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Merril Electronics Corporation (A)

Author: Remmers, H. Lee INSEAD Area: FinancePublisher: Fontainebleau : INSEAD, 1992.Language: EnglishDescription: 11 p.Type of document: INSEAD CaseAbstract: Merrill Electronics was a medium sized distributor of personal computers, related peripheral equipment and software, and various other consumer electronics and domestic appliances. In July 1991, sales turnover and profits had improved over the past 18 months since the arrival of a new general manager, but the company's needs for financing were also growing rapidly. Borrowing had increased to the point of being told by bankers that no additional credit line would be extended. Faced with serious cash flow problems and under pressure from their banks, Merrill's management decided to take action. In Case B, it is July 1992 and Merrill Electronics is reviewing its currency risk position. Its principal foreign suppliers are Japanese and fluctuations of the dollar/yen exchange rate during the past year or so seem to have had a serious impact on costs and earningsPedagogical Objectives: Case A gives students a hands-on opportunity to develop and refine their skills by analysing Merrill's financial statements and other data. It raises a number of issues that face rapidly growing, sales oriented companies where working capital investment needs exceed their ability to generate adequate funds internally. The first issue is to discover where the problems lie. Case B raises many of the typical issues facing exporters, importers, and others active in international trade. The case also gives students exposure to understanding foreign exchange, futures and options market information appearing in the financial press. Finally the question of whether or not currency movements can be forecast if brought up.
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Case A gives students a hands-on opportunity to develop and refine their skills by analysing Merrill's financial statements and other data. It raises a number of issues that face rapidly growing, sales oriented companies where working capital investment needs exceed their ability to generate adequate funds internally. The first issue is to discover where the problems lie. Case B raises many of the typical issues facing exporters, importers, and others active in international trade. The case also gives students exposure to understanding foreign exchange, futures and options market information appearing in the financial press. Finally the question of whether or not currency movements can be forecast if brought up.

Merrill Electronics was a medium sized distributor of personal computers, related peripheral equipment and software, and various other consumer electronics and domestic appliances. In July 1991, sales turnover and profits had improved over the past 18 months since the arrival of a new general manager, but the company's needs for financing were also growing rapidly. Borrowing had increased to the point of being told by bankers that no additional credit line would be extended. Faced with serious cash flow problems and under pressure from their banks, Merrill's management decided to take action. In Case B, it is July 1992 and Merrill Electronics is reviewing its currency risk position. Its principal foreign suppliers are Japanese and fluctuations of the dollar/yen exchange rate during the past year or so seem to have had a serious impact on costs and earnings

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