PolyPanel Case FM

PolyPanel Case Study

Alia Malouki, Claudia Marquina & Nicole Guerrero

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Exhibit 1

Exhibit 2

1. business analysis

FM

PolyPanel

• Retail distributor of panels for construction or modification of houses and industrial warehouses.
• In 2007, 3 million sales.
• 55% of sales concentrated in the six months around summer.
• Cyclical construction because it depends on the demand of the panels.
• Typical client is a small contractor that works in new buildings or reforms of old ones.

why customer buy from PolyPanel?

• Lower prices than competitors
• better customer service

• fast delivery
• good quality
• product diversity

2. P&L Analysis

P&L Analysis

Sales, GM and open have increased over the years. Looking at the P&L, the company is profitable and has a stable growth. Growth of sales (33%) surpasses growth of opex (28%) meaning opex is decreasing as a % of sales. They have a smaller opex because of the small number of employees. There is a high rise in the ROE Overall, based on this information, we would invest in the company because they seem profitable

3.Balance sheet analysis

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Sources and Applications of Funds

Main ivestents & Sources of financing

Policy of PolyPanel

1. The collection of accounts receivables is 60 ( but some pay at 90 days), as well as the inventory and payments.

Reality:

1. Collection: From 2004 till 2007 has increased from 70 to 81 representing 11 days of delay.
2. Inventory: Decreased from 102 to 80 that could be risky.
3. Payments: Fluctuation during the years.

1. Cash acquisition has become less effective making the collection days 15 days more than the days of payment 2.NFO increased faster than WC that resulted in the need for more credit

1.Main investments:- Accounts Receivables (461)-Inventory (260), 2.Main sources of financing: - Suppliers - Bank lines of credit - Equity -Long term debt.

4.Diagnosisof the problem

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Does Polypanel need more and more each year?

They collect receivables early but pay payables much earlier = continuous NFO increase. Since NFO>WC, the company has a continuous need for credit, more and more each year. This has also happened because account receivables and inventory has increased while account payables have decreased.

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5. Action plan

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Recommendations

We would recommend Mr. Lichtstein to slow down the growth The company could be more strict with customer credit terms by forcing them to pay within 60 and not 90 days. This will may cause unreliable customers to not buy from the company which will decrease their growth a little. This will improve cash flow and reduce the funds in the account receivables ad they will receive payments quicker = less financial stress and less pressure on WC Additionally, try to find more suppliers so that they won't only rely on 1, which is risky. This can give them power over their current supplier so they can ask for longer credit terms.

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