Financial Management Case Studies
1) A rapidly-growing distribution company struggling to survive due to an array of financial issues
The Client suffered from cash flow issues caused by rapid growth, undercapitalization, and lack of financial management expertise and control processes. The Client accumulated excessive losses and struggled with liquidity issues that threatened the company’s future viability. They had grown too rapidly and lacked processes and working capital to fund their success. The Client needed financial restructuring and a solid, experienced financial advisor if the company was to succeed.
Rankin McKenzie was brought in to clean up the company’s finances and help find bridge capital. We helped the Client establish new banking relationships and secure a loan. Interim short-term financing was also secured to fund seasonal business. Subsequently, a plan was developed to help the Client set goals for predicted future growth and cash flow requirements. The Client was impressed with our ability to problem-solve in a time of their greatest need.
Rankin McKenzie continues to provide ongoing financial advice and services in the form of part-time Controller services to help the company during its next growth phase.
2) A technology start-up company headed by an inexperienced CEO that needed to raise significant equity capital
The Client needed to raise considerable equity capital to fund the continuation of their product development and their sales and marketing efforts. Previously, the Client had raised limited capital from local Angel investors, but now needed to attract sophisticated institutional investors. This was the first time the CEO had headed a venture-backed start-up company and he needed prudent business counsel to avoid the typical pitfalls of a young company.
Additionally, the Client’s daily bookkeeping was being handled by an administrative assistant with little accounting experience. Accounting records were inaccurate and incomplete. The CEO was understandably concerned that his accounting records would not pass the rigorous due diligence conducted by the new institutional investors. The Client needed an experienced CFO who had successfully raised venture capital and who could serve as a trusted advisor to the CEO. He also needed to make sure the day-to-day was being handled in a professional manner that would give investors confidence.
At the recommendation of the Client’s attorney, Rankin McKenzie was engaged to both assist the CEO in raising equity capital and to be responsible for the company’s accounting functions. Rankin-McKenzie utilized a team-approach to meet the client’s needs. The team consisted of a part-time CFO who had extensive start-up and capital fundraising experience and a part-time Controller who had expertise in QuickBooks. The Rankin McKenzie team helped the CEO successfully raise over $7 million in equity capital from a top-tier venture capital firm. Moreover, the team’s careful management of the company’s books and records made the VC due diligence a painless process. The CFO served as the CEO’s close confidant to help guide the Client through numerous challenging growth opportunities.
3) An e-commerce start-up company in need of accounting expertise
Sales were beginning to grow rapidly and the company was in need of a clear, concise mechanism for reconciling sales per the company website to the back gateway and bank.
Rankin McKenzie provided a part-time Controller to the Client in order to establish procedures for tracking and reconciling sales on a monthly basis. Additionally, numerous financial reports were developed that have provided management with valuable tools for running the business successfully.
Rankin McKenzie continues to provide ongoing, part-time Controller services to help the company during its next growth phase.
4) A biotech start-up company that needed to raise capital
The Client needed to raise its first institutional round to complete initial animal studies. The co-founders completed a draft of a presentable Business Plan, but early investor feedback indicated that the financial projections were unrealistic and unacceptable. The financial presentation needed to clearly demonstrate the use of capital and what additional capital requirements would be required upon successful completion of the animal studies. The Client did not have the experience to undertake this financial presentation and had limited resources to engage an experienced full-time CFO.
Rankin McKenzie was brought in to meet with the co-founders and review the Business Plan. We devoted time with the co-founders to understand their Business Plan and then develop a five-year financial model to show the cash flows required to execute the Business Plan. After several iterations, a final financial model and summary was incorporated into the revised Business Plan for investors. After reviewing with previously contacted investors and several new investors that Rankin McKenzie knew, two investors expressed interest in negotiating a term sheet with the Client. In addition, the Rankin McKenzie partner assisted the Client by making sure that the existing financial statements were reliable and understandable. The Client was impressed with our ability to problem-solve in a time of their need.
Rankin McKenzie continues to provide ongoing, cost-effective financial advice and services in the form of a part-time CFO to help the company during its capital raise and subsequent events.
The case allows you to apply the principles of capital budgeting to a hypothetical project. Your task is to assess whether you would invest in this project, given the information in the case.
When the case is ready, you can download the case in pdf format and the last exhibit as an excel.
After the case in analyzed in class, you can also download the presentation of the solution and the excel files containing the solution for the finite life and the infinite life. You can also download the summary sheet for group project.
When the time comes, my analysis of the case (not necessarily the right one) will be below.
- Case analysis (excel file): Finite life and Perpetual life (Excel spreadsheet)
- Case presentation
- An explanation of the case grading (will come after I grade the cases)