University of St.

La Salle

Financial Management

Case Study #2: Growing Pains

Submitted to:

Felix D. Cena

Submitted By:

Bon Rian Despabeladero

Jasmine Cate Jumilla

Charlene Yee

Jishelle Monterola

COMA2B
 1. Brief Background

In 1998, Vicky and Mason Coleman founded their firm making oatmeal
treats at the urging of their close friends who just like the flavor of their oats.
Mason, a former college gymnastics coach, claims he never planned to launch a
business but the idea of being able to help his team at school was a big inspiration
for him to take the plunge. Their business, Oats 'R' Us, was founded in 1998 and
had sales of over $4 million by 2004 thanks to significant assistance from
neighborhood stores and a sponsorship from a significant bread manufacturer.
Mason was certain that sales will rise sharply in the coming years given the
present trend of eating healthy snacks and being active. Mason was certain that
his company would be able to at least match, if not surpass, the industry growth
prediction of 30% per year for sales growth. Mason immediately dialed Jim
Moroney, the treasurer. Jim quickly requested the accounting division for the
company's financial figures.

2. Statement of the Problem

The main issue with Oats 'R' Us is that the business is growing a lot faster
than expected. Determining how much additional money would be needed to
support the growth rate anticipated for the following year is the company's main
concern. The corporation must also have the ability to compute forecasted data in
order to properly understand and prepare the business for the upcoming term.

3. Areas of Consideration
1. External Affairs

a.) Forecast for Industry Growth and Growth Rate

In general, forecasting assists the firm in making an effective choice based on the
anticipated future events. To sum it up, a growth forecast creates data-driven business
operations strategy based on current economic conditions. a growth forecast creates
data-driven business operations strategy based on current economic conditions.

b.) Sources of External Financing

External financing is a significant aspect that has an impact on the company's

operations. Loans, trades, shares, stocks, bonds, investors, and other credit activities are
significant external financial sources since they may assist the company's financing.
When a company's ability to raise money and operate on its own is compromised, they
are used. The capability of external finance to make items more quickly and efficiently is
a crucial issue to take into account. These outside sources of funding also consider the
company's growth rate while determining whether to invest in it.
 2. Internal Factors

a.) Company’s Growth Rate

After a few years after the company's launch, its growth rate has increased. It has
to be investigated for upcoming planning. If calculated correctly, the growth rate might
effectively demonstrate the additional financing required for the business's next few years
of operation. Finding the company's growth rate will reveal the potential size of its
financial resources.

b.) Annual Sales

The company's commercial transactions are supported by annual revenues. It

produces revenue that may be utilized for both current and future activities. In order to
keep the firm operating and move on to a new accounting period, it is imperative to
maintain track of yearly sales. Additionally, it is critical to comprehend what will come
next in the decision-making process.

4. Alternative Courses of Action and Analysis

The various alternatives to the problem are covered in this section. Teams and management
develop a variety of solutions. When projecting sales for Oats 'R' Us, Jim just has a few
alternatives. The generated solutions include and cover every component that the business should
think about or work toward, and they are incredibly valuable. Forecasting can be simplified by
using financial planning models. The inputs include current financial statements, management
predictions, and occasionally members of the marketing team. The planning model calculates
how management decisions will affect costs, working capital, fixed assets, and financing
requirements. The outcome is pro forma financial statements, which are projections based on the
planning's inputs. In order to lessen the need for EFN, Mason can reduce the amount of
dividends paid to shareholders, cut expenses, and boost accounts receivable and accruals.
5. Conclusion and Recommendation

Setting up the anticipated predictions would assist Oats R Us in managing its issue and obtaining
the additional funding the company requires. A moderate method allows for a small adjustment
to the operating program or the creation of a new allocation structure. The company ratio
performs somewhat poorly, yet it performs and uses resources adequately. It is still conceivable
to build the debt so that the additional value is allocated predominantly in the long-term debt,
which is consistent with offering the payment to accrue interest for a protracted period of time,
even though no adjustments to account management are necessary. There can be risks related to
various modifications if it decides to internalize its efforts in this situation. The adjustments and
account expansions undertaken to protect internal assets might decrease the company's value and
lengthen payments. Customers and members of staff may decide not to accept price increases
and unpaid pay in order to keep the business open. because of variations in the profit ratio and
accruing costs, which is advantageous to a number of rivals in the industry. The issues that were
found in light of the settings are listed below. There may be benefits depending on the business'
preference for further outside financing. The predicted net income is still increasing despite the
increase in debt and changes to some costs. All other aspects stay the same, but the company's
assets and revenues that have financial ratios that are the closest to the industry average improve
in value.In order to avoid the costs associated with changing policies and the time needed to
establish a new accounting system, it is therefore advised that you partner with external finance
for the company's development. The operations manager was informed about the utilization of
Fixed Assets' % capacity by the additional financial values that were required in the planned
growth rate. As a result, this will enable the business to expand its operations while also assuring
that the rate of sales growth will help with future debt and other types of financial commitments.