Working Capital Management Case Study Solution
It’s really important for HH to solve their cash problem. One way is to increase their revenue. It’s clear that HH is growing up the line aggressively, so it’s worth considering that prices should be raised and unit growth must be slowed down. Brown can although expand into other products, but this again would incur additional expenses. Secondly, it can reduce its operating cost by cutting down some extra factors in order to run business efficiently. Thirdly, it should improve its receivable collection time as well as inventory days. Although improving inventory days is particularly unclear since they are planning on moving to more mature plants. HH seems to be operating efficiently, net fixed asset turnover has increased therefore they should restrict investing more in fixed assets, and look for increase in business financing.
| Angel financing: This is a form of equity financing, where an investor in exchange of equity positon supplies funding. It’s a small scale financing provided by family and friends. | |
| Advantages | Disadvantages |
| · It’s less risky when compared to debt financing, since in event of failure the capital does not have to be returned back. Neither the interest has to be paid.
· Angel investor look for personal opportunity and investment. · No collateral requirement · Bring in their experience in order to make better decisions. · Flexible business agreements |
· Loose control in a position of ownership, Angel investor will have a say in decisions.
· Division of profits. · It’s not easy to find an angel investor. · Angels don’t have national recognition
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| Venture capital: Type of financing by the investors to small businesses and startup companies that showcases long term growth potential. | |
| Advantages | Disadvantages |
| · No repayment required
· Industry connections and expertise is provided by the venture capitalists · Include their experience when it comes to high level decision making. · Provides confidence in order to displace blame. |
· Loss of control& catering the investors demands.
· Expensive when compared to angel financing due to negotiations. · Diminished ownership · Demand quick returns |
| Private equity: consists of capital not listed on public exchange and is an alternative investment class. It comes from accredited investors or institutional investors who draw out money for extended time period. | |
| Advantages | Disadvantages |
| · Receive large amount of funding
· Involvement of experienced professionals · Higher returns due to expertise help · Provides follow-up funding
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· Loss of ownership
· Loss of management control · Investment will be made only if your business is up to their mark. · Providing regular information to the investor · Legal and regulatory issues |
