How to structure liquidity / turnaround case?

Question

Hi, how would you structure this, and what do you think of this structure?

Situation / question: Client is hit from external effect, is bleeding cash, needs cash short-term, and also thinks that not all of his businesses are profitable anymore. How to turn the situation around (short- and mid-term)?

Possible structure:

Short-term: Liquidity / cash management

Investigate situation / objective
- Info sources: BS, IS, CFS
- Important KPIs: cash ratio, quick ratio, current ratio; Fin. CF, Op. CF, Inv. CF
- How long to survive? How much additional CF is needed?
Generate cash (also structure regarding CFs possible, i.e. Fin. CF, Op. CF, Inv. CF)
- Supplier, e.g. stop to pay
- Customer, e.g. factoring
- Employees, e.g. layoff
- FIxed / current assets, e.g. de-invest
- ...

Mid-term: Turnaround / restructuring

Investigate situation: analyze market, analyze strengths and weaknesses of company (value creators, value destroyers)
Restructure
- Invest in value creators, de-invest in value destroyers
- Restructure core-competencies and processes
- Restructure organization and culture
Improve further: profit opportunities (revenue opportunities, cost opportunities)
Plan and implement

Answer 1

Hello!

Overall I agree, particularly with the split in short term-medium term for the problem.

However, this would not appear like this as a case. If you see the Library of cases, you can find much more real ones -particularly the ones made by coaches-.

Hope it helps!

Best,

Clara

Answer 2

Hi there,

This is a fantastic framework. Well laid out.

However, I would add a few things, particularly in the short term fixes segment:

Restructure debt (longer-term debt and/or lower interest rates)
Issue debt/equity (improve cashflow)...especially w/ current interest rate landscape
Reduce accounts receivable
Increase accounts payable

Overall, well done!