Situation Analysis 1

Situation Analysis 1 - SITUATION ANALYSIS Updated August...

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SITUATION ANALYSIS Updated: August, 2001 This work plan should be reviewed and the relevant steps performed as soon as practical at the beginning of an assignment. This review should provide us with the following: 1. A thorough understanding of the Company’s situation. 2. Data that will be relevant to negotiating loan amendments, DIPS, etc. 3. Data that will be relevant to analyzing bankruptcy issues. 4. Ancillary data our clients will expect/appreciate if we are conversant in. Business Model Overview 1. Revenue drivers – pricing, volumes. 2. Cost drivers – COGS, overhead. 3. a. Changes over last several years i. Changes anticipated by Management. ii. Changes planned for by Management. 4. Existing and new competition and plans to deal with. 5. New technology impact (products, demand systems, production, etc.) 6. Gain an understanding of litigation related to the Company/Industry. Trade Support 1. Obtain an accounts payable listing; make sure it is complete by analyzing a trial balance and agreeing/reconciling to a balance sheet. 2. Have outstanding amounts declined from historical levels (analyze historical balance sheets and payable level trends)? 3. Have terms (prices, rebates and discount programs, return arrangements, etc.) and credit limits been curtailed? 4. Any vendor refusing to ship without cash-in-advance (“CBD”)? 5. Are common carriers paid up to date and continuing to provide services? 6. Are any of these vendors “sole source” or are there second call vendors? 7. Any vendor seeking cash deposits or LC’s? 8. Has the Company met with vendors (what was said, has financial data be provided? Are they organized? 9. Understand how this particular trade community has reacted in other troubled matters. 10. Have vendors been delivering late/preferring other customers? 11. Is the trade “stretched”? What is arrangement to deal with past due amounts? 12. Understand issues pertaining to reclamation claims. 13. Do any vendors possess Company-owned tooling? How much? How necessary? 14. Does the Company purchase off-shore? How much? Where? 1
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15. How is the Company dealing with its trade creditors? Who is the main contact with the trade? 16. Are checks being held? How much? Why? [Note: Critical to immediately understand (and subsequently monitor) the trade situation since it is typically a key source of working capital and its contraction (typically) would represent the use of a secured lender’s collateral in favor of a junior creditor.] Inventory 1. How does the Company determine gross profit on a monthly or more frequent basis? 2. How does the Company value inventory monthly? To what extent are estimates used? 3.
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Situation Analysis 1 - SITUATION ANALYSIS Updated August...

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