Executive summary.
In this business case, a shift from seasonal to level monthly production of toys will change the seasonal cycle of Toys World's working capital needs and necessitate new bank credit arrangements.
It has to be analyzed the company's performance, forecast fund needs and make a recommendation. The case introduces the pattern of current assets and cash flows in a seasonal company and provide and elementary exercise in the construction of the pro forma financial statements and estimation of fund needs.
Toy World has been facing two basic issues, as follows:
- The first one is if it has to change to a level monthly production.
- The second area of concern is the financial arrangement with the bank.
These two points are analyzed in detail here in this paper.
Finally, I have suggested some recommendations for the issues that I have mentioned above. In reference to the first issue, it will be profitable for the company to change to level monthly production.
In reference to the second issue, Toy World has to get a bigger loan.
If the company follow this recommendations, it will obtain a profit of $ 531,000 that represents $180,000 more than with seasonal production
Background
Toy World, Inc is a manufacturer of plastic toys for children, founded in 1973 by David Dunton. In the past, the company's production schedules had always been highly seasonal, reflecting t ...