Darlarna Furniture
Fredrik Blix immigrated to Canada six years ago after meeting his wife Cathy, a Canadian, on a Mediterranean holiday. Mr. Blix was born in Darlarna province in Sweden, but moved to Stockholm after completing the Canadian equivalent of high school called gymnasium. While in Stockholm, Fredrik earned a diploma in commercial design and apprenticed with Arlanda, a furniture manufacturer that supplies the IKEA chain with innovative new products.
After working for Arlanda for eight years and acquiring a reputation as a very inventive young designer, Mr. Blix moved to Winnipeg, Manitoba, his new wife’s home town, and secured a design job with Palliser, Canada’s largest furniture manufacturer. Initially, Mr. Blix enjoyed his job at Palliser and became involved as a hockey coach in the local community and was an avid curler, but after a few years he became frustrated at work. Although he had a very friendly relationship with his colleagues and received a number of raises and promotions, he longed to return to designing furniture with more of a Swedish influence as he had at Arlanda back in Sweden.
A New Venture
In early 2015, Mr. Blix approached the Crocus Fund, a labour-sponsored venture capital firm located in Winnipeg about financing a new “boutique” furniture manufacturer. His new company, Darlarna, would design and manufacture high-end, Swedish-styled furniture for distribution in Canadian initially but he hoped eventually to “crack” the U.S. market. Instead of distributing his product through the large chains such as The Brick, Dufresne, or Leon’s or department stores such as The Bay, Mr. Blix hoped to sell his products through high-end, independently-owned furniture retailers who provide interior design services along with an extensive selection of home furnishings.
After preparing a detailed business plan and raising $180,000 in financing from friends and family in the Mennonite community in Winnipeg and Steinbach, the Crocus Fund agreed to make a matching investment for a 40 percent share in Darlarna Furniture. By October, 2015, Mr. Blix had purchased a small factory and the necessary manufacturing equipment and had recruited skilled furniture makers who he knew from working at Palliser. Darlarna began shipping product in January, 2016 and quickly built up sales in its target market with its unique designs.
Expansion
After a very successful 2016, Mr. Blix found that his current factory couldn’t keep up with demand so he began purchasing additional manufacturing equipment. Instead of buying used equipment for which there was an active market in Winnipeg with Palliser’s large manufacturing operations, Fredrik felt new equipment might help impress customers when they came for factory visits. By late 2008, the factory was becoming too small due to growing sales and large inventories of raw materials and work in process, so a search was begun for new facilities in Winnipeg.
In 2018, the Winnipeg economy was.
Darlarna FurnitureFredrik Blix immigrated to Canada six yea.docx
1. Darlarna Furniture
Fredrik Blix immigrated to Canada six years ago after meeting
his wife Cathy, a Canadian, on a Mediterranean holiday. Mr.
Blix was born in Darlarna province in Sweden, but moved to
Stockholm after completing the Canadian equivalent of high
school called gymnasium. While in Stockholm, Fredrik earned
a diploma in commercial design and apprenticed with Arlanda, a
furniture manufacturer that supplies the IKEA chain with
innovative new products.
After working for Arlanda for eight years and acquiring a
reputation as a very inventive young designer, Mr. Blix moved
to Winnipeg, Manitoba, his new wife’s home town, and secured
a design job with Palliser, Canada’s largest furniture
manufacturer. Initially, Mr. Blix enjoyed his job at Palliser and
became involved as a hockey coach in the local community and
was an avid curler, but after a few years he became frustrated at
work. Although he had a very friendly relationship with his
colleagues and received a number of raises and promotions, he
longed to return to designing furniture with more of a Swedish
influence as he had at Arlanda back in Sweden.
A New Venture
In early 2015, Mr. Blix approached the Crocus Fund, a labour-
sponsored venture capital firm located in Winnipeg about
financing a new “boutique” furniture manufacturer. His new
company, Darlarna, would design and manufacture high-end,
Swedish-styled furniture for distribution in Canadian initially
but he hoped eventually to “crack” the U.S. market. Instead of
distributing his product through the large chains such as The
Brick, Dufresne, or Leon’s or department stores such as The
Bay, Mr. Blix hoped to sell his products through high-end,
independently-owned furniture retailers who provide interior
2. design services along with an extensive selection of home
furnishings.
After preparing a detailed business plan and raising $180,000 in
financing from friends and family in the Mennonite community
in Winnipeg and Steinbach, the Crocus Fund agreed to make a
matching investment for a 40 percent share in Darlarna
Furniture. By October, 2015, Mr. Blix had purchased a small
factory and the necessary manufacturing equipment and had
recruited skilled furniture makers who he knew from working at
Palliser. Darlarna began shipping product in January, 2016 and
quickly built up sales in its target market with its unique
designs.
Expansion
After a very successful 2016, Mr. Blix found that his current
factory couldn’t keep up with demand so he began purchasing
additional manufacturing equipment. Instead of buying used
equipment for which there was an active market in Winnipeg
with Palliser’s large manufacturing operations, Fredrik felt new
equipment might help impress customers when they came for
factory visits. By late 2008, the factory was becoming too
small due to growing sales and large inventories of raw
materials and work in process, so a search was begun for new
facilities in Winnipeg.
In 2018, the Winnipeg economy was “booming” and it was very
difficult to find skilled furniture makers given opportunities in
the building trades and the Tar Sands oil developments in
northern Alberta. As a result, Darlarna was forced to give its
workers a significant increase in wages and benefits to retain
them. Also, key production inputs such as fine leathers and
foam cushioning materials rose dramatically in price due to a
rapid expansion of the Chinese furniture industry.
By 2018, Mr. Blix felt that Darlarna was ready to expand into
the U.S. market so he began taking out ads in a number of
3. American design magazines to test the market and prepared an
expensive new catalogue displaying its many products. With
the prospect of increased orders from the U.S., the company
expanded its order processing, shipping/receiving and
accounting functions despite industry reports of a possible deep
recession in the U.S. in the coming year due to excesses in the
mortgage, consumer, and corporate lending markets.
Financial Statements
The financial statements for Darlarna’s first three years of
operation are:
Income Statement
2016
2017
2018
Net sales
1,304,000
1,507,000
1,791,000
Cost of sales
781,000
952,000
1,210,000
Gross profit
523,000
555,000
581,000
Marketing
135,400
149,670
220,245
General administration
151,000
151,200
6. 51,300
130,200
Current portion of long-term debt
32,500
42,800
57,850
Total current liabilities
272,500
360,460
569,072
Long-term debt
325,000
428,000
578,500
Shareholders' equity
Common shares
360,000
360,000
360,000
Retained earnings
87,574
119,229
56,715
Total liabilities and equities
1,045,074
1,267,689
1,564,287
Mr. Blix was also able to attain average ratios from the Bank of
Montreal, which they considered typical of operations in the
high-end furniture manufacturing industry.
Ratio
Industry Average
Current ratio
7. 2.5
Cash ratio
.5
Inventory turnover in days
90 days
Accounts receivable turnover in days
60 days
Accounts payable turnover in days
15 days
Cash conversion cycle
135 days
Fixed asset turnover ratio
4.01
Total asset turnover ratio
2.21
Long-term debt to total capitalization ratio
30%
Cash flow coverage
3.21
Effective interest rate
8%
Gross profit margin
45%
Operating profit margin
25%
Net profit margin
10%
ROA
22%
ROE
31%
Financing
Darlarna was able to secure both line of credit and term loan
financing with the Bank of Montreal. The line of credit had a
limit of $300,000 and was secured by both inventory and
8. accounts receivable. Since Darlarna’s customers were small
retailers with more limited access to financing compared to the
large chains or department stores, the Bank of Montreal was
only prepared to lend 40 percent of the value of the accounts
receivables that were not yet past due. Also, because the
inventory was composed mostly of raw materials and partially
completed furniture and as a result difficult to sell, it agreed to
lend only 20 percent of its value. The line of credit is non-
committed, which means the bank is not obligated to lend to the
company under the loan agreement if it feels the company is in
financial difficulties or if the bank has a shortage of loanable
funds.
All loans require that the company maintain a current ratio of
2.0, a cash flow coverage ratio of 4.0, and a long-term debt to
total capitalization ratio of 55 percent. The loan agreements
also specify that Mr. Blix could withdraw no more than $70,000
a year for living expenses and that he had to receive the bank’s
permission to make capital purchases. Financial statements
were to be provided when Frederic Blix met with his loans
officer in July and January each year.
Darlarna sells all products net 60 and purchases most of its
inputs 2/15, net 60. These terms are typical of the high-end
furniture manufacturing industry.
Company Analysis
When Mr. Blix got his 2018 financial statements back from the
accountant in mid-January, 2019, he became quite concerned
about the dramatic drop in profits as he knew the venture
capitalists were looking to sell their investment soon. He was
also alarmed by reports in the media that a number of
investment firms in the U.S. had failed and required government
bailouts to continue operating. Could a severe recession be
soon to follow? How would this influence demand for his
products? Would the Bank of Montreal still be prepared to
provide needed financing?
In response to these concerns, Mr. Blix retained Sally Delaney,
CPA to conduct an analysis of Darlarna’s operations and to
9. make recommendations for future action within the week.
PAGE
2
Ethical Case Studies
Consider the ethical dilemma the health care professional faces
in the selected case study. Pay particular attention to details
that will help you analyze the situation using the three
components of the Ethical Decision Making Model (moral
awareness, moral judgment, and ethical behavior).
Note: The case study may not supply all of the information you
may need for the assignment. In such cases, you should consider
a variety of possibilities and infer potential conclusions.
However, please be sure to identify any speculations that you
make.
Reducing Hospital Readmissions
Caleb Powell was preparing the agenda for the upcoming
executive leadership meeting and he shook his head ruefully. As
chief executive officer for Virginia County Regional Hospital
(VCRH), Caleb believes that a key piece of VCRH's future
success lies in reducing readmission rates, not only in the areas
identified by federal guidelines, but across the board. A few
weeks ago, he read a piece from the National Institutes of
Health discussing strategies associated with reduction in
readmission rates. He decided that he wanted to discuss the
issue in detail with his leadership team.
Caleb's goal is to align the hospital's strategic planning with the
goal of reducing readmissions. The stakes are high; under
provisions of the Affordable Care Act, hospitals with higher
than expected 30 day readmission rates for heart failure, heart
attack and pneumonia are penalized with reduced payments.
Historically, hospitals (including VCRH) have struggled to
10. avoid the penalties, but Caleb believes that believes that a
focused approach will allow them to be successful. He also
believes that reducing readmission rates will improve patient
satisfaction, which has become a key metric in measuring
hospital quality.
Caleb's initial research into this issue revealed that while many
facilities were incurring the Centers for Medicare and Medicaid
Services (CMS) penalties, there was still significant variability
in terms of hospitals implementing successful strategies for
reducing their readmission rates. However, several themes have
emerged. Hospitals that established partnerships with
physicians, physician groups and other local hospitals have had
greater success. In addition, a clear discharge planning process
and nurse driven medication reconciliation have also been
associated with reducing the risk of readmissions.
At the same time, Caleb is concerned that an aggressive policy
to avoid readmissions could be construed as too focused on the
hospital's bottom line and indifferent to patient needs. The last
thing he wants is to create a policy that prevents patients from
seeking or receiving care. Caleb hopes that this meeting will
begin a productive discussion around developing strategies to
improve VCRH's performance in this area.
Caleb's email to the executive leadership team with the agenda
for the meeting included the following note:
“As we research the readmission rate issue for improvement, we
need to be aware that we cannot add additional days to the
patient's initial stay. It's a balancing act. We also cannot hinder
a patient from coming back into the hospital for a readmission.
I'll be asking for your input about whether we should create a
system to profile health care providers whose patients have high
readmission rates.”
Old School or Out of Touch?
Corey Davidson is the new Emergency Department Director at
Crosby Community Hospital. When he was hired, the hospital
administrator explained that the first order of business would be
11. for Corey to develop a system for documenting the reappraisal
process for physicians applying for reappointment to the
medical staff and for clinical privileges. At the time of his
interviews, Corey didn't think much of this focus, but now that
he has been on the job for several months, he realizes that there
was a very specific reason: Dr. Lacey.
Dr. Lacey has been practicing medicine in Crosby County
longer than the hospital has existed, and has treated virtually
everyone who works in the hospital. With his twinkly blue eyes
and white hair, Dr. Lacey was Crosby's very own Dr. Santa. Dr.
Lacey's reputation used to be unassailable, but unfortunately
age and declining health are taking a toll on his skills.
Complicating the situation is the fact that Dr. Lacey is seen as a
beloved icon by anyone who didn't actually work with him.
When Corey logs onto his email one Monday morning, he finds
a request to meet with Margaret Truman, Director of Nursing.
When they meet, she wastes no time in explaining what she
wants to discuss.
“You're going to have to do something about Dr. Lacey... or
rather, Dr. Lasix, as the nursing staff are currently calling him”
“What's happened?” Corey asks, somewhat nervously.
“Well, you know how we've been moving toward a more
evidence–based approach to diagnosis and treatment in the ED”
Margaret says. One of the areas where we've established some
solid guidelines is regarding patients presenting with shortness
of breath.”
Corey nods. “Yes, I remember you presented on piloting the use
of the guidelines.”
“That's just it — Dr. Lacey is completely unwilling to use
them” Margaret says. We've come to terms with his
unwillingness to use the electronic health record — that's a
battle we just weren't going to win — but this is getting serious.
He's gotten it into his head that Lasix is the drug of choice for
anyone who comes in with dyspnea. This goes against the
guidelines we've assembled, but he won't listen to a mere nurse
— especially when he's ordering meds for a patient.
12. “The thing is — Lasix can be an effective treatment in some
cases, but it isn't recommended as the first treatment option for
a patient who has been brought into the ED. There are a number
of situations where Lasix can actually be harmful. If the patient
has pneumonia or dehydration, they shouldn't be given Lasix at
all. The guidelines we established specifically call for delaying
the use of Lasix until a definitive diagnosis of heart failure can
be confirmed by chest Xray and laboratory studies.”
A thought occurs to Corey. “Why are you coming to me today
with this? Did something happen over the weekend?”
“That's exactly why I'm here,” says Margaret. “We had a patient
present Saturday night with confusion and difficulty breathing.
Dr. Lacey ordered Lasix and chest xrays, but the nurse assisting
him suspected sepsis. The patient had come in from a nursing
home and her skin was not in good shape. Sure enough, the
patient had a particularly nasty pressure sore.
“The problem is that Dr. Lacey will not listen to the nursing
staff and his own skills are less than they used to be. In this
case, the nurse was able to convince him to follow the
guidelines, but honestly, nurses have their own work to do and
it doesn't include watching over a doctor to make sure he
doesn't actually harm anyone.”
Corey nods, glumly aware that he is going to be the person who
took away Dr. Santa's ER privileges.
Measles Making A Comeback
Piper Banks is the medical director for Open Arms, a non-profit
medical clinic and wellness center serving low-income patients
in an urban neighborhood. On most days, Piper loves her job
and the work her clinic is able to do for people in the
community, but lately there has been a problem that is beyond
frustrating. This past summer, the city experienced a significant
measles outbreak. Thousands of people were exposed to the
measles and 78 cases were confirmed. Of the 78 cases, 73
involved unvaccinated children in the city's East African
immigrant community.
13. What Piper finds most troubling is not that the “herd immunity”
was compromised, though that does trouble her. Worse, in her
opinion, was the fact that members of the anti vaccination
community were distributing fliers and talking to families in the
affected community. The anti vax activists reportedly told
people that the measles outbreak had been created by the
government in order to pressure immigrant parents to vaccinate
their children. One of Open Arms' primary goals has been to
counter the fear and misinformation that anti vaccine groups
have been spreading in the community for nearly a decade. That
misinformation specifically promotes the purported vaccine
autism link, despite extensive research disproving those claims.
This is troubling, because there is a high incidence of autism
within the community and parents are justifiably concerned.
Despite her frustration, Piper hasn't given up hope. Religious
leaders and trusted health care providers in the community have
been enlisted by clinic staff members to convince parents to
protect their children by getting the measles mumps rubella
vaccine.
At a staff meeting, Piper asks for insights to the situation.
Felicia Cruz, the clinic pediatrician, expresses optimism about
the situation. “Since the measles outbreak, I've seen several
parents who've refused to inoculate their children come in,” she
says. “They're still nervous — very nervous, in fact — but
they're more open to believing us than I've ever seen.”
Nasra, an intern at the clinic who is working toward a master's
degree in public health, adds “I was recently talking with a
woman who said that the imam at her mosque has been very
blunt. He said If you care about your child, you must vaccinate.
I think it's important to make sure parents know how
devastating these diseases are. I heard that the anti vaxers were
trying to set up measles parties to deliberately expose
unvaccinated children to children with measles. We need to
explain to these parents that they are playing with fire.”
“I wonder how many parents would make different choices if
they could actually see the effects of these diseases” says
14. Emily, a clinic nurse. “People have forgotten how devastating
these diseases used to be. They think that if they feed their
children a nutritious diet, then these vaccine–preventable
diseases will be mild. Sometimes I wish I could take them to the
cemetery and show them all the little headstones from when we
didn't have vaccines.”
Piper is encouraged by these comments, and by the fact that the
clinic has been administering almost twice as many vaccines
since the measles outbreak as they had the previous year. Still,
she worries about how to counter the information being spread
by the anti vaccination activists and respond in an ethical way
to parents who don't want to vaccinate their children.
Running head: ABBREVIATED TITLE OF YOUR PAPER 1
ABBREVIATED TITLE OF YOUR PAPER 4Full Title of
Your PaperLearner’s Full Name (no credentials)Capella
UniversityCourse TitleAssignment TitleMonth, YearAbstract
[Add text here. Delete this page if not required.]
Keywords: [Add keywords here.]Title of Paper
[Add text here, using heading levels as appropriate.]References
[List references here.]
Case 1: Darlarna Furniture
Student Instructions
1. Prepare the following financial exhibits for 2016, 2017, and
2018:
0. Ratio table with industry averages
0. Vertical analysis of income statements and balance sheets
0. Horizontal analysis (index numbers) of income statements
and balance sheets
15. 0. 5-part analysis of ROE
0. Cash flow statements (2017 and 2018 only)
Note: All ratios should be calculated using year-end figures –
yearly averages should not be used.
2. Prepare a 2-page memorandum as requested by Mr.
Blix. The memo should be divided into sections describing
liquidity, asset management, long-term debt ability,
profitability, and recommendations.
Submit the memorandum with exhibits using the assignment
drop box in Moodle.
No Excel file should be submitted.
Financial Ratios
2016
2017
2018
Industry Average
Current Ratio
Cash Ratio
Inventory Turnover in Days
16. A/R Turnover in Days
A/P Turnover in Days
Cash Conversion Cycle
Fixed Assets Turnover
Total Assets Turnover
LT Debt to Total Capitalization
Cash Flow Coverage
Effective Interest Rate
18. Analysis of ROE – 5-Way
EBIT/Sales
EBT/EBIT
NI/EBT
Total Asset Turnover
Debt Ratio
ROE
2016
2017
2018
Evaluation Form
Total: _________ / 100
19. Letter Grade: _________
Accuracy of Financial Data - 25%
Ratio table
/5
Vertical analysis
/5
Horizontal analysis
/5
Analysis of ROE
/5
Cash flow statements
/5
One mark will be deducted for each major mistake.
Thoroughness of Analysis – 50%
Liquidity
/10
Asset management
/10
Long-term debt paying ability
/10
Profitability
/10
Recommendations
/10
Layout and Writing Quality – 25%
Memo layout
/5
Grammatical and spelling errors
/10
Writing style
/10
