Haefren Baum

Topics: Accounts receivable, Generally Accepted Accounting Principles, Cash flow Pages: 3 (837 words) Published: March 31, 2012
Name of the business: Haefren Baum

Nature of the business: Home furnishings retailer

Marketing analysis: Haefren Baum sells high quality home furniture, which is manufactured by German company, Wiegandt GmbH Cologne. The demand for high-end furniture is cyclical and influenced by consumer confidence and the overall economy. They have been incorporated since 1970, therefore they do have a reputation and brand image already built. They have been a customer of Wiegandt since 1968 and have maintained good relations so far. The German economy had a bust in 1993, which lead to a decline in furniture sales. This is evident in the sales dropping in 1993 to 1995 from $18,647 to $14,397. Much of the industry has to cut back prices to keep sales volume up. Haefren Baum, being a small retailer was really affected by this price deduction as more competitors entered the market. They built outlets in Rhineland suburban areas to try reaching consumers in the midst of intense competition with a wider selection and reduced prices. Regardless of their efforts in cutting prices and building outlets, the suffered from a (-1.24%) sales growth in 1995 but it was an improvement from (-21.05%) sales growth in 1994. Their market position is deteriorating, because as number of furniture outlets grew by five times, the industry sales were still “soft” even after the economy was recovering in 1995. I believe the sales will remain stagnant because of the increased competition and inability to expand due to tight credit and cash issues.

Operations analysis: Haefren Baum is a retailer that obtains its products from Wiegandt GmbH Cologne. Being a retail company, they are not asset intensive and this is apparent in their decrease in fixed asset turnover from 6.98 in 1993 to 5.39 in 1995. They have cash flow issues rising from their high inventory and accounts receivable needs and their account payable extensions. They have generated negative operating cash flows, which is caused by net...
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