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Financial Statement Analysis - Case Study

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I need help to respond with Complete the readings for this unit, including Case 3.3 titled "W.T. Grant Company." Refer to the narrative information and the financial data provided.

Using a Microsoft Word document, complete the assignment under "Required" on page 179 in your textbook?you will help to determine the cause for their financial problems. Then, write a 300- to 400-word essay explaining your position.

Please show the mathematical calculation in excel. Thanks.

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Introduction:
W.T Grant Company was the seventeenth largest retailer in United States in 1975 with sales volume of more than $1.7 billion. The company had a huge reputation in terms of supplier of low priced soft goods. Big brands like Macy's, Sears, J.C Penny were some of the competitors of the company. W.T grant was a very successful company until the 70's but the company started facing problems after it changed strategies in mid 1960's. One important aspect about the success of W.T Grant was the fact that the company had paid continuous dividends since 1902. The decline in the company started when it moved its strategy to expand operations in suburban areas. Another reason for its decline was a drastic shift in the product line. Grant was successful in targeting the lower income group, but with Sears moving upscale the company changed its strategy and included high end products in which it was not very successful.
Analysis of Grant's financial problems:
Financial problems in W.T Grant started long before the company actually filed for bankruptcy under chapter XI in October 1975 and finally got liquidated in beginning of 1976. The most important reason for the bankruptcy of Grant was not decline in profitability but detoriating liquidity position of the company. Suppliers lost confidence in the company and the company was not able to display latest inventory even after the banks provided with guarantee to the supplies for repayment in case Grant was not able to make the payments for purchases. The company also made significant change in its credit policy and decentralized organization structure was introduced. There was also significant change in the credit policy of the company and the company allowed its customers to make the payment in 36 months with as low as $1 in the first month, which resulted in increase in bad debts. The provision for ...

Solution provided by:
Sonia Agarwal, CA
Education
  • Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
  • Bachelor of Commerce, West Bengal University
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