Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Save to My Library
Look up keyword
Like this
5Activity
0 of .
Results for:
No results containing your search query
P. 1
Halloran Metals

Halloran Metals

Ratings: (0)|Views: 1,880 |Likes:
Published by Umair Babar Chishti

More info:

Published by: Umair Babar Chishti on Jan 06, 2012
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as DOCX, PDF, TXT or read online from Scribd
See more
See less

05/09/2013

pdf

text

original

 
Halloran Metals
Q.3) What economic risks are implicit in Halloran¶s logistics choices? How has the firmendeavored to reduce these? How successful have they been?Halloran¶s logistics strategy is to cater to small orders in the minimum amount of timei.e. one day. It is involved in Stage one processing which requires modest equipment.Intermediate processing needs large investments in equipment. Halloran operates fromseven warehousing locations and carries excess inventory in all the locations at alltimes. This is a part of their logistics and marketing strategy of not turning down a singleorder or customer regardless of its size. Due to which it runs different economic risks ina market which is price competitive and growth-oriented at the same time. Moreover, inorder to increase customer goodwill, it extends credit terms to their loyal customersbeyond the usual 30 days period and results increasing the risk of recovering accountsreceivable. Referring to Exhibit 1, the income statement section shows that theoperating expenses are high-particularly the cost of warehousing which limit operatingprofit. Under liabilities section, it shows that the company is highly leveraged and isshowing high accounts payable figures depicting high default and liquidity risks. If acompany fails to perform well in future years, it can default in making payments to itscreditors which will consequently affect overall operations and limit company¶s ability toborrow in future. It can also face problems in securing capital for capital expenditureand, thereby, running liquidity risk. To further emphasize on this point, we compareHalloran and Allied¶s quick ratios. Quick ratio is a measure of company¶s ability to meetits short-term obligations.Quick Ratio = (Current assets-Inventories)/Current liabilitiesHalloran (2001) = (51,438-30,980)/29,752= 0.68 Allied (2001) = (45,518-19,364)/22,710
(Figures from Exhibit 6)
 =1.15High quick ratio means that a company is more capable of meeting its short-termobligations and has strong financial condition. Quick ratio analysis shows that Allied is ina better position to cater to increased customer demand in future and to bringoperational efficiency. Due to lower quick ratio, Halloran faces problems in bidding for bulk-buying and making large investments in equipment. It also faces certain difficultiesin expanding its operations due to its highly leveraged and inventory-intensive nature. Acomplete analysis of ratios is given in
 Appendix1.
Halloran has tried to reduce its risks by exploiting small investment opportunities. Thecompany buys a small depot, strengthens its customer base, and builds a warehouse inthat location to fulfill the demand arising from that area. It reduces both default andliquidity risk. It keeps Halloran in a position to make debt repayments and leaves it with

Activity (5)

You've already reviewed this. Edit your review.
1 hundred reads
1 thousand reads
Vania Utami liked this
Jake Boisvert liked this
haris_muzaffar liked this

You're Reading a Free Preview

Download
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->