Financial Turnarounds: Preserving Enterprise Value by Henry A. Davis

By Henry A. Davis

In monetary Turnarounds: protecting firm worth, the world's best company turnaround experts train the fundamental talents you want to deal with a monetary turnaround -- or, larger but, steer clear of the necessity for one. This publication offers an in-depth, insider's examine twenty profitable turnarounds representing each key section. The authors supply case summaries, early symptoms, and monetary findings for turnarounds in production (Maytag and Navistar) and retailing (Joseph A. Banks and Musicland), in addition to excessive know-how, actual property, and the providers region. They evaluate best turnaround tools -- monetary and non-financial. ultimately, they give useful assistance for spotting the early symptoms of monetary catastrophe -- and taking powerful motion to prevent it. a part of a brand new sequence of books backed through the monetary Executives examine starting place, a nonprofit associate of monetary Executives overseas, the preeminent specialist organization for senior monetary executives, representing 15,000 monetary executives all over the world. The examine beginning, proven in 1944, funded the examine and case reviews during this publication.

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By the 1990s, those corporations were looking for consulting firms that could provide equipment service and help them use information systems to gain competitive advantage. Computer equipment service firms such as Microserv had to become subcontractors to broaderbased consulting and service firms rather than selling directly to end users, as they had been accustomed to doing. Maytag, a high-end appliance manufacturer, and St. Luke’s Hospital, which serves a low-income neighborhood, also needed to develop good responses to their changing business environments.

A turnaround consulting firm, reports that one company he worked with had not paid enough attention to the balance sheet and was running out of cash. It had 96 days of accounts receivable, and its inventory turnover was two and a half times per year, compared with an industry average of between eight and nine. Reducing inventory and receivables to a normal industry level fixed the cash shortage and eliminated the need for external financing. These situations crop up, he believes, because developing companies often get addicted to revenue growth that masks underlying weaknesses—until that growth starts to plateau.

Overexpansion is undoubtedly tempting to retailers because they need relatively little cash to open new stores. The resulting obligations, however, create an immediate cash drain if the sales volume and margins do not develop quickly. All four of these retailers found that when sales did not meet projections, they did not have enough cash flow to service their expansion-related debt. But overexpansion is not entirely limited to retailers; this also happens to high-technology and service companies.

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