FIN 370 Week 4 Individual Assignment Reeds Clothier Case Study and Questions
In order to increase sales, Reeds Clothier concentrated on increasing inventory. They were afraid that lower inventory level will harm sales. Company renovated the stores and tripled the inventory. But sale did not increase as they expected. While they tripled the inventory, sales doubled only. This resulted in excess inventory. Money was stuck up in inventory. Instead of analyzing the problem and addressing the root cause, company considered it as cash problem and tried to solve the problem by having progressively larger line of credit. But increasing the line of credit could not solve the problem. When banks demanded payment, severity of the issue came to the attention of the owners of Reeds Clothier. Now they are trying to analyzing financial problem and finding solution.
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