Sweet Dreams Incorporated Case Study - 1407 Words

Introduction Sweet Dreams Incorporated (SDI) utilizes two manufacturing plants both in North Carolina and South Florida to produce mattresses and box springs. SDI has encountered financial difficulty since the beginning of the 1990s that has been prolonged due to the ineffective strategies they have implemented. As the problem prolongs, the company is faced with potentially being forced to file for bankruptcy as it’s current, quick, and debt ratios, all have failed to meet the contractual limits of the agreement between SDI and First International Bank (Sweet Dreams, Inc., 1997). Furthermore, SDI has recently signed a contract for a plant expansion that would require an additional $9,500,000 of capital that is regarded as essential for the†¦show more content†¦Lax Credit Standards: In an effort to remedy such disproportion between inventory and demand, in 1995 SDI began to negligently issue credit lines. As exemplified by Table 2, due to such leniency net sales continued to increase between 1995 and 1997 (Appendix A). However, as illustrated by Table 1 the relaxed credit standards caused a 39% spike in accounts receivable from 1994 to 1995 (Appendix A). Consequently, the increase in inventory and accounts receivable negatively impacted the current ratio of the firm. As a result, the firm’s liquidity dropped significantly below industry average in 1995 to 1.90 from 2.96, well above the 2.25 average, in 1994 (Appendix C). Therefore, the cash flow of the firm was negatively affected by the issuance of credit as accounts receivable continued to rise. Loan Reliance: As inventories and account receivable steadily increased, the firm distressingly opted for a short-term solution. By means of long-term lending in 1994 and higher short-term credit in 1994 and 1995, SDI chose to temporarily resolve the current issues of the firm without considering the potential long-term ramifications. As illustrated in Table 1, long-term loans remained the same while short-term bank loans increased by 71% between 1994 and 1995; a drastic change within a short span of time (Appendix A). Similarly, as depicted in Table 2, the interest on the firm’s short-term loans rose from 1994 to 1995Show MoreRelatedSweet Dreams Incorporated Case Study1268 Words   |  6 PagesSweet Dreams Incorporated (SDI) utilizes two manufacturing plants both in North Carolina and South Florida to produce mattresses and box springs. SDI has encountered financial difficulty since the beginning of the 1990s that has been prolonged due to the ineffective strategies they have implemented. As the problem prolongs, the company is faced with potentially being forced to file for bankruptcy as it’s current, quick, and debt ratios, all have failed to meet the contractual limits of the agreementRead MoreFinancial Analysis and Forecast of Sweet Dreams Inc2212 Words   |  9 PagesDreams M.I.A. Consulting | Financial Analysis and Forecasting of Sweet Dreams Inc. Sweet Dream Incorporated (SDI) is a manufacturing company focused on mattress and box spring production for large retailers and hotel chains. With two facilities at their disposal, SDI manufactures over 20 different styles of bedding for their consumers. SDI’s founder and president, Douglas May, has contacted our consulting firm with regards to current financial problems between himself and SDI’s bank, FirstRead MoreThe Significance And Meaning Of Dreams2000 Words   |  8 PagesThe Significance and Meaning of Dreams Dreams are an experience that we all share as human beings, yet are also completely unique to each and every one of us. For these reasons, dreams have puzzled man since the beginning of time. Around the early 1900’s, a man by the name of Sigmund Freud pioneered the psychology of dreams through many of his theories. His ideas are a milestone in dream psychology and are still used today. 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