1648 Taft Avenue Corner Pedro Gil

Street Malate, City of Manila, Philippines

GRADUATE SCHOOL OF BUSINESS AND MANAGEMENT

Master of Business Administration

Financial Management

“Asia Nova Ceramics, Inc. (Asia Nova)”

Case Analysis

Submitted by:

RUTH JOY R. PAREDES

Mentored by:

PROF. FAUSTINA C. RANA

 CASE ANALYSIS

ASIA NOVA CERAMICS, INC. (ASIA NOVA)

I. Time Context:

1993-1995

II. Viewpoint:

Management of the Company (Asia Nova’s President, Alex Valenzuela)

III. Statement of the problem:

Determine ways to improve its operation management in order to maintain its revenue
despite the competition?????

IV. Objectives:

Must:

To come up with the strategy to make this business competitive but still
sustainable.

Want:

Acquire a more efficient inventory level decision leading to a more profitable

production in the long run.

To evaluate the Financial Statement and Balance Sheet

V. Areas of Consideration:

A. Strengths
 1. The company was one of the leading manufacturers of ceramic tiles in the
country.

2. The company’s distribution network was the most extensive in the industry.

B. Weaknesses

1. Manufacturing process was extensive on capital investment

2. Asia Nova’s sales declined by 20 percent and profits declined by 45 percent.

3. Possibility of bankruptcy and closure of business for unsettled obligation

4. There is a possibility that the quality of the product might change because of
the new system.

C. Opportunities

1. The chance to be able to compete with large ceramics company.

2. Sales will be maintained in 1995.

3. Plant restructuring, it will be more efficient in the production.

D. Threats

1. Trade Liberalization under Asian Free Trade Agreement

 VI. Alternative Courses of Action:

1. Obtain Bank loan amounting to P 20 Million which can be paid within 3-5 years. (ACA 1)

Advantages:

a. Plant restructuring will be completed.

b. They will be more efficient in the production.

c. Workers will be able to produce more units.

Disadvantages:

a. Probable spoilage and obsolescence

b.

c.

2. Asia Nova should review the ordering costs and carrying costs of the inventory (raw materials,
goods-in-process and finished goods) to determine the level of the inventory to keep.

Advantages:

a.

Disadvantages:

a.

3. Improve their Marketing Strategy (ACA 3)

Advantages:

a.

Disadvantages:

a.

VII. Recommendation:
 I recommend ACA 2,

VIII. Detailed Plan of Action:

% of gross % of gross
Income statement profit 1994 profit 1995 Movement Remarks

Sales 100.00% 86.4 100.% 86.4 - Sales will be

 maintained*
(66. (53
Cost of goods sold -76.4% 0) 62% .5) (12.5)

Gross margin from

Gross profit 23.6% - 20.4 38% 32.9 12.5 23.6 to 38 %

Selling, general and administrative (17. (19 Additional cost of

expenses 19.8% 1) .1) (2) P Million
(2 (
Interest expenses (short-term) 2.3% .0) 2.0) -
(19. (21
1) .1) (2)

Income before tax 1.5% 1.3 11.8 10.5

0. 3.
Income tax 30.8% 4 -30.8% 6 3.2
30.77%

Profit margin from

Net income 1.04% 0.9 9.5% 8.2 7.3 1.04% to 9.5%

Result computation from the given information

*The prices might be lower in 1995 but additional sales is anticipated due to the proposed plan of the
Company – including plant restructuring and additional inventory, also good credit terms, which incur
cash discounts.

BALANCE SHEET

1994 1995 Movement % Movement

Balance sheet
Current assets
cash balance will increase
2. 17. 15. with the bank loan
Cash 1 8 7 747.62% proceeds
3. - temporary investment to be
Temporary investments 4 - 3.4 -100.00% sold
accounts receivable
14. 7. - suggested to be collected
Accounts receivable 1 2 6.9 -48.94% and reduced by half
10. 20. 10.
Inventory 3 6 3 100.00%
29. 45. 15.
9 6 7
Non-current assets
Deduct depreciation of
52. 64. 12. P7.5M and add P20M for
Plant and equipment 4 9 5 23.85% restructuring

82. 110. 28.

Total assets 3 5 2

Current liabilities
- - Other balance sheet items
Accounts payable 8.5 8.5 - 0.00% remained the same
Other balance sheet items
Bank loan - short term - 15.1- 15.1 - 0.00% remained the same
- - Other balance sheet items
Accrued liabilities 2.0 2.0 - 0.00% remained the same

- 25.6- 25.6 -
Non-current liabilities
-
Bank loan - long term -- 20.0 20.0 100.00%

-
Total liabilities - 25.6- 45.6 20.0

Shareholder's equity
Other balance sheet items
Share Capital - 40.2- 40.2 - 0.00% remained the same
- Profit, see Income
Retained earnings - 16.5- 24.7 8.2 49.70% statement table

-
Total equity - 56.7- 64.9 8.2