Minh Phuong, head of the HCMC Division of Thanh Long Corporation, has just completed a miserable nine months. If it could have gone wrong, it did. Sales are down, profit is down, inventories are bloated, and quite frankly, Im beginning to worry about my job, she moaned. Phuong is evaluated on the basis of return on investment (ROI). Selected figures for the past nine months following:

Sales. $14,400,000

Profit 1,080,000

Average operating assets.. 18,000,000

In an effort to make something out of nothing and to salvage the current years performance, Phuong was contemplating implementation of some of all of the following four strategies:

1. Write off and discard $180,000 of obsolete inventory. The company will take a loss on disposal.

2. Accelerate the collection of $240,000 of overdue customer account receivable.

3. Stop advertising through year-end and drastically reduce outlays for repairs and maintenance. These actions are expected to save the division $450,000 of expenses and will conserve cash resources.

4. Acquire two competitors that are expected to have the following financial characteristics:

Projected sales Projected operating expenses Projected average operating assets

Tetra Holdings $9,000,000 $7,200,000 $15,000,000

Thanh Long Corporation 13,500,000 12,360,000 14,250,000

Required: - 1. Compute sales margin, asset turnover, and ROI for the HCMC Division of Thanh Long Corporation for the past nine months.

- 2. Evaluate each of the first two strategies listed, with respect to its effect on the HCMC Divisions last nine months performance, and make recommendation to Phuong regarding which, if any, to adopt.

- 3. Are there possible long-term problems associated with strategy 3? Briefly explain.

- 4. Determine the ROI of investment in Tetra Holdings and do the same for the investment in Thanh Long Corporation. Should Phuong reject both acquisitions, acquire one company, or acquire both companies? Assume that sufficient capital is available to fund investments in both competitors.