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Chapter 16 Case Study: Casa de Diseno In January 2012, Teresa Leal
was named treasurer of Casa de Diseno. She decided that she could
best orient herself by systematically examining each area of the
company’s financial operations. She began by studying the firm’s
short-term financial activities. Casa de Diseno is located in Southern
California and specializes in a furniture line called ―Ligne Moderna.‖
Of high quality and contemporary design, the furniture appeals to the
customer who wants something unique for his or her home or
apartment. Most Ligne Miderna furniture is built by special order
because a wide variety of upholstery, accent trimming, and colors is
available. The product line is distributed through exclusive dealership
arrangements with well-established retail stores. Casa de Diseno’s
manufacturing process virtually eliminates the use of wood. Plastic
and metal provide the basic framework, and wood is used only for
decorative purposes. Casa de Diseno entered the plastic-furniture
market in late 2004. The company markets its plastic-furniture
products as indoor-outdoor items under the brand name ―Futuro.‖
Futuro plastic furniture emphasizes comfort, durability, and
practicality and is distributed through wholesalers. The Futuro line
has been very successful, accounting for nearly 40 percent of the
firm’s sales and profits in 2011. Casa de Diseno anticipates some
additions to the Futuro line and also some limited change of direction
in its promotion in an effort to expand the applications of the plastic
furniture. Leal has decided to study the firm’s cash management
practices. To determine the effects of these practices, she must first
determine the current operating and cash conversion cycles. In her
investigations, she found that Casa de Diseno purchases all of its raw
materials and production supplies on open account. The company is
operating at production levels that preclude volume discounts. Most
suppliers do not offer cash discounts, and Casa de Diseno usually
receives credit terms of net 30. An analysis of Casa de Diseno’s