Horniman Horticulture Essay Example for Free

Horniman Horticulture EssayExecutive SummaryHorniman Horticulture is a wholesale nursery located near Lynchburg, VA. Its owned by loading dock and Maggie Brown. From 2002-2005, the nurserys operations grew by more than(prenominal) then 40%. Revenue growth has exceeded the industry benchmark. The nursery now consists of 52 greenhouses, 40 dry land of land, and 12 full-time workers as well as 15 seasonal workers.ProblemWhile experiencing booming demand and improving margins, the Browns are confused by their plummeting cash in balance.AnalysisHornimans current assets are growing over time, but in a less liquid fashion, less from cash and more from receivables and inventory. Horniman is not receiving money as quickly as they would hope, which is shown by the 9-day increase in receivable days since 2002 (exhibit 2 p.141). This figure is also well preceding(prenominal) its benchmark. The Inventory days increased every year as well and was well above the benchmark of 386.3. Payab le days decreased much more than was expected, to 9.9 in 2005 when the benchmark was 27.What most likely happened is that as Horniman grew, it began selling inventories with higher margins and better financing options were being offered to its customers. Favorable terms are attractive to freshly clients but it can also increase risk of non-payment from customers. In terms of where the cash they have made is going, we must look at how they are distributing their cash flow. Most cash was invested cover version into the business itself to build capital. It seems as if every dollar of profit was put towards more net working capital.Recommendation change magnitude the payable days or lowering the days receivable outstanding would reduce the cash conversion cycle. Although it is important to invest cash back into the company for growth, a more conservative approach of holding on to more cash would benefit Horniman in the future.