FIN486 - WEEK 5 Learning Team Week 5 Team Problem

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Resource: Principles of Managerial Finance, Ch. 16

Complete the following case study: Integrative Case Casa Diseno pp. 681.

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In January 2015, Teresa Leal was named treasurer of Casa de Diseño. She decided that she could best orient herself by systematically examining each area of the company’s financial operations. She began by studying the firm’s short-term financial activities. Casa de Diseño, located in southern California, specializes in a furniture line called “Ligne Moderna.” Of high quality and contemporary design, the furniture appeals to the customer who wants something unique for his or her home or apartment. Most Ligne Moderna furniture is built by special order because a wide variety of upholstery, accent trimming, and colors is available. The product line is distributed through exclusive dealership arrangements with well-established retail stores. Casa de Diseño’s manufacturing process virtually eliminates the use of wood. Plastic and metal provide the basic framework, and wood is used only for decorative purposes. Casa de Diseño was spending an estimated $26,500,000 per year on operating-cycle investments. Leal considered this expenditure level to be the minimum she could expect the firm to disburse during 2015. Her concern was whether the firm’s cash management was as efficient as it could be. She knew that the company paid 15 percent annual interest for its resource investment. For this reason, she was concerned about the financing cost resulting from any inefficiencies in the management of Casa de Diseño’s cash conversion cycle.
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