Case Analysis For Sure Cut

Case analysis for Sure Cut

By Chengjie Diao 3320657

Sure Cut Shears is a manufacturing company producing scissors and industrial shears. According to the investigation, cheaper products are sold directly to different chains. The most of the products were distributed to a variety of retailers. The sales of the company is seasonal, which will reach the peak on July and December of each year .During this time, Sure cut shears need to borrow more short term bank loans to increase the additional working capital for more production. This period is about 5 months and the company should be able to pay the loan if the sales process is normal. This company needs short term and large amount bank loans to support its business. However, as Sure Cut shears Company experience a seasonal business in which the sales and profit largely depend on the fluctuation of the business conditions, it is very hard to forecast the sales and profit in the future. A lot of unexpected problems may occur during the business. Sure Cut shears was unable to repay the loan because the company experienced unexpected sales downturn and business recession. Revenue declined during the peak period.

Mr. Fisher assumed the sales and revenue will experience a steady increase in July and December as Exhibit 1 and 2. But the reality is not the same. Unexpected sales downturn and decrease in revenue led the liquidity of the company low. The company is experiencing a modernization program which leads more costs. Those increased the risk of Sure Cut.

To prevent this problem, I think the company will need put more emphasis on liquidity of the company and unexpected problems. It is important to monitor the current ratio and quick ratios which measure the liquidity all the time. Do not make prediction too optimistic as the unexpected problem may occur all the time and always keep some amount of cash through the production