Monte Bianco Essay Example

year, especially lower demand during summer months. Additionally, there is a substantial surge of 109.6% in account receivable totaling an impressive sum of 19,641,600 thousand liras. Despite having an initial cash amount of 1,121,450 thousand liras available, projections indicate that there will be a cash shortfall for most of the year as depicted in Figure2.

Figure 2 shows that there is a significant cash deficit of approximately -4 051 791 thousands of liras at the end of the year. The analysis considers the possibility of the bank increasing the company's credit line. Currently, this credit line is 25 billion liras by the end of 2000 and could be expanded by an additional 5 billion liras with an annual interest rate of 10%. While this financing would allow for positive cash flow and implementation of the company's strategy, it would also result in an increase in interest expenses of around 500 thousand liras, leading to a decrease in profit.

To evaluate this strategy, changes in Return on Equity (ROE) between 2000 and 2001 are examined. It is projected that ROE would decrease from 21.23% to 9.46%. By using the Du Pont method and analyzing components like profitability ratio, asset turnover, and financial leverage ratio separately, we can gain a better understanding of how this change will impact the company.

The company primarily relies on debt as its main financing method, which exceeds the use of venture capital. However, using ROE as a measure of efficiency is not sufficient as it fluctuates based on tax debt. Therefore, additional financial data is necessary to gain a comprehensive understanding of the company's real estate. Overall, these details

present a negative evaluation of the strategy to exclusively produce private labels, as the drawbacks outweigh the benefits for the company.