10 Advice to Struggling Teams - 10.2 Emergency Loan

10.2 Emergency Loan

Emergency loans are listed on page 1 of the Courier /FastTrack . Every time a cash flow shortfall occurs, an Emergency Loan with a 7.5% premium above the current debt interest rate is issued. Modest emergency loans are no big deal. Emergency loans in excess of 10 million indicate serious problems.

Typical Problems

• Excess Inventory: Check the inventory status of each product on page 4 of the Courier /FastTrack . If there is excessive inventory, try and determine why. Were sales forecasts simply too high (found in the Decision Audit, see 3.7.3 Decision Summaries)? Or, was it a matter of having a poor product (in the minds of the customers from that segment) when compared to the competition? Instructors can determine this by comparing products on the Market Segment Analyses .
• Unfunded Capacity and Automation Purchases: Sometimes companies make big investments in plant but forget to raise the money. Check the Cash Flows From Investing Activities|Plant improvements line on page 3 of Courier /FastTrack (Financial Analysis). Were there large investments in plant & equipment? If so, how was the capital raised?