GROUP 3

WORKING CAPITAL
Presentors:
POLICY AND
MANAGEMENT
Catherine Fabre
Alfred Peralta
Talha Macabanding
 A CASE ANALYSIS FOR OLYMPIAN BACKPACKS,
INC.
OLYMPIAN BACKPACKS, INC.
  Company Background
 Time Context
 Point of View
 Statement of the Problem
 Statement of the Objectives

 Areas of Consideration
 SWOT Analysis
AGENDA

 Alternative Courses of Action

 Conclusion/Recommendation
 Detailed Plan of Action
 The company was started in February 1995 by the spouses
Merlin and Carl Gatdula. They started the nylon bags business
and designed the products that became a “hit” with students.
Their backpacks had superior features compared to those of
competitors. Olympian bags used durable, high density
materials and sewing threads of tested strength and durability.
COMPANY
While there were many brands of backpacks in the market,
BACKGROUND students preferred Olympian Backpacks despite it being more
expensive.
The Gatdulas also own other businesses, and because of that
they hired Mr. Leon Caballo as manager for Olympian
Backpacks, Inc. to be able for them to concentrate more on
their other businesses.
 Olympian Backpacks sold on credit terms of 60 days. The
company maintained accounts for about 20 retailers, ranging
from large department stores to medium-sized specialty stores
and retail outlets. Sales of the backpacks and camping gear
COMPANY were highly seasonal. Most of the company's sales were in the
BACKGROUND school break up to school opening, from April to July. There
were another two months of good sales in November and
December, but sales on other months were quite lean. There
appeared to be very little management could do to influence its
sales pattern.
 There were always problems in obtaining imported materials,
primarily of nylon, taffeta and accessories like zippers and
leather patches. There were few suppliers of these materials
and they strictly enforce the 30-day credit period. Gatdula, and
Caballo after him, kept monthly purchases at a steady level to
maintain good relations with suppliers.
COMPANY On August 19, 1995, Gatdula took out a P2.0 million loan from
BACKGROUND Oriental Bank with a maturity of one year. Gatdula conserved
funds by producing bags according to sales pattern. Workers
received wages on piece-rate basis. They work longer hours
during peak months and took breaks on rotating work
schedules during periods of low sales. The company had no
other debts besides those to suppliers, the short-term loan and a
minimal amount of accruals.
FINANCIAL
STATEMENTS
1995 AND 1996
TIME CONTEXT February 1995
POINT OF VIEW Leon Caballo – Company Manager
 Olympian Backpacks might not have sufficient cash
STATEMENT OF to pay off current obligations to suppliers and
THE PROBLEM operating needs.
  To be able for Olympian Backpacks, Inc. to meet current
obligations to banks and suppliers
 To collect the company’s receivables on a timely basis
 To formulate a strict policy in terms of credit and collection
STATEMENT OF
THE OBJECTIVES  To maintain good relations with banks and suppliers
 To have a stable and synchronized set of cash flows
 To have a good and sound financial position
 To improve the firm’s operations
AREAS OF SWOT Analysis
CONSIDERATION
SWOT ANALYSIS

STRENGTHS WEAKNESSES OPPORTUNITIES THREATS

Products are of high Products are Competitors might sell at a

quality. More loyal customers lower price.
expensive.
Price of raw materials may
Products are profitable.
The company has poor Demands for bag may increase due to inflation.
financial position. increase.
Consumers are after its
Limited suppliers
quality.
Receivables have built Price of raw materials may
Quantity and quality of decrease due to good Demands for bag may
up to a large amount. relationship with suppliers.
materials are at a right increase due to new entrants
price. to the industry.
No policy for
New investment Credit rating might decrease
High demand for products collection of opportunities due to untimely payment of
during seasonal months. receivables. bank loans.
  Encourage timely collection of receivables by setting up
trade discounts to customers.
 Enforce strict policy on collection of receivables.
ALTERNATIVE
 Request for a longer credit term from suppliers.
COURSES OF
ACTION  Request for an increase in credit limit from Oriental Bank.
 Request for a new loan from other banks.
 Increase collection of receivables
CONCLUSION/ by encouraging timely collection
RECOMMENDATIO thru giving of trade discounts to
N
customers and enforcing a strict
policy on collection.
 Activity Person Responsible Time Frame

1 Set up credit policy to customers. Owners, Manager, Sales Manager ASAP

Set up discount rate to be given to

2 early paying customers.
Owners, Manager, Sales Manager ASAP

3 Offer an early payment discount. Owners, Manager, Sales Manager Within 2 weeks

Enforce a penalty on past-due

4 receivables.
Owners, Manager, Sales Manager Within 2 weeks

DETAILED PLAN OF ACTION

 Activity Person Responsible Time Frame
Offer a payment plan to customers
5 with little or no capacity to pay.
Owners, Manager, Sales Manager Within the month

Conduct a meeting with the owners

Owners, Manager, Sales Manager
6 to be able to evaluate the current
company status.
ASAP

Train managers and staff to improve

7 their skills more in dealing with a
wide range of customers.
Manager, Sales Manager, Salesmen Within the year

8 Monitor the result. Manager, Sales Manager Within the year

DETAILED PLAN OF ACTION

END OF PRESENTATION

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