Revord Refrigeration Case Study

REVORD REFRIGERATION CASE STUDY

Revord Refrigeration is a manufacturer of refrigerators. From its inception until 2 years ago, the

company had a steady record of growth in sales, assets, and profits. During the second half of 2017

the company experienced a drop in demand for refrigerators. 2018 continued to be a poor year and,

despite intense marketing efforts that included high discounts and extended credit, sales barely

increased. Inventories ballooned and the company’s payments to suppliers slowed considerably.

In January 2019, Alex Revord and his finance manager Chris Baranek were reviewing the prospects

for 2019. Mr. Revord anticipated a surge in demand for refrigerators in the coming years. He felt

that production facilities needed to be expanded in order to meet future demand. He anticipated that

if steps were initiated immediately, the expansion program could be completed by the middle of

2019. By then, the company’s bulging inventories could be brought down. In order to finance the

expansion, he proposed to obtain a $1 million loan from the company’s bank. He instructed Mr.

Baranek to prepare a forecast for 2019 EXCLUDING the expansion plan.

You are the lender for Revord Refrigeration’s bank. Complete your analysis (see below), including

your recommendation to approve/deny the loan to the bank’s loan committee. Complete the

REQUIRED items listed below. Assume you are the loan officer for the company’s bank. Would

you approve the loan? If yes, what conditions would you attach to the loan? Please make sure to

justify your answer either way.

REQUIRED:

1. SPREADSHEET:

a. In an Excel spreadsheet, common size the attached data for all three years provided

in the:

i. Income statement

ii. Balance sheet

b. In the same Excel spreadsheet, calculate case ratios indicated below for all three

years.

c. In the same Excel spreadsheet, construct a Statement of Cash Flows for 2018.

2. PAPER:

a. Case background / scenario / define the problem (why are you doing this case)

b. Income statement analysis

i. Trend analysis

ii. Benchmark analysis

c. Balance sheet analysis

i. Trend analysis

ii. Benchmark analysis

d. Statement of Cash Flows (2018) analysis

e. Ratio analysis

i. Trend analysis

ii. Benchmark analysis

f. Summary/Determination

i. Take a stand – would you approve or deny the loan? Why?

ii. Offer any suggestions to Alex for financial improvements

Income Statements

(Thousands of Dollars)

Revord Refrigeration Peer

2017 2018 Proj.