Adept Chemicals

Topics: Cash flow, Inventory, Generally Accepted Accounting Principles Pages: 5 (1200 words) Published: September 24, 2012
Industry Analysis
* Industry is large and stable
* Heavily regulated creates opportunities for supplies
* Aggressive investment in new and current plants (new business for suppliers) * Slim margins manufacturers will likely put pressure on hygiene supplier prices. Industry KSP is to keep costs low

Competitive Analysis:
* Eco Lab + JDH major competitors
* have large financial backing
* hygiene suppliers compete on product formulations, price and service * our four product lines are not stable and sustainable * our competitors have huge financial backing so they can invest in trying to make a better formula and be able to compete on a better level

Consumer Analysis:
* competitors often offered price match in Adepts bid situations * Manufacturers rarely switched suppliers as it was often risky, time consuming and expensive * Consulting services are considered a bonus

* Want things that make them more money so the more money the make the better it looks for their margins * Customer loyalty is huge in this business
* Want a company that offers good service so our locations may a benefit for us

* Cannot use price as a competitive advantage because we have competitors with deeper pockets * Cargill bid could drastically increase Adepts size an aloe them to compete for large manufactures contract * Adept will need to focus on customer satisfaction with superior products and services

Corporate Capabilities
* Decision making Mike Brock does not have majority, we are limited in our decision making abilities because we need to get Sodrox on board * Sodrox may not be willing to extend funds until equity has been paid in dividends

Human Resources:
* Brock has significant experience, a strong reputation and lots of industry knowledge * We may not be able to expand because he is being overextended * We need to bring n another sales person because we are already turning people way * Fact that it is a family business he will be more inclined to hire his son * Mike is Adept is this sustainable? he needs someone to take over; probably time to think about succession planning

* We have a reputation for high quality products with exceptional service

* Strong growth
* But no cash and has not had cash for 3 years should they be thinking about taking on more business? If we grow when we have cash flow problems, we will not be able to finance inventory for the new clientele * Demands for working capital increase when you grow so you need cash – we need to ensure that whatever decision we make does not strain our working capital anymore

Cash Flow Analysis
* AR = major use of cash at this point we do not know if AR Is going up because our sales are going up or if it because our customers are not paying on time; either way it is tying up cash * Growth = days would be the same

* Bag management = longer days
* Positive cash flow in both years this means we are sustainable * Largely due to increases in net income and AP
* AP is a course of cash (look at current ratio); business it not that sustainable because if any of the companies we are working with changes their terms, we are screwed * Are we purchasing more or are we taking longer to pay calculate days of AP to find out * Matching cash flow from ops is being used to purchase new assets 00> would a longer-term source of cash be batter? * Cash flow of indicating that we should look at ROA, Age of AR and Age of AP

Ratio Analysis:
* SCF can help you determine relevant rations to calculate and analyze * Industry rations are often a useful point for comparison * The case will sometime give insight into relevant ration * In most cases, at least you should do one ration from every category * COGS went up the reason for this...
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