C. R. Plastics
(4 pages of text)
Jamie Bailey, owner and president of C. R. Plastics, had successfully grown his business every year since 1994 when he began producing recycled plastic outdoor furniture. This rapid growth had provided its own challenges in terms of constrained financing and by summer 2010, Bailey was desperate for a new source of cash. He subsequently auditioned to be on Dragon’s Den, a television show where entrepreneurs could pitch their business to a group of venture capitalists, who could then choose to invest their own cash in exchange for a share of the business. With a week remaining before he had to present his final pitch, Bailey had to make a difficult prediction: How much money would he need to meet the growing demand into 2011? Complicating his analysis were competing proposals to fundamentally change how production was managed. In addition to reconfiguring labour allocation, one method required significant investment in equipment, while the other increased inventory during the off-season. Which alternative would allow the company to retain a greater share of the equity when Bailey pitched his business to the Dragon’s Den panel?
The objectives of this case are to explore several key accounting concepts in a seasonal business:
- The impact of growth and seasonality on cash flow.
- The alternative strategies for managing seasonal production and the resulting implications on operating expenses versus inventory and financing.
- The determination of financing options, including the valuation of a business in need of new capital.
Canada, Small, 2010
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