Discuss only high$-$interest expenses in the case below. Conversation about Violet's accommodations limited

Li: We should reconsider our collection policy and review our customer base. Currently, we

have three types of customers:

$60\%$ are insurance companies that rent our units for their clients. Payment from these

companies is typically made by cheque, which takes around three months.

$20\%$ of corporations rent our units for their staff when they travel to Toronto.

Their average collection period is two months.

$$ The remaining $20\%$ are leisure clients who find our rooms and houses through our

website and book online or by phone. This group typically pays by credit card or cash

on the first day of each month.

The gap between the collection of $80\%$ of our revenue and the payments to our

owner$/$vendors$,$ which should occur at the beginning of each month, creates difficulties in

cash management. To address this cash flow deficit, we rely on our line of credit, incurring

higher interest rates. We must reassess this situation to improve our cash flow

management and reduce reliance on expensive credit. If you have any recommendations for

managing our cash flows more efficiently, please share them with us$.$

Controller: To confirm Li's discussion, in $2023,$ we indeed paid double the amount of interest

on our line of credit compared to $2022.$

Fang: I have received a proposal from one of our long$-$term partners, Mr$.$ Kara, an

experienced real estate manager in Toronto. Mr$.$ Kara has several units with us for more than

$20$ years and is now interested in renting us one of his strata buildings, Aurora, located in

downtown Toronto. The building comprises $30$ units, including $20$ one$-$bedroom and $10$ two$-$

bedroom apartments. Mr$.$ Kara has been the landlord of this building for over $25$ years. The

initial rent contract he provided outlines a rental period of $10$ years with the option to

negotiate for another $10$ years upon expiration. During our recent meeting, Mr$.$ Kara

expressed an interest in selling the building and mentioned that the initial assessment

values the property at around $$30$ million. Through negotiations with TD and CIBC banks, I

have discovered that there is a possibility for the company to obtain a loan for purchasing

the building, as detailed in the provided Appendix $5.$

Could you please assist us in analyzing this long$-$term asset investment? Or do you think we

should go with the renting the building or buying it$?$ Additionally, I would like to see the

budgeted income statement for the next three years for this project. I am also interested in

understanding how acquiring this long$-$term asset could impact our profitability and capital

structure ratios.

Li: As we have recently established our strategic committee, consisting of myself, my son,

Fang, sales and marketing manager, operations manager, and our controller. I propose that

we initiate our work with a SWOT analysis of VAL. Additionally, we have heard about process

mapping and balanced scorecard as comprehensive performance assessment tools. Could

you please provide more information about these strategic tools and the benefits VAL can

derive from implementing them?

You: For sure. I will analyze all issues and do my best to address all your concerns and

requirements.