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TechIS_Gadgets_CaseStudy_PPT

TechIS Gadgets Inc. is facing financial challenges due to overstocked inventory and delayed receivables, impacting its working capital and liquidity. The company needs to analyze these issues, recommend strategies to improve its Cash Conversion Cycle (CCC), and explore financing options. Addressing these inefficiencies is crucial for maintaining operations and supporting long-term growth.

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Aaron Gutierrez
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Download as PDF, TXT or read online on Scribd
2 views

TechIS_Gadgets_CaseStudy_PPT

TechIS Gadgets Inc. is facing financial challenges due to overstocked inventory and delayed receivables, impacting its working capital and liquidity. The company needs to analyze these issues, recommend strategies to improve its Cash Conversion Cycle (CCC), and explore financing options. Addressing these inefficiencies is crucial for maintaining operations and supporting long-term growth.

Uploaded by

Aaron Gutierrez
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Case Study: TechIS Gadgets Inc.

A Company Struggling with Delayed Receivables and


Overstocked Inventory
Objectives
• Analyze working capital challenges of TechIS Gadgets
Inc.
• Recommend strategies to improve Cash Conversion
Cycle (CCC) and liquidity
• Provide short-term and long-term financing options
Case Overview
TechIS Gadgets Inc. is a growing mid-sized company specializing in
consumer electronics, including smartphones, tablets, and various
accessories. With a presence in both retail and online markets, the
company has built a strong brand in the local market and has
begun to explore international opportunities. However, despite its
successes in the industry, the company has faced several financial
challenges that are affecting its working capital management and
overall liquidity. These challenges primarily stem from issues
related to inventory management and the collection of
receivables, which are directly impacting its ability to maintain
smooth operations.
Case Overview
One of the primary challenges TechIS Gadgets is facing is the management of
inventory. Given the rapid pace of technological advancements in the consumer
electronics sector, product life cycles tend to be shorter, and consumer demand
can fluctuate. To remain competitive, TechIS Gadgets has maintained a large
inventory of products, hoping to fulfill customer demands quickly. However, this
strategy has resulted in overstocking, particularly of items that move slowly or are
nearing obsolescence. For example, older models of smartphones or tablets that
are no longer in high demand are still sitting on the shelves, tying up significant
amounts of capital. This overstocking has not only increased storage and handling
costs but also reduced the company’s ability to allocate resources toward more
profitable products or investments. In addition, the excess inventory creates
inefficiencies in managing warehouse space and increases the risk of stock
becoming outdated or unsellable.
Case Overview
Alongside inventory challenges, TechIS Gadgets also struggles with delayed
receivables from its customers. While the company extends credit terms to
many of its customers, the time it takes for them to pay has increased. The
typical payment terms for large retail clients or business customers are 30-60
days, but some clients take even longer to pay. This has led to a buildup of
accounts receivable, which in turn has left TechIS Gadgets with insufficient
cash on hand to meet its immediate financial obligations. The delayed
payments are further exacerbated by inconsistent follow-up on overdue
invoices, which has created an accumulation of unpaid debts. This slow
collection cycle is particularly problematic for a business that needs to
maintain steady cash flow to pay suppliers, cover payroll, and invest in
ongoing operations.
Case Overview
The impact of these two issues—overstocked inventory and delayed
receivables—has been detrimental to the company’s working capital. The
company’s Cash Conversion Cycle (CCC), which measures how long it takes to
convert inventory into cash, has significantly lengthened. The longer the CCC,
the more time the company’s resources are tied up in its operations, leading to
liquidity constraints. For example, TechIS Gadgets may be sitting on inventory
for months before it is sold, and even after the sale, it may take an additional
few weeks to receive payment from customers. As a result, TechIS Gadgets has
less cash available for day-to-day operations, making it harder to maintain
business activities without relying on external financing.
Case Overview
Additionally, because of the delays in receivables collection, the company is
increasingly relying on short-term loans and lines of credit to cover immediate
expenses, including supplier payments and payroll. However, this reliance on
external financing further strains the company’s liquidity, as it needs to service
these short-term debts while still grappling with its internal cash flow issues. This
reliance on borrowing to fund day-to-day operations also puts the company at risk
if interest rates rise or if credit conditions tighten, limiting the company’s ability to
access affordable financing. The combined impact of overstocking, slow
receivables collection, and dependence on external financing is creating a
scenario where TechIS Gadgets is struggling to maintain a balance between its
short-term obligations and long-term growth objectives. These working capital
inefficiencies are creating a drag on the company’s overall financial performance
and are limiting its ability to reinvest in growth initiatives, innovate, or respond to
market changes effectively.
Tasks:
• Step 1: Analyze Working Capital Challenges
• Step 2: Recommend Strategies to Improve CCC and Liquidity
• Step 3: Short-Term and Long-Term Financing Plan
Recommendations
• Step 4: Presentation and Documentation
– Research Document (Word/PDF)
– PowerPoint/Canva Presentation
– Naming Format:
GroupNumber_CaseStudy_WorkingCapital
Grading Rubrics (Total: 100 Points)
• Research & Analysis: 30 pts
• CCC & Liquidity Strategies: 30 pts
• Financing Plan: 20 pts
• Presentation Quality: 10 pts
• Research Document: 5 pts
• Submission Guidelines: 5 pts
For conclusion
• Identify and fix inefficiencies in receivables and
inventory
• Implement effective CCC strategies
• Balance short-term and long-term financing for
sustainable operations
Thank You!
END

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