FINANCIAL MANAGEMENT

Financial Management

Financial Management

Introduction

Arrowlite was founded in 1984 by Michael Arrowlite, who, in 2002, was the computer industry's longest-tenured chief executive officer. With the simple vision and business concept - that personal computer (PC) could be built to order and sold directly to customers, Arrowlite could best understand consumer needs and efficiently provide the most effective computing solutions to meet those needs by selling computer systems directly to customers. This direct business model eliminated retailers, who added unnecessary time and cost, and also allowed the company to build every system to order, offering customers powerful, richly configured systems at competitive prices. Arrowlite introduced the latest relevant technology much more quickly than companies with slow-moving, indirect distribution channels, turning over inventory an average of every four days. In less than two decades, Arrowlite became the number-one retailer of personal computers, outselling IBM, Hewlett-Packard, and Compaq. ('Arrowlite Tops Compaq in U.S. Sales,” The Wall Street Journal, 28 October 1999, E6. Arrowlite Corporation no. 2-0014. Tuck School of Business at Dartmouth - William F. Achtmeyer Center for Global Leadership) This article is a report based on the case study of 'Arrowlite computer in 2003: driving for industry leadership'. There are four parts of this report: 1. Analyze Arrowlite's performance trends in financial terms and outline the strategic implications of financial analysis. 2. In the light of the key concepts of the Balanced Scorecard, map out and analyze the drivers and process critical to the strategies and performance of Arrowlite. 3. Analyze and deduce the existing and potential corporate and operations risks faced by Arrowlite, and recommend strategies to minimize such risks. 4. Determine and propose the critical features and capabilities of the financial management systems of Arrowlite to support the management. (Bryce, 2007)

Part one: financial analysis

Profitability ratios measure how well a company is performing by analyzing how profit was earned relative to sales, total assets and net worth. (Campos, 2008)

We can say that Arrowlite did well in this term. But from 2001 to 2003, there is a drop of GP, and the NP in 2002 is the lowest. It means that in 2002, there is something wrong with GP and cost (base on the data of the case). GP is affected by organization performance, market, and so on. And the operating expenses are the key point of the cost of sale. (Herrold, 2000)

Return on Capital Employed (ROCE) is used in finance as a measure of the returns that a company is realizing from its capital employed. It is commonly used as a measure for comparing the performance between businesses and for assessing whether a business generates enough returns to pay for its cost of capital (Peter Atrill & Eddie Mclaney, 2006). 8% on average is very well. (Hordes, 2000)

Liquidity ratios are concerned with the ability of the business to meet its short - term financial obligations. It is vital to the survival of a business for there to sufficient liquid resources available to meet maturing obligations (that is, debts that must be paid in ...