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C. R. Plastics Essay

Decision: how much money would he need to keep up with growing demand
– should they level load
Problem: C. R. Plastics need financing in order for growth of the company
 bank line of credit: $500 000
 personal money: $150 000
 credit card: $35 000
– Jamie has exhausted his means in financing and needs an injection of new money Objective: convince the Dragons’ to provide financing without giving up more than 30% of his company

Company
Recycled plastics  assemble into chairs

KSF
– cost control
– innovated products
– managing inventory

Industry
 outdoor furniture is high fragmented and competitive
– C. R. Plastics are competing with a lot of different companies making their business risky to invest in – other businesses have the opportunity to cut costs lower if they see the opportunity to do so, making the business riskier
 trend for North America to be a net importer of furniture due to cheaper oversea production

– hard for the company to bring value to consumers based on price
– difficult for the company to create bigger margins for themselves
– the strong $CA impedes competitiveness with oversea companies
– risky because the company will not be able to compete on price
– how will investors recuperate their money
 outdoor furniture is highly seasonal
– the company has a narrow time frame to generate sales making the business riskier
 furniture business is not novel
– highly likey for companies to come up with similar product – would investors want to invest in a company that does not have patents or security in knowing they are the sole providers of such a product
 currently no national retailer interested in high-quality recycled plastic furniture – minimal opportunity to get a deal with a large order unless a Dragon is able to have a connection
 company has inventory issues (financing cash issue – tying up cash)

– where do we keep the chairs
– obsolete

Company Overview
 Bailey has offered a variety of other plastic products in his company portfolio
– the original Adirondack chair comprises of 50% of sales
– perhaps the cost of offering so much variety increases the COGS
 C. R. Plastics already has so much financing ($500 000 line of credit, $35 000 credit card) – they have a significant amount of money they need to pay back, riskier for investors to put their own money and add to the mix

Income Statement
 2009 their gross margins increased significantly however the trend up to 2009 did not look healthy – their operations show economies of scale (healthy sign)

Balance Sheet

Current Ratio
CA/CL = 2.07
 solid ratio confirming if the company were to liquid, they will be able to cover all their liabilities

Quick Ratio: be conservative and check the situation of the company
disregarding their inventory CA-INV/CL = 0.89
 assuming the value of the inventory is low, the company does have liquid assets that can almost cover the value of the liabilities
– shows a relatively positive sign if the company were to liquid

Debt Ratio:
TA – TOE / TA = 0.83
 83% of the firms assets are financed by the debt
 as an investor, risky to see the firms assets are funded through debt
 $150 000 on cash injection + bank has evaluated the company as low risk in order to provide the loan in the first place

Return on Equity:
Net Income/TOE = 0.96
 company is very efficient with generating income throughout their current capital

Level
Seasonal
– constant # of workers
– save $16 000/month x 8 months
+ $135 000
– save COGS
– cash flow issues (producing more in slower)
-risk of obsolete
– hire workers to meet
– need funding


Essay Topics:


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