Surecut shears on april 28, 1996, michael stewart, senior loan officer at the hudson national bank of new york, was reviewing the credit file of surecut shears, inc in preparation for a luncheonmeeting with the company’s president and treasurer. Surecut shears inc case solution,surecut shears inc case analysis, surecut shears inc case study solution, bank loan officer must determine whether to abandon the convenants and extend the line of credit granted surecut scissors. The surecut™ wire cut-line indicates exactly where the blade will cut your paper, photo, scrapbook page or specialty material our patented tripletrack™ system interlocks the blade and rail for straight, precise cuts every time.
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Surecut shears case write-up the issues presented in this case are mainly due to incorrect assumptions about the market for sales in 1995 and the subsequent retail downturn that followed more specifically, mr fischer (ceo of surecut shears) assumed sales and demand in 1996 would be consistent with the prior year.
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Why was surecut shears unable to repay its bank loan by december 31, 1995 as originally forecasted surecut was unable to repay its bank loan for two primary reasons, an overestimating of sales (drop in demand) a build up of capital in inventories (this was in part due to the seasonality of the business. Surecut shears is an example of how the inability to meet forecasted totals can have disastrous effects on the long term profitability and viability of the company as a whole well beyond any anticipated savings. A bank loan officer must determine whether to waive convenants and extend terms on a line of credit granted to surecut shears at issue is whether the inability of surecut to pay down its line of credit is due to a temporary cyclical downturn or other long-term financial problems.
Surecut shears surecut shears profitable business with great track record increasing sales trustworthiness cause inaccurate forecast modernization of plant. Surecut shears now faced a credit problem because they no longer expected to be able to pay off the seasonal loan interpretation of exhibits due in part to a slackening of sales, inventory at the end of march 1996, the amount of additional money tied up in inventory over the 9-month period of interest is almost double the forecast.