Case1 - Case#1 Case#1: (GMC) .GMCs

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Financial Markets and Institutions
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Chapter 1 / Exercise 27
Financial Markets and Institutions
Madura
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Cash Management EssentialsCase #1Global Manufacturing CompanyCase #1: Liquidity Management - 2000Global Manufacturing Company (GMC) is an Ohio-based company specializing in electronic controls for automated manufacturing and assembly line machinery. GMC’s products are used in a wide variety of industries, including: automotive, computers, consumer electronics and appliances. The company was founded by two electrical engineers, Frank Kilowatt and Larry Voltz and began operations in 1979, initially selling their products to smaller manufacturing machinery suppliers in the U.S. market.They have expanded significantly in recent years and now sell a small portion of annual sales to companies in Canada, Mexico, and Europe. Due to the high level of demand for their products, they are able to price all of their sales in US Dollars and sales have been growing rapidly (about 25% per year). For the last three years (1998-2000) their profits have been exceptionally strong, but there always seems to be a shortage of cash for their operations.Even though Frank and Larry have put in extra equity capital, reinvested all net profit back in the business, and used long-term borrowing as much as possible for the expansion of production facilities, they are continually having to make short-term borrowing arrangements with their bank to cover funds shortfalls, sometimes with very little notice.
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Financial Markets and Institutions
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Chapter 1 / Exercise 27
Financial Markets and Institutions
Madura
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