CASE STUDY ON RATIO ANALYSIS: B.C. COMPANY 30 The B.C. Company is a maker of golf balls and golf accessories. It is a closely held business owned by the Taylor family. Edward Taylor has been the President of B.C. Company for the past 15 years. Although B.C. Company has performed well over the past few years, the Board of Directors is concerned about the future. At a recent Board meeting, Edward's brother, Danny, declared that B.C. Company was due for a "reengineering." He convinced the Board to purchase We are B.C." T-shirts for all employees and to hire a consultant to lead the company through the reengineering / change process. Edward believes the company is doing just fine but he agrees to hire a consultant. After several weeks of study, the consultant issues a report that includes the following significant recommendations: Inventory Control. B.C. Company's inventory levels are too high. The entire inventory process - ordering, procurement, storage, and eventual sale should be restructured to reduce inventory to more management levels. Cash Management. B.C. Company does not do a good job of converting receivables to cash. Vendors are paid too quickly. A restructuring of receivables and payables management should be performed in order to improve the company's cash position. 3 Reengineer for Growth. B.C. Company has a strong balance sheet but relatively poor sales. The company's working capital (defined as current assets minus current liabilities) could easily support $10 million in sales. The company needs to grow in order to improve its profitability. Edward reads the consultant's report and shakes his head. It seems as though the consultant has been studying someone else's company. He plans to tell the Board the report is completely wrong and none of the recommendations should be followed. You are the Chief Financial Officer for B.C. Company. Edward turns to you to help support him before the Board. Attached are the following to assist you with your analysis:

GOLF HAL AND ACCESSORES INDUSTHY Batance sacet At Docemher 31 1.B.C. Company balance sheets for the past three years. 2. The golf ball and golf accessories industry balance sheets for the past three years. 3. B.C. Company income statements for the past three years. 4. The golf ball and golf accessories industry income statements for the past three years. After you analyze the data provided, prepare a report to Edward Taylor. The report should include the following: 1. Strengths of B.C. Company 2. Weaknesses of B.C. Company 3. Recommendations to Edward Taylor 4. Do you agree with the Consultant's report? Notes: All sales are on credit Since B.C. Company is a private company, no PE ratio can be computed. The industry data is relevant for companies the size of B.C. Company. GOLF BAL. AND ACCESSORtES INDUSTRY B.C. COMPAYY Balunce Shoeta Ar Decenater 31 GOLF HAL AND ACCESSORES INDUSTHY Batance sacet At Docemher 31 1.B.C. Company balance sheets for the past three years. 2. The golf ball and golf accessories industry balance sheets for the past three years. 3. B.C. Company income statements for the past three years. 4. The golf ball and golf accessories industry income statements for the past three years. After you analyze the data provided, prepare a report to Edward Taylor. The report should include the following: 1. Strengths of B.C. Company 2. Weaknesses of B.C. Company 3. Recommendations to Edward Taylor 4. Do you agree with the Consultant's report? Notes: All sales are on credit Since B.C. Company is a private company, no PE ratio can be computed. The industry data is relevant for companies the size of B.C. Company. GOLF BAL. AND ACCESSORtES INDUSTRY B.C. COMPAYY Balunce Shoeta Ar Decenater 31