CASE-4_CHAMPION-CATTLE-FARMS.docx

Dung Tien Nguyen PCU-MBA-Financial Management 2rd Trimester, SY 2015-2016

26 Jan 2016 Prof. F. C. Rana

Case 4: Champion Cattle Farms. INC

Philippines Christian University

The Report Financial Management

Case study: Champion Cattle Farms. INC

Submitted To Prof: F.C. Rana

Submitted By Dung Tien Nguyen

Manila: 26 Jan 2016

Dung Tien Nguyen PCU-MBA-Financial Management 2rd Trimester, SY 2015-2016

26 Jan 2016 Prof. F. C. Rana

Case 4: Champion Cattle Farms. INC

Viewpoint:DBB’s Santo Time Context: 1997-1998 Definition of the Problem:Champion cattle farm is in danger of inability to accumulate enough cash to ensure repayment of the DBB loan in March 15, 1998 Objectives: Must objective: To give strategies of business based on financial analysis for reducing variable cost and deferring payment of the DBB loan until mid-April if they feel needing Want objective:Evaluate the break-even revenue, beak-even volume and cash inflow estimation to find problems of break-even forecast. These give strategies to help Champion Cattle Farms repayment in March 15. Areas of Considerations:

Dung Tien Nguyen PCU-MBA-Financial Management 2rd Trimester, SY 2015-2016

26 Jan 2016 Prof. F. C. Rana

Case 4: Champion Cattle Farms. INC -

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Champion cattle farms had 2,5 million loan which were one-year loan on lump-sum payment term with interest of 16 percent payable in arrears. So they have total payment in March 15 is: 2,5 + 2,5x16/100 = 2,9 million Case 1: sold of 250 heads on month; Profit on month = 2,400,000 - 250x7200 – 10,000 = 590,000 P Net income on month = 590,000 – 590,000x35/100 = 383,500 Plinh Total cash on year = 383,500x12 + 835,000 = 5,437,000 > 2900,000 P  The loan is very easily for repayment Case 2: Sold of 100 heads on month; Profit on month = 960,000 - 100x7200 – 10,000 = 230,000 P Net income on month = 230,000 – 230,000x35/100 =149,500 P Total cash on year = 149,500x12 + 835,000 = 2,629,000 < 2900,000 P  The Loan is very difficult for repayment

Alternative Courses of Action: ACA1: Request the bank to defer payment of the DBB loan ACA2: Research cost to reduce cost and increase profitand find another investment course ACA3: Use promotions to increase number of sale, and finding more business partnership ACA1: Request the bank to defer payment of the DBB loan Advantage: - It suitable for emergency case - It help company have safety for loan - It reduce pressure for financial of company Disadvantage: - It’s notflexible for financial deployment and mobilization - The company have to pay more money for deferring payment of the bank loan ACA2: Research cost to reduce cost to increase profit and find another investment course Advantage: - It make company will be develop faster - Finding out good partnership, and the company can be optimize the cost and increase profit Disadvantage: - It’s not suitable in short time. - It can make the product of company that will be change the quality, so the company can loss amount of customer. ACA3: Use promotions to increase number of sale, and finding more business partnership Advantage: - Ease for deploying and can gethigh effective - It help company can develop market - Help company can attract many customer Disadvantage: - Profit of company can be down, and it make increase the cost - Can damage to financial if break-even monthly sale is high Recommendation: ACA3 is recommended because of the following reasons: 1. Break-even monthly sale is just 40,000 P. This level is not high so we can ensure that have profit 2. We can develop market for company, this will attract big amount of customers for company 3. Help employee systems of company can be worked more professional Action Plan: 1. Analysis financial to give goal of financial: - 2900,000 – 835,000 = 2,065,000 P (on year) - Profit on moth = (2,065,000/12) + (2,065,000/12)*(35/100)= 232,382P

Dung Tien Nguyen PCU-MBA-Financial Management 2rd Trimester, SY 2015-2016 Case 4: Champion Cattle Farms. INC 2. Analysis lean months to stock up on yearling:

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Make diagram planning in period and yearling Give planning for event month as holiday, festival … Give strategies marketing for every month and give income subject Give analysis for every moth which the sale is low to find directions Give planning for reducing cost of the low sale of months

26 Jan 2016 Prof. F. C. Rana

Dung Tien Nguyen PCU-MBA-Financial Management 2rd Trimester, SY 2015-2016

26 Jan 2016 Prof. F. C. Rana

Case 4: Champion Cattle Farms. INC

3. Advertising:

4. Organizing the Sales Force: 1. Need change poor ability sellers 2. Have strategy of sale and training these will help to improve sale skill of seller 3. Priority people have good experience about sale 4. Change target sale to give incentive suitable with each seller. 5. Organization and improve service and support service