Inner-City Paint Corporation (Revised) Essay

Alternatives1. Management Improvement Mr. Walsh should take up focal point degree. He needs to insure employee empowerment and delegation. He needs to learn employee empowerment and delegation. The plant manager needs to be trained on speckership since he has no experience in management. He should also expire hiring a public relations specialist and a marketing specialist to improve on these two aspects of the trading.2. Facility Improvement Equipment at Inner-metropolis tonality is common chord large mixer, two petiteer mixers, machines in the lab and the trucks. Mr. Walsh should buy more equipment so that his consumers wont project to worry about their order not being ready. He has enough transportation Equipment. But he should buy some new mixer and more lab equipment. In order to don all of this he should take the loan.RecommendationI would recommend the first alternative which is to improve management. Mr. Walsh wasnt trained and didnt understand management. He could grip the company when it was small. He got lost as the Inner-City tonality grew. If Mr. Walsh did some training, then the company probably wouldnt be in such a mess. He did understand how to expand the business and add employees were they atomic number 18 needed but he lacked better-looking trust to other people. With employee empowerment training he should be able to trust new employees. So with this alternative we can see that the company will grow favorably.METHODS OF ANALYSISS.W.O.T AnalysisStrengths Competitive prices of its products. Steady issue in its market. The companys reputation had been built on its fast service it frequently supplied paint to contractors within 24 hours.Weaknesses Customers view Inner City as a company that negotiates on price and payment out of desperation. His plant managers only experience has been that of a painter. Operating without management controls or financial controls. Inability to pay suppliers on time Poor condition of facilities All records are processed manually Inventory records are not kept. Lack of proper delegation of authority. Employees take turns making paint and driving the delivery trucks. Unskilled employees.Opportunities Considering a purchase of a computer to organize the business and reduce needless paperwork. Consultants who are able to quickly spot problems in business. The production of color paintsThreats The stave in the housing market combined with the s low geardown in the overall economy caused financial difficulty for the company. Walsh manages the corporation today in much the same way that he did when the business began. Walsh lacked on giving trust to other people. Rumors abound that the company is in difficult financial straits, that it is unable to pay suppliers, and it owes a considerable sum for payment on brook taxes. Paint contractors are hesitant to give larger orders. Larger orders usually go to larger companies that have demonstrated their reliability and solvency. No audit has been performed. This could lead to penalty by the Internal Revenue Service (IRS).Porters Five Forces Industry AnalysisThreat of New entrants there are low entry barriers in the paint manufacturing industry. This is because it is based on the low costs to enter the market and product unanimity. This is due to an easy and cheap development stage. As for capital requirements, hards need to invest small financial resources before entering this market.Rivalry Between Competing FirmsInner-City Paint is confronted by aggressive competition in its business. There are small paint manufacturers in Chicago that supply the immediate area. The market for paint is highly competitive. It doesnt compete with giants such as Glidden and DuPont. disputation among the giants isnt that fierce, but they lose their large orders to them.Bargaining Power of SuppliersThere is a high bargaining power of suppliers since the industry is highly dependent on component suppliers, a powerful supplier could e xert pressure on the market, by supplying components at a higher price to increase his profits. their products are the primary raw material for the paint manufacturing companies. They could also erect high switching costs. Since Inner-City Paint is working only with few selected suppliers, the company is running at a higher risk than the average.Bargaining Power of BuyersThere is a low bargaining power of buyers this is due to high number of other paint manufacturers in the area in the industry and the customer has the options to take the cheapest and the best.Threat of SubstitutesThere is a high threat of substitutes because there are larger companies that have demonstrated reliability and solvency that paint contractors can choose. There are also other small paint manufacturers in the area.FINANCIAL ANALYSISInner-City Paint breadbaskets revenue for the year is $1,784,080. It experienced a Net Income of $ 17,610.Profitability RatiosReturn on assets = $ 17,610 = 5.98%$ 294,565This shows that Inner-City Paint is not providing an adequate return on the firms investment.Net Profit Margin = $ 17,610 = 0.987%$ 1,784,080This ratio indicates how much money Inner-City Paint makes with each incremental dollar in sales that they experience, meaning that a higher ratio would result increased profit with each additional dollar in sales.Liquidity RatioCurrent Ratio = 262,515 = 0.92285,030This ratio shows that Inner-City Paint is currently in trouble meeting its financial commitments because its current ratio is below 1.Leverage RatiosDebt Ratio = 300,030 = 1.02294,565This measures the portion of total assets provided by the companys creditors. In conjunction with other ratios, this ratio indicates the degree to which operating losses may be cushioned from adverse actions by creditors.Common Size monetary Statement AnalysisINCOME STATEMENT% to SalesSales$ 1,784,080 100.00%Cost of Goods Sold 1,428,730 80.08%Gross Margin 355,350 19.92%ExpensesSelling expenses 72,460 4.06%Ad ministrative expenses 67,280 3.77%Presidents salary 132,000 7.40% shoes Managers salary 66,000 3.70% tote up expenses 337,740 18.93%Net Income $ 17,610 0.99%BALANCE SHEETAmount % to Total AssetsAssetsCurrent AssetsCash $ 1,535 0.52%Accounts receivable (net of ADA of $63,400) 242,320 82.26%Inventory 18,660 6.33%Total current assets 262,515 89.12%Non-current AssetsMachinery and transportation equipment 47,550 16.14%Less accumulated depreciation 15,500 5.26%Total non-current assets 32,050 10.88%Total Assets 294,565 100.00%LiabilitiesCurrent LiabilitiesAccounts payable $ 217,820 73.95%Salaries payable 22,480 7.63%Notes payable 6,220 2.11%Taxes payable 38,510 13.07%Total current liabilities 285,030 96.76%Non-current Liabilities long-run notes payable 15,000 5.09%Owners EquityCommon equity 12,400 4.21%Deficit (17,865) (6.06%)Total liabilities and owners equity $ 294,565 100.00%With all of this information we can point out that most of the expenses is attributable to Walshs salary. His six -figure income is not the average salary of a president in such a small company. He might try taking a small pay cut to invest that money in the business. He should also make set selling prices. Next, he should check into finding cheaper suppliers to bring his operate materials cost down. Financially ICP needs a financial account manager to start investing money and watch finance closer.