Although I could not get my forecasting model to work, nor could I get my Cash flow statement balance to the information that was given I do still have some input on this case. Albeit that I can not quantify my thoughts in the model it became a more thinking outside of the box and project prioritization type of exercise.
When going through the case and my basic financial statements one could easily see that they were facing huge growth rates but unable to hold on to the level of profits a shareholder would want to see and certainly cash flow problems. It seems as if Dynatronics had worked themselves in to a difficult situation and the only way to get out was with the very few options they had at the time: take on more debt at a higher interest rate, roll out new product line, change the company's procedures on finished goods inventory, and an IPO. Without the full support of quantitative data analysis the following is the order and though process I would take before making a final decision.
As it seems, the biggest problem the company is seeing is the lack of functioning cash flows. Since the company was almost completely dependent on the local bank's line of credit, securing a source of immediate cash in my eyes is necessary and the starting point of this case. Even though interest expenses would increase along with the debt to equity ratio of the company I just can not see Dynatronics avoiding overdrawn accounts or bankruptcy without the additional funds especially since the two previous years they borrowed around $2M per year. However, this additional line of credit would be not to maintain ongoing business but to allow for growth, sales retentions, and foothold in the industry.
As soon as the cash was received from the factoring division of the bank my first step would be to correct the lack of finished goods inventory. In the case on exhibit 3 the reduction of lost sales for increasing finished goods was an opportunity...