Introduction:

Bodie Industrial Supply Inc. (BIS), running in the city of Ontario, Canada, is playing in the business field as a distributor of commercial-grade tools, parts and equipment. The company is running their operations with a total Equity of $1.05 million and a roundly turnover of $2.066 million currently which is providing anet income of $ 0.057 million.

The company is currently facingobstacles in the form of bearing a range of liabilities which have to be paid to continue to having a healthygoing concern in the future. The company has a plan to take a loan of $ 200,000 which will be used for theexpansion of assets to increase its production, sales which will lead to an increase in the annual income of the company.

The company is required to consider its expected future cashflow for its growth after expansion of assets that will generate enough cashflow to overcome its liabilities and produce enough growth for its wellbeing in future.

Bodie Industrial Supply Inc Harvard Case Solution & Analysis

Background:

Liz Bodie purchased the company in the year 2003 and changed the business’s name to Bodie Industrial Supply Inc (BIS). Erstwhile to acquiring the company, Bodie already had a metropolitan-basedcompany which is now emegedin BIS. She also had a hardware store for many years which she sold for acquiring BIS.

Bodie has the ambition to operate her own business in long run basis for which she has expanded BIS into full services distributors of maximum line business, certified mechanical tools, maintenance parts and related equipment for construction, utility and farming markets. The company hasbeen struggling to maintain its reputation in the current market lately.

The company’s customer was primarily the industrial sector in its region with a population of 135,000 from medium to large size corporations in the manufacturing, commercial construction, and engineering industries.

Problem:

The company is commencing under the burden of increasing liabilities and downfall of annual income which can be seen in current figures of the financial statement. In fact, thecompany has no proper path to collect its debts and compactly pay it liabilities. The company also has the problem ofmaintaining a reasonablestatement of cashflowwhich is thebackbone of any business.

Some top analysts have a view that company should not go over its cashflow, if in the case that it doesgoover, company will cease in upcoming few years. The company’s financial statement is suffering through a low sale, which is causing its insufficient income to overcome expenses. The company has an immense amount of loan and interest payments that goes along with it, making the company weaker from a financial point of view.

The company is considering to take a bank loan amounting to of $200,000 which will be useable in expansion of company’s asset. The company believes that the asset expansion will boostthe sales and income of the company in abetter way which will enablethe company toovercome its creditors.

Analysis:

The analysis is compressing in the basis of the calculation which is shown in Exhibit number 1 to Exhibit number 5 as per company’s decision of considering taking out aloan of $200,000 and invest in asset expansion. The analytical figures show that the company willgenerate itscashflowsufficiently to overcome its liabilities in anappropriate manner resulting in generationof adequate income for good future going concern of the business................

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