvious issue is their cash decreased greatly from the year 2002 to the year 2005. In 2005, the cash was below $10,000 which could produced their payable days becoming shorter and receivable days making longer.

2.How is the company using its cash?

There are two significant aspects considering in terms of the cash utilized by the company: where the cash cames from and where the cash is utilized . It is apparent that sales were dominant to retail nurseries which means by selling. In terms of the profit, the Horniman Horticulture had brought greatly enhancing gross profit, operating profit and net profit in several years, and gross margin, profit margin and net profit margin had kept improving from 2003 to 2005. But recently adverse decline in the firm's cash balance from $120,100 in the year 2002 to $9,400 in the year 2005 produced Maggie's concern, which means their cash had gone somewhere through the booming business. Where their cash has utilized can be considered easily by checking their balance sheet. Great amounts of increasing accounts receivable, inventory, current assets compared with...