4230 ps1 - Chun Ken Kenneth Kuk PAM 4230 Prof. Sharon...

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Chun Ken Kenneth Kuk PAM 4230 Prof. Sharon Tennyson Jan 27 th , 2008 How does the company's business environment (including ownership structure, financial situation and competitive situation) affect the ability of the company to bear losses? Explain. Kindling Bros. Furniture Co. Kindling Bros. Furniture Co. has a long history of producing fine furniture. It has 50 franchised dealers across the country, which makes it fairly resistant against regional temporary business interruptions due to its high degree of geographical diversification. The building is old, and depreciated, leading to a higher chance of asset damages. The stock of lumber in the warehouses could be destroyed by a flood or a fire. The company is a family business, wholly owned by the successor of the founding brothers. The company’s president does not have other noticeable assets, which makes the company fairly vulnerable to risks such as damage to assets or product liability risks as it has no access to adequate cash flows. The company is only operating under a modest cushion of liquid assets, which also suggests a high chance of going under on catastrophic occasions. As the company is not experiencing a steady growth, and the business shows trends of declining, it is more difficult to raise debts in the event of emergency. In terms of firm structure, Kindling Bros. Furniture Co. is exposed to high risk because of the nature of its labor force. All workers are skilled craftsmen who require years of trainings and apprenticeship. If the experienced workers go on a strike, the production process would be significantly disrupted. The workers, with the help of unions, could be very powerful while bargaining terms with the company. The business interruption
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This note was uploaded on 03/31/2009 for the course PAM 4230 taught by Professor Tennyson during the Fall '07 term at Cornell.

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4230 ps1 - Chun Ken Kenneth Kuk PAM 4230 Prof. Sharon...

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