Bob and Maggie Case

Horniman Horticulture

Bob and Maggie Brown purchased a wholesale nursery business and decided to run the business to meet their financial and family needs. The nursery's operations filled 52 greenhouses and 40 acres. They both agreed that Bob would run the nursery's operations and Maggie would watch its finances. She took advantage of discounts for early payments as well as to keep overall costs down. They secured their nursery against any unexpected, destructive weather. The revenue increased significantly with an increase in operating profits. They had some concerns, such as increasing employment rates that were unstable and had to potential to increase in the future. Unexpected weather changes could damage inventory and make it hard for payments to be made on time. Horniman Horticulture is facing a decline in their cash balance. Bob and Maggie have acquired additional property to expand their demand.

After reading the case, the first question I have is whether or not the business strategy that they picked will be the best fit for the company. Would it be a good idea to purchase a new property? We can see how operating profits and sales are increasing aggressive, which indicates that Bob has an effective management strategy. If they purchase a new property, their operating profits will change and possibly for the worse, because they might need new staff which could result in an increase in operating costs.

The company has been paying off their payable early, without paying attention to the receivables. They are paying out at faster rate than they receiving AR, which caused cash to fall below their target. I think if she offers discounts similar to the Hornimans suppliers to encourage them to pay early that it will decrease receivables and increase cash. Moreover, they have been keeping inventory for increasing periods of time because of the landscape campaign with the plant grown in periods between two to three years. I think that will make the company issue a new debt to accomplish the increase in their expenses that come from the new property.