Crazy Craig

CRAIG’S CROCODILES, INC

“Crazy” Craig Cravath is a somewhat eccentric yet enthusiastic businessman who believes in the social responsibility of business. Incidentally, he is also interested in making enough money to live a comfortable life. As a supporter of the ecology movement, he is very concerned with the hunting of animals for industrial purposes, such as the making of furs, shoes, and ladies’ handbags. As a consequence, he formed Craig’s Crocodiles, Inc., a company with a mission of promoting crocodiles as household pets. (The choice of the animal was purely coincidental.) He plans to catch crocodiles in Southeast Asia and sell them in the United States.

The senior leadership team of the company consists of Mr. Craig Cravath (President), Bubba Gump (Vice President of Production, who is in charge of catching crocodiles), Wiley Lowman (Vice President of Sales), and Nikita La Femme (Vice President of Operations, who is in charge of administrative functions including cash collection from customers).

Facilities Planning

The first task facing Mr. Cravath was to raise capital. This required estimating future capital needs by projecting the physical facilities and working capital needed for the business. Mr. Cravath's estimates showed that he would need a fleet of boats to catch crocodiles in Southeast Asia and a holding tank in the State of Gould to keep them alive in captivity after they are shipped. Because of the need to extend liberal credit terms to skeptical customers, the company needed working capital to carry inventories and receivables. Finally, the company needed a large start up investment for sales and an advertising campaign. The firm also needed funds to hire new employees and to rent office space in the State of Gould. Mr. Cravath asked Nikita La Femme to prepare a forecast of activity to plan facility needs and to translate it into capital needed to start the business.

First Year Results

Based on the forecast provided...