Premium Essay

“Reed’s Clothier” Case Study and Questions

In: Business and Management

Submitted By rtyepez
Words 1559
Pages 7
“Reed’s Clothier” Case Study and Questions
University of Phoenix
DATE

“Reed’s Clothier” Case Study and Questions
Reed’s Clothier Case Study Analysis Jim Reed, II the owner of Reed’s Clothier, a men’s clothing establishment is facing financial difficulties. Established in 1934, by Jim Reed to cater to the numerous Virginia Military Institute (VMI) graduates, the business struggled for the first several years. By 1976, the business annual sales had grown to $800,000, where Jim Reed decided to retire and hand over the business to his son, Jim Reed II. In 1981, Jim decided to expand retail floor space and acquired an $880,000 long-term mortgage debt. During this time, Jim increased inventories with the belief that higher inventories led to higher sales. In 1994, the business had grown to more than $2 million in sales. The increased inventories, along with the acquired mortgage payments have seriously eroded Reed’s positive cash flow. During the last year, Reed had slowly increased his line of credit at the bank and failed to take advantage of cash discounts offered by suppliers. Now, many of Reed’s accounts are almost 40 days past due, causing suppliers to demand payment. Jim decided to visit his bank in order to further extend his line of credit by an additional $100,000. Harold Holmes of Fist Virginia National Bank has advised Reed that the bank will not extend their line of credit, and that Reed must repay an overdue note of $13,000 within 30 days. Holmes suggested the Reed seek assistance from a consultant in order to establish a better inventory system and reduce inventories through an inventory reduction sale. Further, Holmes suggested that Reed reduce accounts receivables by aggressively collecting its past-due accounts. Jim was resistant to Holmes’ suggestions, believing that if he was aggressive in collecting accounts, customers may become angry…...

Similar Documents

Premium Essay

Unilever Case Study Questions

...Knowledge Managment Caste Study Unilever 1. What advice would you give Cathy Bautista on improving the strategic focus of Unilvers knowledge management activities? I think that Unilever should savings the cost, achieved from a contact center deployment which can include higher agent productivity and fewer escalations can be used to fund subsequent rollouts. Maybe they can provide a simple way to recommend content through social channels more company sponsored forums and online feedback forms. It can be really helpful for the company. Unliver should concentrate on „what they don’t know” they should discover where the search process broke down and determine why the company may not have understood the true intent of the user’s initial inquiry. Thinking globally also requires planning for the use of knowledge management across multiple channels and Unilever should increase the efficiency and effectiveness of relationships with partners and vendors. 2. What changes, if any, would you make to Unilever’s communities of practice? Yes In my opinion Knowledge Management Group (KMG) has to put in place a more formal framework to help ensure the effective and efficient operation of the firm’s communities of practice. 3. How could ’learning histories’ be further developed to capture organisational memory? They can develop learning histories with surveys tend to produce a set of "answers" that are endorsed (or not endorsed) by senior management. The learning history creates a......

Words: 283 - Pages: 2

Premium Essay

Case Study Questions

...1. A business model is a revenue generating partnership of the business and its customers. The business model activates the business plan. There are several questions that formulate the business model. Such as • What is our relationship with our customer? What are they offering the business? • Will this customer be in relationship for the short term or long term? • Is there one customer that controls our business? • What marketing or other strategies guarantee new long-term customers? • How do we increase the return on investment from each customer with repeat business? A business plan is a living document that presents the strategies that will drive the business toward the future and sustain it in the present. The plan lays out the mission, and the following strategies marketing, advertising, sales, and most importantly the financial health of the business. It communicates the roles, responsibilities, and goals of leadership to navigate the business into profitable territory and avoid any threats to the success of the business. 2. What are the eight key components of an effective business model? Customers--- There has to be a ready consumer. Willing to purchase your product or service. Resources and Capabilities-Access to capital, expertise in the field, suppliers, supply chain, and delivery chain These are necessary to support the business, provide innovative products and services, get the product to market quickly, and supply the product at the best possible......

Words: 1230 - Pages: 5

Premium Essay

Case Study Questions

...Case Study Questions: 1. Provide a synopsis of the Jones and Shephard case. The Co added extra obligations and responsibilities to be managed with the addition of the ISD department, which made the work load that currently existed, be more of a deficit than a benefit to the Co. The main focus was to resolve internal projects to a satisfying level and incorporate the needs of the external customers with sufficient supported outcomes of both. 2. Highlight three enterprise management causes/considerations and three project management causes/considerations for the situation. Include what seemed to be missing. From the business objective; the implementation of the ISD department was added too rapidly, and the addition of approximately 50 new employees created a budget increase where this could have been minimized or alleviated. The business did not have a well thought out plan when they added the ISD division, with no project supervisor that could only focus on this new implementation. The business did not allow the Division Director to focus on strategic planning and policy formulation as a main focus to help enhance the company. The projects X and Y were not guided by individual project managers, which caused the Director to be solely responsible for the daily performance of them. There was no head person or supervisor in place to deal with Customer inquiries and needs. The Idea of the Matrix would seem to be a proven effective internal structure for the......

Words: 796 - Pages: 4

Premium Essay

Case 16 Reed's Clothier Inc.

...Case 16 Reed’s Clothier Inc James Jackson University of Phoenix Finance for Business FIN 370 Mr. Arnold Harvey July 21, 2010 Case 16 Reed’s Clothier Inc Reed’s Clothiers was founded by Jim Reed in 1934 when Jim retired from the military. Over the years, the business grew, netting over $800,000 by 1976. Jim Reed then decided to retire and handed over the family business to his son, Jim Reed II. The younger Jim then decided to buy a building in a prime area in downtown Lexington, creating a 880,000 mortgage debt. As the years progressed, Reed’s Clothiers success grew along with their inventory stock. Because of the rapid growth in Reed’s Clothiers’ inventory, debt was incurred. As the debt grew out of control and accounts became past due, Jim decided to make a visit to the bank his family did business with. There he learned that he was over extended in his credit and that he now had more debt and past due accounts than he did cash flow. The banker suggested that Jim hire a specialist to help manage his inventory and to get the company back on track. It was then Jim knew Reed’s Clothiers was in financial trouble. Reed’s Clothiers Question 1. Calculate a few ratios and compare Reed’s results with industry averages. (Some industry averages are shown in Exhibit 4.) What do these ratios indicate? Ratio                                                                             Reeds                             Industry Current   (current assets/current liabilities)......

Words: 880 - Pages: 4

Premium Essay

Reed's Clothier Case Study

...Introductory Case Summary Jim Reed II is facing a dilemma of negative cash flow due to his business being slow. Jim’s decision for an increase of inventory has brought on uncontrollable debts. He was in hopes of increasing his line of credit thru his bank, but is rejected due to delinquency in the payment history and owing the bank $130,000 which needs to be paid within 30 days. Jim Reed’s personal banker, Harold Holmes, suggested rapid changes to the business, in order to regain control and pay off debts. Some of these changes include: hiring a consultant to overlook the financial situation and help manage Reed’s Clothier’s inventory system and reducing inventory and accounts receivables to the industry average. After going over the balance sheet, Holmes suggested a considerable reduction in accounts receivable since that was an area which can be controlled. Ratio Analysis and Interpretations 1. Calculate a few ratios and compare Reed's results with industry averages. (Some industry averages are shown in Exhibit 16.4.) What do these ratios indicate? Exhibit 16.4. Reed's Clothiers Selected Ratios* Liquidity Ratios Industry Current ratio 2.7 Quick ratio 1.6 Receivables turnover 7.7 Average collection period 47.4 Efficiency Ratios Total asset turnover 1.9 Inventory turnover 7.0 Payable turnover 15.1 Profitability Ratios Gross profit margin 33.0 Net profit margin 7.8 Return on common equity 25.9 Liquidity......

Words: 1423 - Pages: 6

Premium Essay

B of a Case Study Questions

...customer distribution | Making a strategy to focus on the most of customers | Location of the ATM that has been destroyed | Making a strategy to ensure the security of the ATM | | | add as many lines as required. | | -------------------------------------------- [ 1 ]. core business process – All organization possess core business processes that allow the enterprise to operate, delivering products and services to its customers. A typical organization has no more than five or six core process, including: (1) financial management, (2) people management, (3) perhaps supply-chain management, (4) perhaps sales force management, (5) perhaps product design and development, and so forth, depending upon the nature of the business under study. Note that a not-for-profit, like a university or hospital, may have very different core processes from those of a commercial bank or an automobile manufacturer....

Words: 674 - Pages: 3

Premium Essay

Reed's Clothier

...Reed’s Clothier” Case Study and Questions Reed’s Clothier Case Study Analysis Jim Reed, II the owner of Reed’s Clothier, a men’s clothing establishment is facing financial difficulties. Established in 1934, by Jim Reed to cater to the numerous Virginia Military Institute (VMI) graduates, the business struggled for the first several years. By 1976, the business annual sales had grown to $800,000, where Jim Reed decided to retire and hand over the business to his son, Jim Reed II. In 1981, Jim decided to expand retail floor space and acquired an $880,000 long-term mortgage debt. During this time, Jim increased inventories with the belief that higher inventories led to higher sales. In 1994, the business had grown to more than $2 million in sales. The increased inventories, along with the acquired mortgage payments have seriously eroded Reed’s positive cash flow. During the last year, Reed had slowly increased his line of credit at the bank and failed to take advantage of cash discounts offered by suppliers. Now, many of Reed’s accounts are almost 40 days past due, causing suppliers to demand payment. Jim decided to visit his bank in order to further extend his line of credit by an additional $100,000. Harold Holmes of Fist Virginia National Bank has advised Reed that the bank will not extend their line of credit, and that Reed must repay an overdue note of $13,000 within 30 days. Holmes suggested the Reed seek assistance from a consultant in order to establish a better......

Words: 1585 - Pages: 7

Premium Essay

Case Study Questions

...CISM 4136 A- Global Information Resource Management Case Questions Carol V. Brown, D.W. DeHayes, J.A. Hoffer, W.E. Martin,&. W.C. Perkins, Managing Information Technology, Seventh Edition, 2012, Prentice Hall. Case Study 1 - Midsouth Chamber of Commerce (A): The Role of the Operating Manager in Information Systems 1. Identify the key players in the case and describe their respective roles. Are these the right roles? What roles in particular should be modified? How might such role modifications be accomplished? 2. Focus on the role of the software vendor- Unitrak Software Corporation. Was it an appropriate role? Did Unitrak act responsibly? 3. How much is Kovecki to blame for this situation? 4. One of the recurring themes of this book is the importance of information systems politics. To what extent does IS politics explain the situation that has developed at the Midsouth Chamber of Commerce? 5. The case involves what appears to be a fairly routine use of information technology to support a service organization. Yet the Midsouth Chamber of Commerce encountered major problems in bringing up its new system. Is there a lesson here for organizations seeking to adopt new information technology? What is it? 6. What should Lassiter do now? Case Study 11-1- Vendor-Managed Inventory at NIBCO 1. What was the catalyst for NIBCO to develop a VMI program, and why was it able to respond? 2. Describe what types of transactions are involved in NIBCO's VMI......

Words: 1468 - Pages: 6

Premium Essay

Reed's Clothier Inc.

...Reed's Clothier Case Study Beverly Jaquez FIN/370 August 3, 2011 Mr. Curtis Henson Reed's Clothier Case Study Reed’s Clothier was founded in 1934 by Jim Reed. In 1976 the company was turned over to Jim’s son, Jim Reed II. Since then Jim has made several changes to the company from expanding the retail floor space, modernizing the store to give it a contemporary look. Jim increased the amount of inventory because he believed that sales were lost due to an item not being available that a customer wanted to buy. Because of this sales did increase but so did the inventory. The current situation is that Jim is in default with Reed’s suppliers who are demanding payment. If no payment is received, they will cease all deliveries. He is also over 45 days past due on the note payable with the bank. This prompted Jim to go to his bank of many years and request an increase in the line of credit by $100,000. Unfortunately, the bank will not extend the line of credit any further. His banker suggested that he hire a consultant, pay the overdue note payable within 30 days to continue the present line of credit, have an inventory reduction sale to reduce the inventory, and reduce accounts receivable by collecting on the past due accounts. Jim does not believe this is a good idea. He feels he will be reducing his sales and losing customers if he follows the banker’s suggestions. Ratios Reed’s current ratio is 2.02. The industry average is 2.7. This means that for every......

Words: 637 - Pages: 3

Premium Essay

Reed's Clothier, Inc.

...QUESTIONS 1. Calculate a few ratios and compare Reed's results with industry averages. (Some industry averages are shown in Exhibit 4.) What do these ratios indicate? 2. Why does Holmes want Reed's to have an inventory reduction sale, and what does he think will be accomplished by it? 3. XXXXX XXXXX had adopted a very loose working capital policy with higher current assets than industry averages. If he merely tightens his working capital policy to the averages, should this affect his sales? 4. Assuming that Reed's can improve its operations to be in line with the industry averages, construct a 1995 pro forma income statement. Assume that net sales will be reduced 5 percent to $1,938,000 but that depreciation and amortization will not change but remain at $32,000. 5. What type of inventory control system would you suggest to XXXXX XXXXX? 6. What type of accounts receivable control would you suggest to XXXXX XXXXX? 7. Is the increase in sales related to the increase in inventory? (See Exhibit 5.) 8. What is Reed's cost of not taking the suppliers' discounts? Reed's Clothier Case Study Introductory Case Summary Jim Reed II is facing a dilemma of negative cash flow due to his business being slow. Jim’s decision for an increase of inventory has brought on uncontrollable debts. He was in hopes of increasing his line of credit thru his bank, but is rejected due to delinquency in the payment history and owing the bank $130,000 which needs to be paid within 30 days...

Words: 1621 - Pages: 7

Premium Essay

Reed's Clothier, in,

...will be more favorable than owing a brown pinto. In a work setting, the benefits from critical thinking based on the decision making process include profit, cost reduction and efficient. These benefits come from making good decisions when one is faced with circumstances that require choosing what is best for the company. In conclusion, Critical thinking was defined as the ability to analyze facts; generate, and organize ideas; defend opinions; make comparisons; draw inferences; evaluate arguments and solve problems (Safi & Burrell, 2007, p. 2). Critical thinking enables us to decide what is best from a circumstance and to choose a decision that is going to be better. That decision can occur personally and professionally as in the case of Trim Masters with the ability to think critically and choosing a supplier to make parts to prevent production to stop. This shows the importance and the benefits the critical thinking has on the decision making process. References Kirby, G. R., & Goodpaster, J. R. (2007). Thinking . Retrieved from www.ecampus.phoenix.edu. Safi, A., & Burrell, D. N. (2007). Developing Advanced Decision-Making Skills in International Leaders and Managers.  Vikalpa, 32(3), para.. Retrieved from http://www.ebscohost.com...

Words: 790 - Pages: 4

Premium Essay

Cis1101 Review Questions and Case Study Questions Cis 1101 Review Questions and Case Study Questions

...CIS1101 REVIEW QUESTIONS AND CASE STUDY QUESTIONS Click below link for Answer http://workbank247.com/q/cis1101-review-questions-and-case-study-cis-1101-r/23695 http://workbank247.com/q/cis1101-review-questions-and-case-study-cis-1101-r/23695 MODULE 1 CHAPTER 1 REVIEW QUESTIONS 1. Briefly describe the technologies that led businesses into the second wave of electronic commerce. 3. Briefly describe the specific activities that a computer assembly operation might include in B2B electronic commerce for its supply management or procurement operations. 5. Many business analysts have discussed the concept of the first-mover advantage. What are some of the disadvantages of being a first mover? CASE STUDY C1 CRITICAL THINKING QUESTIONS 1. Toys“R”Us sales exceeded $300 million by 2004 on the Amazon.com site. Explain how Amazon, Toys“R”Us, and other toy sellers who participated in Amazon’s Marketplace retailer program benefitted from the network effect as a result of the relationship between Amazon and Toys“R”Us. 2. In 2004, Toys“R”Us sued Amazon.com for violating terms of the agreement between the companies; specifically, Toys“R”Us objected to Amazon.com’s permitting Amazon Market-place retailers to sell toys. (Note: When the lawsuit was filed, Amazon Marketplace was called “zShops.”) Amazon.com responded by filing a countersuit. After more than two years of litigation, a New Jersey Superior Court judge ruled that the agreement had been......

Words: 2988 - Pages: 12

Premium Essay

Reed’s Clothier Case Study

...Reed’s Clothier is at the present time suffering from financial problems the owner Jim Reed is in fear of losing his business. The business has a bank note 45 day’s in arrears, Reed’s has a bank note of $130,000 that comes due in 30 days the company also has $85,000 in cash reserves, $491,000 in inventory, and $413,000 in accounts in accounts receivable that need to be collected. Reed’s Clothier has meet its financial obligations, and the company needs to convert inventory into cash. To determine the financial standings of the company, a financial analysis will have to be done if Reed’s Clothier is to find the best way to raise the funds needed to cover the bank note and save the business. Ratios are used to calculate the information from the financial statements, and figure debt, inventory, receivable terms, expenses, and the assets of the company. Comparing the industry standards on the two items will determine the inability to repay the debt to the funds that can be collected in accounts receivable. The collection period for the company is 74.1 days compared to the industry average of 47.4 days shows a problem in accounts receivable that disrupts cash flow. The payable turnover ratio is also an important ratio. The industry standard is 15.1; Reed’s Clothier has a ratio of 7.0. If Reed’s has an inventory reduction sale, they may allow the company to raise the necessary funds to repay bank, this would be one suggestion for Reed’s personal banker Holmes. Holmes believes...

Words: 1146 - Pages: 5

Premium Essay

Reed's Clothier

...“Reed’s Clothier” Case Study and Questions University of Phoenix FIN/370 – Finance for Business DATE “Reed’s Clothier” Case Study and Questions Reed’s Clothier Case Study Analysis Jim Reed, II the owner of Reed’s Clothier, a men’s clothing establishment is facing financial difficulties. Established in 1934, by Jim Reed to cater to the numerous Virginia Military Institute (VMI) graduates, the business struggled for the first several years. By 1976, the business annual sales had grown to $800,000, where Jim Reed decided to retire and hand over the business to his son, Jim Reed II. In 1981, Jim decided to expand retail floor space and acquired an $880,000 long-term mortgage debt. During this time, Jim increased inventories with the belief that higher inventories led to higher sales. In 1994, the business had grown to more than $2 million in sales. The increased inventories, along with the acquired mortgage payments have seriously eroded Reed’s positive cash flow. During the last year, Reed had slowly increased his line of credit at the bank and failed to take advantage of cash discounts offered by suppliers. Now, many of Reed’s accounts are almost 40 days past due, causing suppliers to demand payment. Jim decided to visit his bank in order to further extend his line of credit by an additional $100,000. Harold Holmes of Fist Virginia National Bank has advised Reed that the bank will not extend their line of credit, and that Reed must repay an overdue note of......

Words: 1796 - Pages: 8

Premium Essay

Reed’s Clothier Case Study

...Reed’s Clothier Case Study FIN/370 November 02, 2011 The Reed’s Clothier Case Study Reed Clothier Case is a family owned and operated business that was established in 1934. Jim Reed, who is the founder of the establishment, is going through some financial difficulties. The first Virginia National Bank would not extend their line of credit, they also notified Jim on an overdue payment of $130,000, which needed to be paid within a month. Reed had made a choice to safe the business, by taking the cash in reserves in the amount of $85,000 and cash inventory in the amount of $491,000. Reed was determined to meet the financial obligation of the business, so he decides to covert a portion of the inventory into cash. Financial ratio analysis will provide the financial standing of the past, present, and future of the company to determine the best way to restore financial standing within the business. Liquidity Ratio: Reeds Industry, Current Ratio (2.0 & 2.7), The current ratio tells whether Reed can pay back it short-term liabilities and provide a sense of how efficient the company is run. Reed ratio is greater than 1, by knowing this Reed will be able to pay back his short term goal. Receivables Turnover (6.4 & 7.7), The Receivables Turnover ratio is a way for Reed to measure to quantity their effectiveness in extending credit as well as collecting debts. Reeds ratio is below the average, so this indicate the company should re-assess its credit......

Words: 1114 - Pages: 5