week 3 learning team

Topics: Corporate finance, Finance, Accounts receivable Pages: 3 (522 words) Published: July 17, 2014


Working Capital Management
Frank DeCosta, Dianna May, Julie Ormston, and Yasir Zaidan
FIN/571
July 17, 2014
G. Willis
Working Capital Management
Finagle A Bagel was purchased in 1998 by Alan Litchman and his wife Laura Trust. At the time Finagle had been in operation for 4 years and operated out of 4 locations. Having come from a corporate background with no bagel baking experience, Alan and Laura faced with many financial and operations decisions with their purchase. Situations such as renting a facility or owning it, incurring debt or partnering with a venture capitalist, building banking relationships, opening lines of credit, and establishing trade credit. Each of these decisions effected if Finagle was in the red or black. Many small companies are faced with similar decisions, determining if the cost is justified and the potential return. When Alan and Laura purchase Finagle, they determined that they wanted to own their facilities, arguing that in the long term it is better to own then rent. This was very advantageous for Finagle as it put them in a position to negotiate with banks when the economy declined. Finagle built partnerships with banks as they were seen as a good investment to the banks, this in turn meant lower interest rates to finance their debt. Early on Finagle had the opportunity to take on partners as a means to raise capital, but they decided instead to take on debt which allowed them to continue to operate their business without oversight. Venture capital partners could have enabled Finagle to grow faster without debt but it could have cost them control over the long term direction they saw for Finagle. As with any business, a good accounting department is necessary. Determining if spending justifies the cost, for Finagle they recognized that they need to spend $10,000 to earn $1,000; as a majority of the profit went to overhead such as electricity and personnel. Understanding the cost of spending enabled...

References: Finagle A Bagel. (2014). Where to Buy. Retrieved from http://www.finagleabagel.com/where-to-buy.aspx#!cafe-locations
Parrino, R., Kidwell, D., & Bates, T. (2012). Fundamentals of Corporate Finance (2nd ed.). Hoboken, NJ: John Wiley & Sons.
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